02 Nov What is the difference between an Escrow Shortage and an Escrow Deficiency?
If you don’t understand the difference between an escrow shortage and an escrow deficiency – you are not alone. Many attorneys even get this confused.
Regulation X defines a deficiency as the “amount of a negative balance in an escrow account.” This happens when a mortgage servicer has advanced funds to cover disbursements (such as property taxes, homeowners insurance, association fees, etc.) which causes a negative balance in the escrow account.
An escrow shortage occurs when there is still a positive balance in the account but not enough to pay the estimated items that need to be paid during the next period.
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