Existing FHA Mortgage question - Escrow

[Anonymous]

I have a question about something that has been bothering me since June and hoping one of the mortgage experts can help me out. 

When we received our Escrow Analysis from GMAC for our FHA mortgage, they advised that a requirement of our loan is that we maintain an overage in our Escrow account (to the tune of $800) and we had the option to pay that in full with the enclosed payment coupon (sorry, not an option) or to have our monthly payment adjusted by approximately $90 per month. 

Our next Escrow Analysis should be in April, and at that time after increase in Homeowners Insurance premiums assuming property taxes remain mostly the same, we should have approximately $600 overage in the Escrow.  I can expect that my payment will be reduced at that time, correct?

Also, is this a real requirement?????  And if so, shouldn't our loan officer have made us aware of this and planned accordingly?  There was a significant deposit into our Escrow account at closing to ensure there would be enough funds for property taxes when they were due. 

[Anonymous]

it is hard to tell.  Yes, any necessary funds should have been requested at close, but there may have been some adjustments in insurance, taxes, etc that require the extra fee.  Or maybe something just got figured out incorrectly.  Not sure. 

[Anonymous]

I think you misunderstood my question, (or I miscommunicated it). :-)

I'm wondering if anyone has ever heard of FHA loans requiring an overage of a certain percent in the Escrow account.  For all I know, GMAC could be making it up as a way to hold onto $800 of my money without paying me any interest on it.

And if the requirement is indeed a valid requirement, I would've expected our loan officer to be aware of it and to have planned accordingly back when we closed on the loan in June of 2009.

It's not a new loan, it's an existing FHA mortgage that we refinanced into back in June 2009, our April 2010 Escrow Analysis Statement informed us of the required overage, and since we didn't have the funds to pay into the Escrow to meet the required overage, they adjusted our payment.

I'm expecting that in April our payment will be adjusted back down, at least somewhat, since we will have the funds in the Escrow to meet the overage requirement, or at least most of them depending on what happens with our tax bill in December.

[Anonymous]

I accidently pasted a differnet post on here initially.  IT has since been edited....

Yes, it is not unheard of for escrow to require some overage.  This is so at any point when they make a payment, your escrow does not go negative.  This can happen if there is a change in the loan unexpectedly (higher taxes or insurance) or if you happen to miss a payment.  I would expect once the amount is fullfilled that the payment would be lowered.  That said, I would consider (if you can afford it) still paying that extra 90 per onth towards the mortgage if you have gotten used to the higher payment..  It will 1100 per year in extra priciple payments will help you quite a bit in the long term...

[Anonymous]

I did see your original post before you edited. :-)

I do kind of see the logic behind requiring the overage, it's just a bit annoying that there's $800 sitting in what is basically a savings account that I can't collect interest on.  Oh well.

And yes I am planning on continuing to pay the same payment, and am hoping to request that they get a new appraisal on the home this Spring as we've made many improvements and would like to see if we could get out from under the PMI that we're paying right now.  If we got rid of that along with the payment adjustment for the overage, we'd be paying over $2k per year extra towards the principal.  We shall see I guess!

[MarineVietVet]

I've had mortgages for many years and it's not unusual at all for the payments to increase each year because of an escrow shortage. By law (at least here in Texas) the lender is required to keep a certain amount in escrow at all times.

When my payments have increased it's because my property taxes and/or insurance went up from the year before.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[Anonymous]

I completely understand the Escrow being adjusted for taxes/insurance premiums.  This adjustment, however, was solely to fund an overage in the Escrow account to the tune of $800.  The letter they sent informed me something along the lines of "your mortgage contract requires you to maintain an overage in your escrow account equal to X% of the amounts escrowed, in your case you owe us $800".  I had never previously had to carry an overage in my Escrow account, they were only adjusted when taxes or insurance premiums had increased or decreased.

[Anonymous]

I am pretty sure that is legal for them to do and it may have ust gotten overlooked at closing.  Either case, escrow funds are not wasted money and there is no way around it.  Just follow up with the escrow company when that money has been paid that they re-adjust your payment accordingly.