Mortgage escrow misconceptions persist as payment amounts rise

"Rising property taxes and insurance premiums continue to reshape what homeowners experience month to month, and escrow is often where that impact shows up first, said Katie Brewer, CEO of LERETA. This year's survey reinforces that many borrowers feel confident in their understanding of escrow, yet misconceptions still persist and that gap can lead to real frustration when payments change."

"The survey also found that 61% of borrowers said they completely understand how escrow accounts work, a slight increase from 60% last year. Escrow accounts are used by mortgage servicers to collect funds for property taxes and insurance, which are then paid on the borrower's behalf. But despite this perceived understanding, confusion remains widespread. The survey found that 39% of borrowers mistakenly believe their total monthly mortgage payment cannot change if they have a fixed-rate mortgage and an escrow account,"

"Among borrowers who experienced a payment increase, 62% said higher property taxes contributed to the change, up from 57% last year. Nearly half (48%) cited higher homeowners insurance premiums, while 21% pointed to rising flood insurance costs. More than one-quarter (26%) also cited interest rate changes. Payment increases continue to catch many borrowers off guard. Among those who saw their monthly payments rise, 60% said they were surprised by the change, compared with just over half last year."

Rising property taxes and insurance premiums are increasing monthly homeowner costs and often affect escrow accounts. 61% of borrowers said they completely understand escrow accounts, up slightly from 60% last year. However, 39% mistakenly believe total monthly mortgage payments cannot change with a fixed-rate mortgage and an escrow account. Among borrowers with payment increases, 62% cited higher property taxes, 48% higher homeowners insurance premiums, 21% rising flood insurance costs, and 26% interest rate changes. Sixty percent of those with higher payments were surprised. 93% recognize escrow covers property taxes and 85% recognize it covers homeowners or flood insurance. LERETA works with servicers to deliver timely tax and flood data so borrowers receive earlier, clearer communication.

Read at www.housingwire.com