Escrow & Title
What is 'aggregate adjustment' in a mortgage escrow account and what does it prevent?
AA. An upward adjustment to escrow to cover anticipated expense increases
BB. A RESPA-required calculation ensuring lenders don't collect more than a 2-month cushion in escrow; prevents lenders from holding excessive escrow reserves✓ Correct
CC. A downward adjustment when property taxes decrease
DD. The annual reconciliation between estimated and actual escrow expenses
Explanation
Under RESPA, lenders cannot collect more than a 2-month cushion in escrow accounts. The aggregate adjustment ensures that, when all 12 months of escrow payments are aggregated across all items (taxes, insurance), the account balance doesn't exceed the allowed cushion. This protection prevents lenders from requiring excessive upfront escrow deposits at closing.
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