Start with the expected escrow disbursements
List each projected tax, insurance, or other permitted escrow item with its expected amount and month of payment. The timing matters because a large tax bill early in the cycle can create a much lower projected balance than the same bill paid near the end of the cycle.
Run a month-by-month trial balance
For each month, add the projected borrower escrow deposit and subtract projected disbursements. The running balance shows the expected low point during the analysis period. Aggregate analysis looks at the account as a whole rather than maintaining a separate cushion for each escrow item.
Apply the selected cushion carefully
Federal rules generally limit the cushion a servicer may require, but loan documents and state law can impose additional limits. The software can help calculate a selected cushion, but the servicer remains responsible for using the correct legal assumptions for the specific loan.
Use the result to prepare disclosures
The calculated monthly escrow amount and projected activity feed the initial or annual disclosure. Actual servicing events can differ from the projection, so annual analysis compares expected and actual account activity and determines whether a surplus, shortage, or deficiency exists.
Use software when the calculation becomes repetitive
Prepare initial and annual escrow disclosures and perform a 12-month aggregate escrow analysis on your Windows computer.