Lenders are responsible for collection of the appropriate amount of taxes and insurance.
The Aggregate Method of calculation must be used for establishing escrow accounts. This method is defined as the accounting method a lender uses in computing the sufficiency of the escrow account funds by analyzing the account as a whole.
Lenders are responsible for collecting the correct amount of escrows at closing. If insufficient funds are collected at closing, AHFA will require the lender to correct the shortage in addition to providing the borrower with a re-disclosed initial escrow account statement. The shortage must be corrected before the loan will be purchased by AHFA.
The Aggregate Adjustment reflected on the Closing Disclosure must always be a negative number (a credit) or zero. If your calculations result in a positive number (greater than zero), you must re-check your calculations. However, if your calculations are correct, you can only reflect a zero for the Aggregate Adjustment on the Closing Disclosure as the regulation does not permit a positive charge.
AHFA may, in conjunction with the aggregate calculation method, collect a cushion intended to cover disbursements from the escrow account that may occur before a customer's payment is received. A cushion may be no greater than 1/6th of the estimated total annual payments from the escrow account.
The cushion is generally a maximum of two months unless the state’s mortgage loan documents establish a lower or higher cushion limit. States with a higher cushion limit are reduced to comply with the aggregate calculation method. Where a state mandates a lower cushion be held, the state law applies.