The day-45 escrow analysis is the first reconciliation a seller-carry holder runs between the closing-day escrow estimate and the verified tax and insurance amounts. The analysis takes an afternoon, produces the borrower notice of any payment adjustment, and sets the trust account up to fund every disbursement across the year.

Step 1 — Pull the verified amounts from day-30

The day-30 verification produced a written record of the property tax amount, due dates, and parcel identification, and the hazard insurance premium, renewal date, and policy number. Pull those records from the loan file as the basis for the analysis. Where the records contradict the closing statement, the verified records control.

Step 2 — Project the next twelve months of disbursements

List every escrow disbursement scheduled in the next twelve months — first installment property tax, second installment property tax, hazard insurance renewal, flood insurance renewal (where required), HOA escrow (where the loan includes it). Capture the date and amount for each. The total is the projected annual escrow disbursement.

Step 3 — Calculate the monthly escrow deposit

Divide the projected annual disbursement by twelve to set the borrower’s monthly escrow deposit. The result is the base escrow payment that fully funds the year. Compare the base payment to the closing-statement projection. The difference is the adjustment.

Step 4 — Set the §1024.17 cushion

Regulation X §1024.17 caps the aggregate escrow cushion at one-sixth of the projected annual disbursements — two months of average disbursement. Set the cushion at or below the cap to absorb timing differences between the borrower’s monthly deposit and the disbursement date. The cushion amount sits in the trust account from the first payment.

Step 5 — Build the trial running balance

Build a month-by-month running balance projection — opening balance plus monthly deposit minus scheduled disbursements. Confirm the projected balance does not go below the cushion at any month-end. If the projected balance dips below the cushion, the monthly deposit is too low — increase it and rerun.

Step 6 — Identify shortage or surplus

Compare the current trust balance to the day-45 projected opening balance. A trust balance below the projected opening balance is a shortage; a balance above is a surplus. The shortage is cured by adjusting the monthly deposit upward across the next twelve months or by a one-time borrower deposit, at the borrower’s election. A surplus above the threshold in §1024.17(f) is refunded to the borrower.

Step 7 — Produce the borrower notice

The borrower receives a written notice of the analysis result — the projected disbursements, the monthly deposit, the cushion, and any payment adjustment with the effective date. The notice form follows §1024.17(i) and is delivered with a tracking number or electronic delivery receipt.

Step 8 — Update the loan file

File the verification records, the analysis workpaper, the running balance projection, the borrower notice, and the proof of delivery in the loan file. The file is the record a buyer, examiner, or borrower-dispute resolution reviewer will request.

Step 9 — Adjust the payment record

Update the borrower’s payment record — the coupon book, the payment portal, the ACH amount — to reflect the new monthly payment effective the next billing cycle. The first payment at the new amount confirms the borrower received the notice and the adjustment took effect.

Step 10 — Calendar the next analysis

Set the next §1024.17 annual escrow analysis for twelve months from the day-45 analysis date. The annual analysis follows the same workflow with one additional step — reconciling the prior-year projected balances against actual disbursements.

Frequently Asked Questions

What if the day-30 verification produced no record from the carrier?

Re-verify before running the analysis. An analysis built on the closing-statement projection rather than verified amounts is an analysis that produces a wrong borrower payment. The verification call is the foundation of the analysis.

What is the difference between a shortage and a deficiency?

A shortage is the trust balance running below the projected balance plus cushion. A deficiency is the trust balance running below zero — the account is in the negative. Regulation X §1024.17(f) treats the two differently and sets distinct cure paths.

Does the §1024.17 analysis apply to a private-party seller carry?

The §1024.17 framework applies to mortgage servicers collecting escrow on federally related mortgage loans. A private-party seller-carry that collects escrow on a consumer-purpose loan falls in scope in most cases; commercial and investor-property carries follow state-law analogues. Consult qualified legal counsel on the application of §1024.17 in any specific seller-carry matter.

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