Escrow abuse is the practice of using escrow accounts inappropriately to generate more income from hapless borrowers.

Escrow or impound accounts are required by lenders to pay future persistent expenses such as real estate taxes and insurance premiums. Monthly payments and reserve accounts are determined by a complex system and your monthly bill is adjusted whenever property taxes or insurance premiums vary. However, these escrow payment adjustments often result in overcharges to homeowners sometimes ranging in the amounts of $200 to $1000.

Escrow errors include miscalculations by the loan servicer of monthly payment amounts, incorrect, late or even non-payment of tax bills or insurance premiums as well as incorrect reserve levels. Escrow shortages happen when insufficient funds are held to cover future bills and overages occur when excess funds are held in the homeowner’s account.