Escrow Recalculation Low Share Balance Disclosure Calculation Quick Tips

The Escrow Recalculation Low Share Balance Disclosure Calculation is completed on each escrow loan every year, to verify that the member has the correct amount of funds (no surplus/no shortage) in his escrow share account.

In April 2014, the member does not have enough funds in the escrow share account to satisfy the upcoming year’s payments.

The Escrow Recalculation Low Share Balance Disclosure Calculation involves the following steps:

1. Determine amount and date of all projected disbursements.
2. Calculate the projected monthly share deposit by totaling the disbursements for the year and dividing by 12. In this example: (1326.43 + 365.00)/12 = 140.96.
3. Calculate running balance for each month from a beginning balance of 0.00.

4. Mark the lowest balance (negative value) as the Low Balance (LB).
5. Calculate the cushion, usually the monthly deposit amount multiplied by 2 ($140.96 x 2 = $281.92.)
6. Determine the amount needed to raise the Low Balance to the cushion amount ($281.92 – (-968.63) = 1268.55). This will be the required starting balance.
7. To complete the disclosure, calculate a new balance figure for each month using the required starting balance.

8. The surplus or shortage is the difference between the required starting balance and the projected starting balance. Any surplus over $50.00 must be returned directly to the member. Otherwise the monthly deposit amount is adjusted. Calculate the adjustment to the monthly deposit amount by dividing the surplus or shortage by 12. In this case, a shortage: the required starting balance of $1268.55 – the projected starting balance of $1050.49 = a shortage of $218.06. 218.06/12 = $18.17. Therefore, the monthly deposit, and thus the loan payment amount, must be increased by $18.17 (140.96 + 18.17 = 159.13). If the member pays the shortage before the new payment amount takes effect, the monthly escrow portion of the payment can be reduced back to $140.96.