Rebuild your servicer’s escrow analysis the way RESPA Regulation X requires
Updated October 2026
Once a year your servicer sends an escrow account statement. It shows the past year’s actual deposits and payments, then a projection for the coming year: each month’s deposit, each tax or insurance bill, and the projected balance after each. To check it, enter the balance the projection starts from, each tax installment and insurance premium with the month it will be paid (month 1 is the first month of the new escrow year), and your current escrow payment if you want to see the change. Mortgage insurance paid monthly does not change the low point, so it can be left out. The results show the base payment, the cushion, the projected low point, any shortage or surplus, and the new payment.
Regulation X lets the servicer collect 1/12 of the year’s expected bills each month, plus enough to keep a cushion that is no more than one-sixth of the year’s total, or two months’ worth. Servicers must use aggregate accounting: they run the whole account forward month by month and set payments so the lowest projected balance equals the cushion. If the projected low point is below the cushion, the difference is a shortage; above it, a surplus. A deficiency is different: it means the account actually went negative because the servicer paid a bill with its own money.
Appendix E to 12 CFR part 1024 uses $360 of school taxes and $1,200 of county taxes ($500 and $700) for $1,560 a year. The monthly deposit is $1,560 ÷ 12 = $130 and the cushion $1,560 ÷ 6 = $260. Starting from zero, the balance would fall to −$780 after the December tax bill, so the account needs $1,040 at the start to keep the low point at exactly $260. The calculator reproduces that: a $0 starting balance shows a $1,040 shortage, and $1,040 shows none, with the low point of $260 in month 6.
Taxes of $2,400 are paid in months 6 and 12; the insurance premium rose from $1,800 to $2,700, paid in month 3; the account holds $1,500. Total bills: $7,500, so the base escrow is $625 and the cushion $1,250.
| Month | Deposit | Bills paid | Projected balance |
|---|---|---|---|
| 1 | $625.00 | $0.00 | $2,125.00 |
| 2 | $625.00 | $0.00 | $2,750.00 |
| 3 | $625.00 | $2,700.00 | $675.00 |
| 4 | $625.00 | $0.00 | $1,300.00 |
| 5 | $625.00 | $0.00 | $1,925.00 |
| 6 | $625.00 | $2,400.00 | $150.00 |
| 7 | $625.00 | $0.00 | $775.00 |
| 8 | $625.00 | $0.00 | $1,400.00 |
| 9 | $625.00 | $0.00 | $2,025.00 |
| 10 | $625.00 | $0.00 | $2,650.00 |
| 11 | $625.00 | $0.00 | $3,275.00 |
| 12 | $625.00 | $2,400.00 | $1,500.00 |
The low point is $150 in month 6, $1,100 under the cushion. Spread over 12 months, the shortage adds $91.67, for $716.67 a month. That is why the payment rises twice: once because the bills went up ($550 to $625) and again to make up the shortage ($625 to $716.67). Next year, with the shortage repaid, it drops back to the run rate if bills hold steady.
| Situation | Base escrow | Projected low point | Result | New escrow (shortage spread) |
|---|---|---|---|---|
| Insurance up $900 (to $2,700), taxes flat at $4,800 | $625.00 | $150.00 | Shortage $1,100.00 | $716.67 |
| Tax reassessment after purchase: taxes $4,800 to $6,600, insurance $1,800 | $700.00 | $600.00 | Shortage $800.00 | $766.67 |
| Bills fell: taxes $4,400, insurance $1,800, balance $2,000 | $516.67 | $1,100.00 | Surplus $66.67 | $516.67 |
| Small shortage: taxes $4,900, insurance $1,800, balance $1,700 | $558.33 | $800.00 | Shortage $316.67 | $584.72 |
For a shortage of less than one month’s escrow payment, the servicer may leave it alone, require repayment within 30 days, or spread it over at least 12 months. For a shortage of one month’s payment or more, it may leave it alone or spread it over at least 12 months; it cannot require a lump sum, though you can choose to pay one. A surplus of $50 or more must be refunded within 30 days of the analysis if you are current on the loan (paid within 30 days of the due date); a smaller surplus may be refunded or credited to next year. The servicer must analyze the account each year and send you the statement.
Paying the shortage but not the new run rate. The lump sum removes only the shortage; the higher bills still raise the base payment. Reading the cushion as a fee: it is your money, held in the account. Ignoring a tax bill timing change, which moves the low point. Assuming the shortage means you were overcharged: it usually means the bills rose after last year’s projection. New-purchase reassessment: the first analysis after buying often uses the seller’s old tax bill, so a big reassessment can arrive a year later.
Whether you can pay taxes and insurance yourself depends on your loan documents and the lender’s rules; some loans allow it once you have enough equity, sometimes for a fee, and some do not allow it at all. This calculator does not read your loan documents, handle loans with a voluntary extra-deposit agreement, or check flood-insurance and force-placed insurance rules. If the projection uses a bill you did not get, or a premium you have since lowered by switching insurers, send the servicer the new bill and ask for a new analysis; if the numbers still look wrong, you can send the servicer a written notice of error under Regulation X (12 CFR 1024.35).