Why Did I Get a Disbursement Check From My Mortgage Company?

Receiving an unexpected check from your mortgage company can be surprising. Many homeowners are initially confused about the check’s origin and purpose. These disbursements are typically legitimate refunds or adjustments to your account, not errors or scams, but understanding their source is important.

Understanding Common Reasons for a Check

One frequent reason homeowners receive a check from their mortgage company relates to escrow accounts. An escrow account is a specialized holding account managed by your mortgage servicer, used to collect funds for property taxes and homeowner’s insurance premiums, which the servicer then pays on your behalf when due.

Surpluses in an escrow account, often referred to as escrow overages, occur when the amount collected exceeds actual expenditures for taxes and insurance. This can happen due to an initial overestimation of annual costs, a decrease in your property tax assessment, or a reduction in your homeowner’s insurance premiums. Your mortgage servicer conducts an annual escrow analysis to review account activity and adjust your monthly payment for the upcoming year.

If this analysis reveals a surplus amount above a certain threshold, your mortgage servicer is generally required to refund that excess. This refund is often mailed as a check, separate from your regular mortgage statement.

Mortgage companies may also disburse funds related to insurance premium refunds. If you switch homeowner’s insurance providers or your insurer issues a refund, it might be sent directly to your mortgage servicer. As the servicer pays your insurance premiums from escrow, they will then forward that refund to you. Similarly, if there’s a reduction in your property taxes or an overpayment is made to the local tax authority, the refund may be sent to the mortgage company if they manage your tax payments through escrow, which they subsequently pass on to you.

Disbursements from Specific Mortgage Events

An overpayment during a loan payoff is one scenario where checks from your mortgage company can arise. When you sell your home or refinance your mortgage, the exact payoff amount includes principal, interest, and fees. If the amount sent to pay off the loan slightly exceeds the precise calculation, the mortgage servicer then refunds the overpayment to you.

Refinancing your mortgage can also result in a disbursement check due to closing adjustments. During the refinance process, various costs and payments are prorated, such as interest, property taxes, and insurance premiums. These prorations, along with other closing cost adjustments, can sometimes create a net credit in your favor at closing. This credit may be issued as a check directly from the closing agent or from the new mortgage servicer.

Occasionally, funds sent by a borrower might not be correctly applied to their mortgage account. For example, if an extra principal payment is made but misapplied, or if an incorrect payment amount is submitted, these unapplied funds may sit on the account temporarily. Once identified, the mortgage servicer will typically return these funds to the borrower as a disbursement check.

What to Do When You Receive a Check

Upon receiving a check from your mortgage company, first examine the check itself. Look for payee details, verify the amount, and check for any memo lines that might offer clues about its purpose. Comparing the check’s details with your recent mortgage statements can sometimes provide immediate context.

Next, contact your mortgage servicer directly to inquire about the check’s origin and purpose. Use the official contact information found on your monthly mortgage statements or their official website, rather than any contact details printed on the check itself, to avoid potential scams. Be prepared to provide your loan number and the check details to help them research it.

Review any accompanying letters or documentation that arrived with the check, as these often contain explanations for the payment. Also, consult your most recent mortgage statements and any annual escrow analysis statements you may have received. These documents can help you identify if the check is related to an escrow overage or another account adjustment.

Do not immediately spend the funds until you have fully understood and verified the reason for the disbursement. Once you have confirmed the legitimacy and purpose of the check with your mortgage servicer, you can then confidently deposit the funds.

How to Proactively Understand Your Mortgage Account

Understanding your mortgage account can help you anticipate future disbursements. Regularly reviewing your annual escrow analysis statements is valuable. These statements detail projected costs for property taxes and homeowner’s insurance, comparing them against funds collected in your escrow account. The analysis will show if there is a surplus, shortage, or cushion, directly impacting your future monthly payments or leading to a refund.

Monitoring your monthly mortgage statements is another important step. These statements provide a detailed breakdown of your payment, showing how much is allocated to principal, interest, and escrow. They also track any credits, debits, or unusual activity on your account. Being familiar with these details can help you spot discrepancies or understand account adjustments that might lead to a check.

Many mortgage servicers offer online account access. Their online portal allows you to view payment history, access past statements, and communicate directly with customer service. This digital access helps you stay informed about your mortgage balance and escrow activity.