What Is An Escrow Account? | Mortgage Help | HSBC
What is an escrow account?
An escrow account is one that is established to hold separate funds for the purpose of paying bills such as homeowner's insurance and property taxes.
HSBC collects the funds to be deposited into the account each month from your monthly payment and then pays the bill for you when it comes due. This eliminates the need for you having to come up with the additional funds when they are due. By taking the annual amounts charged for homeowner's insurance, property taxes and other annually paid items and dividing them by 12, the escrow department establishes a payment amount that is added to your monthly principal and interest payment. This spreads the cost of those items over 12 months, making it easier to budget those expenses.
For example, if your homeowner's insurance annual premium (charge) is $300, breaking that cost down over 12 months means that $25 will be added to your monthly payment amount to cover the cost.
When the bill comes due, HSBC has the funds available to pay it for you, since you've already placed the money in your escrow account through your monthly payment.
Your escrow statement explains how the monthly escrow portion of your payment was calculated, and provides estimates of your annual expected costs. You will receive an escrow statement each year if you have an escrow account.
- When is an escrow analysis performed?
- What law establishes escrow account guidelines?
- If my escrow account has a shortage, what are my options?
- If my escrow account has an overage when will I receive the overage check?
- I'm escrowed for taxes but I still received a tax bill. What should I do with it?
- If my homeowner's insurance premium has already been paid from escrow and I change insurance companies, will you pay for the new insurance?
- You recently sent me a letter stating that I need flood insurance, why?
- I am required to have flood insurance, but I have lived in my house for years and have never been flooded. Is there any way I can remove my house from being in a flood zone?
- How do I go about filing a LOMA/LOMR?
- If my house is on a hill (above the base flood level), does this mean flood insurance is not required?
- How much coverage do I need for flood insurance?
- I have proof I am not in a required flood zone. What can I do?
- I have heard the term "Insurance Loss Draft Check." What does this mean?
- For a loss draft check, what is needed to have the check returned back to the homeowner?
- On loss draft checks, can we remove the mortgage company name from the check?
When is an escrow analysis performed?
An escrow analysis is performed annually, to ensure sufficient funds are being collected to avoid escrow shortages and overages. During an analysis we will obtain verification of your current required payments from your tax department or insurance authority, which may result in a reduction or an increase in the required monthly escrow amount.
What law establishes escrow account guidelines?
Real Estate Settlement Procedures Act (RESPA) is a federal law that, in general, dictates how lenders establish and maintain an escrow account for you. A few states also have regulations regarding an escrow account for a homeowner within their state; if the state does not have a regulation, the governing of your escrow account falls back to RESPA regulations.
If my escrow account has a shortage, what are my options?
We automatically spread the shortage over 12 months, but you also have the option to pay the shortage in one lump payment. If you choose to pay your shortage in one lump payment, your account will be re-analyzed and your payment will be reduced to principal and interest and the required monthly escrow amount.
If my escrow account has an overage when will I receive the overage check?
Once the escrow analysis is performed the escrow overage check is mailed within 10-14 days.
I'm escrowed for taxes but I still received a tax bill. What should I do with it?
If your loan closed within 30 days of the tax due date, please send your bill to:
Mortgage Service Center
Attn: Tax Department
P.O. Box 23750
Rochester, NY 14692
or fax to: (817)826-1883 for immediate processing. However, if you live in Pennsylvania, you will receive a tax bill each year. The tax department will mail only to the homeowner; it is up to you to forward your original bill to us for payment. Please send your bill to:
Mortgage Service Center
Attn: Tax Department
P.O. Box 961242
Fort Worth, TX 76161
or fax to (817)826-1874.
If my homeowner's insurance premium has already been paid from escrow and I change insurance companies, will you pay for the new insurance?
No, we will only make one disbursement from escrow for insurance per year. You will be responsible to cancel your previous insurance policy, obtain any refund due to you and then pay your new carrier. If the refund is sent to us, we will deposit it into your escrow account.
You recently sent me a letter stating that I need flood insurance, why?
Our Federal Mapping Company has made a Flood Zone determination based on the Flood Insurance Rate Map (FIRM) published by Federal Emergency Management Agency (FEMA) for your community and has indicated the property now lies on a Flood Zone.
I am required to have flood insurance, but I have lived in my house for years and have never been flooded. Is there any way I can remove my house from being in a flood zone?
Your house may be above the base flood elevation (flooding level) in which case you may want to file a Letter Of Map Amendment or Revision (LOMA/LOMR). If this is approved by Federal Emergency Management Agency (FEMA), you may not be required to maintain flood insurance or your premium may be reduced.
How do I go about filing a LOMA/LOMR?
Contact your city hall, tax assessor or zoning and planning office. Or you may contact FEMA at 800-638-6620.
If my house is on a hill (above the base flood level), does this mean flood insurance is not required?
No. Regardless of the elevation of your property, if your dwelling is in an "A" or "V" zone, flood insurance is required. However, elevation information can be used to get a lower flood premium and/or to file a Letter of Map Amendment or Revision (LOMA/LOMR). While the LOMA/LOMR is being reviewed by FEMA, flood insurance is still required.
How much coverage do I need for flood insurance?
You are required to have coverage for at least 80% of the replacement cost of your house or the loan balance, whichever is LESS.
I have proof I am not in a required flood zone. What can I do?
Fax any documentation (survey, LOMA/LOMR, revised map) to attn: Flood Department at 856-917-9949 or 856-917-9935 or mail it to STARS, attn: Flood Department, 308 Route 38, Moorestown, NJ 08057. We will have our mapping company review it. You will receive notification of the outcome of our research.
I have heard the term "Insurance Loss Draft Check." What does this mean?
In case of a natural disaster (fire, hurricane, etc), the insurance company will inspect a homeowner's property and issue a check to the homeowner to replace the damage. This check is made co-payable to the homeowner and us. We must always be notified when this loss occurs.
For a loss draft check, what is needed to have the check returned back to the homeowner?
Since all loss draft checks are made co-payable to the homeowner and us, it must be sent to us for endorsement. Please send checks to:
Attn: Loss Draft Department
One Assurant Way
Springfield, OH 45505-7459.
If you wish to have the check sent back to you via overnight mail, you must include a prepaid return envelope (UPS, Airborne or FedEx). If the loss draft check is more than $10,000, it must be fully endorsed and must have an estimated list of damages. If the check is $5,000 - $10,000, the check should not be endorsed but an estimated list of damages needs to be sent. If the check is under $5,000, check should not be endorsed and no list of damages is needed.
On loss draft checks, can we remove the mortgage company name from the check?
No, we must be listed on all loss draft checks.
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