Annual analysis
Your servicer reviews the escrow account at least once a year and projects the next year’s taxes and insurance.
Shortages and deficiencies
If taxes or insurance rose, the account may be short. Servicers usually let you pay the shortage at once or spread it over the next year.
Why your escrow payment changes each year and how to handle a shortage.
Cushion
Federal rules allow servicers to hold a limited cushion.
Surpluses
Surpluses above a small threshold must generally be refunded.
Reduce surprises
Appeal an incorrect assessment and shop insurance before renewal.
The federal rule
Escrow accounts on most mortgages are governed by RESPA's Regulation X, which limits the cushion a servicer may hold and requires an annual escrow statement.
Cushion limit
A servicer may hold a cushion of no more than one-sixth of the estimated annual disbursements from the account, unless state law or the loan documents set a lower amount.
Paying a shortage
When there is a shortage, servicers generally let you repay it over at least 12 months, or you can pay it in a lump sum. Ask which options your servicer offers.
Surplus refunds
If the analysis shows a surplus above a small threshold and your loan is current, the servicer generally must refund it within 30 days.
Review your statement
Compare the annual escrow statement with your actual tax and insurance bills and call your servicer if something looks wrong.
General education only; confirm current rules with official sources and a licensed lender.
Sources
Sources checked 10/23/2026.