Twenty-five dollars and twelve cents

Good morning. There is a line on the statement that came Saturday which reads, word for word:

My monthly payment went up by twenty-five dollars and twelve cents, and until Saturday I could not have told you why. I have had this mortgage for eleven years and have opened exactly one of these envelopes, which is the one on the table.

The escrow account is the portion of a mortgage payment that is neither principal nor interest. A servicer holds it and pays your property tax and your insurance premiums out of it as they fall due. Mine also covers flood insurance, for a corner of the yard sitting inside a mapped zone that I learned about several weeks after closing.

All of it runs on a federal rule called Regulation X, at 12 CFR 1024.17, and the arithmetic on that page turns out to be checkable line by line.

Item 1 — where the payment comes from

The statement projects what the servicer expects to pay out on my behalf over the coming year. Mine says $6,141.96, which is the property tax after a reassessment plus the insurance premium that came back higher in June.

Twelve into that gives $511.83. Add the $25.12 they are collecting toward the shortage and you arrive at $536.95, which is the figure printed at the bottom of the page. Two lines of arithmetic and the number stops being mysterious.

Your own statement will carry different figures. These describe one account in one county.

Item 2 — how much they are allowed to hold

Servicers keep a cushion on top, so that a tax bill arriving early does not empty the account. That cushion has a legal ceiling: under Regulation X it cannot exceed one sixth of the year's estimated disbursements, which comes to two months' worth.

A sixth of $6,141.96 is $1,023.66. The target balance on my page reads $1,023.66. I ran it twice on the back of the envelope, having half expected to find something to complain about.

Worth knowing that the federal figure is a maximum rather than a standard. A state can require less, your mortgage document can require less, and plenty of servicers hold less than they are entitled to.

Item 3 — three words that mean different things

The same page uses surplus, shortage and deficiency, and they are not interchangeable, though the letter reads as though they might be.

Shortage is what I have. The balance came in under its target without ever going below zero. Where a shortage is smaller than one month's payment, the rule lets the servicer collect it over twelve months or more rather than asking for the whole thing at once. Mine is being collected that way, which is why the increase is twenty-five dollars rather than three hundred.

Surplus is the reverse, and it has a threshold attached. Fifty dollars or more has to come back to you within thirty days of the analysis. Below fifty, the servicer may refund it or roll it into next year, whichever it prefers.

Deficiency means the balance actually went negative and the servicer covered the difference out of its own money. That one I have never had, and I have no idea what a household experiences when it does. If you have been through it, I would like to hear how it went.

Scope, ten minutes

The money meter

Freddie Mac PMMS, 27 Aug 2026. Federal Reserve, 29 Jul. BLS, 12 Aug.

Adjuster's note

My servicer has done nothing wrong here. Every figure on that page traces back to a rule I could look up in an afternoon, and each one held when I checked it. I read other people's documents for a living for thirty years and filed ten of my own with the staple still in, which is a thing I would have found funny in somebody else.

Day twelve on the telephone call to my insurer. The full policy copy I asked for is eight days out and has not turned up.

If your own statement landed this year, what did the payment do, and did the page tell you why?

Tomorrow: six tenths of one per cent, taken off a retirement account every year since 2011, and three days of trying to find out what it pays for.

Read the policy before you need it.
— Rita