Why is there a shortage/deficiency in my escrow?
Each year insurance and taxes typically increase, and therefore the amount that is paid into escrow will need to increase as well. Escrow payments are projected based on the prior year’s tax and insurance payments as we cannot predict what the future payments will be. Because of this, the amounts paid out are usually more than the amounts collected and need to be recouped. The higher amounts to be collected for the next twelve months generally means the Required Starting Balance will need to increase as well. These two items combined will cause a shortage, and possibly a deficiency as well if the increases over the past twelve months caused a negative escrow balance.