FAQ - Escrow Account
Below are answers to commonly asked questions. Please contact the Loan Servicing Department at 800-800-1577 with any additional questions or concerns.
- What is the required mortgagee clause on my insurance policy?
First Federal ISAOA.
- I have a question on my tax bill amount. Who can I contact?
If you have questions on your assessed valuation, your first contact should be your county's assessor office.
- Do I need to send First Federal my real estate tax bill each time its due?
We usually receive real estate tax information directly from the taxing authority. If you receive a tax bill, please provide a copy to your local branch, mail to PO Box 351, Port Angeles WA 98362 or email to firstname.lastname@example.org.
- Do I earn interest on the funds in my escrow account?
No, escrow accounts are not interest earning accounts.
- What type of bills are paid from an escrow account?
a. Real estate taxes for the mortgaged property,
b. Premiums for insurance required to protect the property, such as homeowners and/or flood insurance,
c. Premiums for private mortgage insurance if applicable,
d. Annual fees for government guaranteed loans (i.e. VA and USDA loans).
- What type of bills are not paid from an escrow account?
a. Interim tax bills,
b. Homeowners association fees,
c. Premiums for non-required insurance policies, such as separate personal property insurance,
d. Special or added tax assessments,
e. Other fees that are not included in your real estate tax bill or are required insurance.
- Do I need to contact First Federal before I change insurance companies for my home?
You do not need to contact First Federal prior to changing insurance companies. Please request your insurance company to list First Federal as mortgagee or lienholder on your policy. This will ensure that your insurance company provides us with the new policy.
- Can I set up escrow reserves for taxes and insurance if it is already an existing loan without escrow reserves?
Yes, escrow reserves can be set up after loan origination. You can access the Escrow Setup Request Form here.
- What is the purpose of an escrow analysis?
An analysis is performed yearly to determine whether a shortage, surplus or deficiency exists in your escrow account. This is a review of our account to compute your monthly payments for the next escrow account computation year and any deposits that may be needed to establish or maintain the account. We also include the amount of taxes and/or insurance we paid for you in the past 12 months with funds from your escrow account to keep you informed of what is being paid on your behalf.
- When will First Federal conduct an escrow analysis?
We analyze all escrow accounts annually, and we'll schedule your analysis for the same month each year.
- How is my monthly escrow amount determined?
To determine your escrow payments, we:
a. Estimate the amount we'll have to pay over the next 12 months for your real estate tax and homeowners insurance bills. We base this estimate on information from your loan closing documents, your taxing authority and insurance company, or your previous tax and insurance bills.
b. We then divide the estimated amount by 12 and come up with a monthly estimated escrow payment amount..
c. First Federal considers escrow reserves, which consists of two months of escrow payments to be used as a cushion which is divided by 12 and added to the monthly escrow payment
d. Determine whether any adjustments, such as shortage payments, are necessary to keep your escrow account in balance.
- How are tax and insurance projections calculated for the next year?
Each year we project how much you'll need in your escrow account for the upcoming year. We base it on the amount of taxes and/or insurance you paid during the past 12 months. The total you paid is divided by 12 to get your projected monthly escrow payment, which you pay each month as part of your monthly mortgage payment. Then, when taxes are due, we'll pay them on your behalf with the money in your escrow account.
Sometimes, your payment must be adjusted to ensure your monthly balance remains above a required minimum balance during the next 12 months. This minimum balance is typically equal to two months of escrow payments.
If your taxes and/or insurance change during the next year or your monthly escrow balance falls below the required minimum amount, you could have a shortage or surplus in your account when we do an annual Escrow Analysis next year.
- What is an escrow minimum balance?
The required minimum escrow balance is typically equal to two months of escrow payments. This minimum balance helps to protect you, so that you have enough funds in the account to cover an unexpected tax and/or insurance increase.
- What happens when there is a shortage or overage?
When there is an overage of over $50.00 on the account, a check for the overage amount will be mailed to you. If the overage is under $50.00, the amount will be spread out over twelve months, decreasing your payment an equal amount each month during that time. If there is a shortage, the payments will increase for an entire year to accommodate the shortage.
- Can I pay my escrow account shortage?
You can pay an escrow account shortage by mail or at a branch. Please request in writing or in person a new escrow analysis in order to account for the payment. If the shortage is less than $1 per month, you don't need to pay it. Note that even if you pay your shortage in full, your escrow payment could still increase.
- What is a cushion?
A cushion is intended to cover an increase in your tax bill in order to avoid any shortages. First Federal follows the Real Estate Settlement Procedure Act guidelines which state we can hold a maximum of 2 months of reserve or cushion in an escrow account for 12 months.
- After I've paid off my mortgage, will you refund the money in my escrow account?
A credit for the balance of your escrow is included with your loan payoff. A refund will be given if the balance in your escrow account is greater than the amount required to pay off the loan.
FAQ - Private Mortgage Insurance
- Can I obtain a new appraisal to show that my property value has increased to have private mortgage insurance removed?
Your principal loan balance must reach 80% of the original appraisal or purchase price, whichever is less, before a request can be made to remove. At that time, a new appraisal will be required to show that the property has held its value.