When we open an escrow account for your mortgage, we use it to make payments on your behalf for real estate taxes and premiums for insurance required to protect the property, such as homeowners insurance. To make those payments, we collect escrow funds as part of your monthly mortgage payment. This ensures that your bills are paid in full and on time, without you having to budget for these large payments separately.
Use the information below as a guide to understanding how escrow accounts work, what happens when we analyze your account, how we determine your escrow payments, and what you’ll find on your statement.
How escrow accounts work
What bills are paid from an escrow account?
We collect funds in an escrow account to pay:
- Real estate taxes
- Premiums for insurance required to protect the property, such as homeowners insurance and flood insurance
We do not collect funds in an escrow account to pay:
- Interim tax bills
- Homeowners association fees
- Premiums for non-required insurance policies, such as separate personal property insurance
- Special or added tax assessments
- Other fees that are not included in your real estate tax bill
- Supplemental tax bills, except in California
Do I need to send you my real estate tax bill each time it’s due?
We usually receive real estate tax information directly from the taxing authority. If we need you to provide it yourself, we’ll send a letter to let you know.
Does Wells Fargo pay interest on escrow?
Yes. Wells Fargo pays interest on escrow in accordance with the Real Estate Settlement Procedures Act (RESPA) and applicable state laws.
Where can I find more information about my escrow account?
For additional escrow account information, you can:
- Access your mortgage account online. Sign on to your mortgage account to check your escrow account balance and see when tax and insurance payments are made from that account. Sign up now if you don’t already have online account access.
- Check your escrow account disclosure statement. We review your escrow account at least once a year, and we’ll send you an escrow account disclosure statement by mail after each review. The statement will show your previous escrow account activity, and projected future activity, including any changes to your monthly mortgage payment. (The statement is not currently available online.) Learn more about escrow statements.
How we analyze and update your escrow account
What is an escrow analysis?
Each year, we review your account to make sure the escrow portion of your monthly mortgage payment covers your real estate taxes and insurance premiums, while also maintaining the minimum escrow account balance, if there is one. Increases or decreases in your annual tax or insurance bills may cause your monthly mortgage amount to change.
If bills paid from your escrow account before the escrow analysis were higher than expected, your account may have a shortage. If they were lower than expected, your account may have an overage.
After each escrow analysis, we’ll send you an escrow account disclosure statement by mail. Learn more about escrow statements.
When will you conduct my escrow analysis?
We analyze all escrow accounts annually, and we’ll schedule your analysis for the same month each year based on the state where your property is located. In certain locations, we’ll wait to conduct the first escrow analysis until one full year after you take out the loan. After that, we’ll follow the regular escrow analysis schedule for your state.
What is an escrow account shortage and what should I do if I have one?
If the real estate taxes and homeowners insurance premiums that we’ve paid on your behalf were higher than expected, your escrow will have a shortage, which will appear on your escrow account disclosure statement.
You can pay an escrow account shortage in one of two ways:
- Pay the amount in full by sending your payment along with the shortage payment coupon on your escrow account disclosure statement. Or, you can pay your shortage by phone by calling customer service at the number listed on the statement.
- Pay the amount over 12 months, with 1/12 added to each monthly mortgage payment. We’ll do this automatically if you don’t pay the shortage in full, unless the shortage amount is less than $1.
If the shortage is less than $1, you won’t need to pay it at that time. Note that even if you pay your shortage in full, your escrow payments could still increase. Learn more about changes to your payments.
I just closed my loan a year ago and now I have a huge shortage. What happened?
The real estate taxes and homeowners insurance that we’ve paid on your behalf may have been higher than expected. We may also have learned that there were past-due tax or insurance bills that weren’t paid at closing, and we’ve paid them on your behalf.
What happens if I have an overage?
If your account is current, we’ll send you a refund check if the overage amount is $50 or more. (You’ll see this transaction listed as an Escrow Refund on your account.) If the overage is less than $50, we’ll apply that amount to your first new monthly escrow payment.
Will you always refund an overage or can you apply it to my future payments instead?
If your escrow account overage is less than $50, we’ll apply it to your first new monthly escrow payment.
We’re required to send you a refund if the overage amount is $50 or more. We can’t apply the surplus funds to future escrow payments, even if those payments are increasing.
Why does my account require a minimum balance and how do you determine the amount?
A minimum balance helps ensure that if taxes or insurance premiums increase, your account can cover them without ending up with a large shortage. Minimum balance requirements are governed by federal law, or by your loan contract and applicable state law. The minimum balance is equal to two months of escrow payments (not including mortgage insurance), unless state law or your loan contract requires a lesser amount.
Changes to your escrow payments
How is my monthly escrow amount determined?
To determine your escrow payments, we:
- 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.
- Divide the estimated amount by 12 and add the result to your monthly payment.
- Determine whether any adjustments, such as shortage payments, are necessary to keep your escrow account in balance.
Will my monthly escrow amount ever change?
It may. We review your account at least once a year to make sure we’re collecting the right amount to cover your projected taxes and insurance premiums. If these payments increase or decrease, we’ll recalculate your escrow payment amount during your escrow analysis. This is separate from the calculation to determine whether you have a shortage or overage, so your payment amount could increase even if you pay your shortage in full.
Any changes to your escrow payment amount will appear on the escrow account disclosure statement you receive each time we review your account.
Why did my real estate taxes or homeowners insurance increase?
If you have questions about changes to your taxes or insurance premiums, contact your local taxing authority or your insurance company.
When I closed my loan I paid real estate taxes and insurance as part of my closing costs. Why are you collecting funds for bills I already paid?
The tax or insurance payments you made at closing were for bills that were due immediately, or for the initial deposit to your escrow account. We continue to collect funds in your escrow account to cover future real estate taxes and insurance premiums when they are due.
Where can I see the amounts currently listed for my tax and insurance bills?
Sign on to your mortgage account and select the Escrow Details link to see the most recent amounts paid for your real estate taxes and homeowners insurance. Keep in mind that these amounts reflect payments we’ve made in the past. If they don’t match your most recent tax and insurance bills, it’s because we haven’t paid those yet.
If you have a new loan, and we haven’t made any payments from your escrow account, the amounts listed on your Escrow Details page are based on what we received when closing your loan.
I’ve scheduled automatic payments for my mortgage. What will happen if my escrow payment amount changes?
If you’ve set up automatic mortgage payments through our Preferred Payment PlanSM, or under Transfer Money & Make Payments in Wells Fargo Online®, we’ll adjust your payments automatically based on your new escrow amount. Your first monthly payment for the new amount will be due on the effective date shown in your escrow account disclosure statement. If your automatic payment frequency is weekly, bi-weekly, or semi-monthly, these payments may increase prior to the effective date so that they add up to the full payment amount when they are due.
If you’ve set up automatic mortgage payments from your Wells Fargo checking or savings account using our online Bill Pay service, you will need to update future payments with the new amount shown in the escrow account disclosure statement, starting with the payment due on the effective date.
If you’ve set up automatic mortgage payments through a non-Wells Fargo bill pay service or banking site, or another third-party, you’ll need to update future payments with the new amount shown in the escrow account disclosure statement, starting with the payment due on the effective date.
Guide to understanding your escrow account disclosure statement
We review your escrow account at least once a year, and send you the results in your escrow account disclosure statement. Here’s a guide to the information you’ll find.
Account summary and contact information
At the top of your statement is a box highlighting mortgage and escrow account details. It also includes customer service information if you need assistance.
The section with your payment information appears on Page 1 of the statement. It shows your current monthly payment amount, your new monthly payment amount, and the date when the new amount goes into effect. This information will vary depending on whether you have a shortage or an overage.
Payment information that appears if you have a shortage
If you have a shortage — meaning that we’ve had to pay more out of your escrow account than you deposited into it —you’ll typically see two different options for your new payment amount:
- Option 1 takes effect if you choose to pay your entire shortage up front. It doesn’t include a “shortage/prepayment” amount as part of your new monthly payment.
- Option 2 does include a “shortage/prepayment” amount as part of your new monthly payment. It takes effect if you choose not to pay your entire shortage up front.
In some circumstances — when the shortage amount is very small, for example — there won’t be an option to pay the shortage up front, so your statement will show only one amount for your new payment.
If your statement does include an option to pay the entire amount up front, there will be a shortage payment coupon at the bottom of Page 1. Detach the coupon and send it with your shortage payment if you choose this option.
Payment information that appears if you have an overage
If you have an overage — which could mean you’ve deposited more into your escrow account than we’ve paid out of it — the new payment shown here will list your shortage/prepayment amount as $0.
If your overage is $50 or more and your account is current, we typically include a refund check for the overage amount below the payment section, at the bottom of Page 1. If your overage is less than $50, we’ll apply it to your first new mortgage payment instead of sending a refund check.
Projected account activity
This section shows your expected escrow activity in the coming year. You’ll see the total projected disbursements (payments) from your account, as well as the activity from month to month.
For each month, we’ll list the required minimum balance for your account, along with the balance w e expect it to actually have. The difference between these two amounts corresponds to your current shortage or overage amount.
Account activity history
This section shows the amounts actually paid to and from your escrow account during the previous year, along with the amounts we had projected.