What is a primary purpose of an Annual Escrow Statement?

What is a primary purpose of an Annual Escrow Statement?

• A. To provide details about future loan payments
• B. To show past year's activity
• C. To disclose insurance premiums
• D. To summarize loan terms

Answer: (B)

The primary purpose of an Annual Escrow Statement is to show past year's activity. This statement summarizes all the transactions that occurred in an escrow account during the previous year, including details of payments made towards property taxes, insurance premiums, and any other charges that have been deducted or credited from the account. This helps the borrower understand how their escrow funds were allocated and whether there are any adjustments needed for the upcoming year. Providing this information allows homeowners to verify that the amounts collected for taxes and insurance are accurate, helping them prepare for future payments. It also ensures transparency between the lender and the borrower, reinforcing trust in the management of the escrow account. This detailed accounting over the past year is essential for the homeowner or borrower to evaluate their financial obligations accurately. In contrast, while information about future loan payments, insurance premiums, or loan terms might be relevant in different contexts, they do not encapsulate the primary function of the Annual Escrow Statement. This statement focuses on summarizing and evaluating the financial activities and balances for the past year.

The primary purpose of an Annual Escrow Statement is to show past year's activity. This statement summarizes all the transactions that occurred in an escrow account during the previous year, including details of payments made towards property taxes, insurance premiums, and any other charges that have been deducted or credited from the account. This helps the borrower understand how their escrow funds were allocated and whether there are any adjustments needed for the upcoming year.

Providing this information allows homeowners to verify that the amounts collected for taxes and insurance are accurate, helping them prepare for future payments. It also ensures transparency between the lender and the borrower, reinforcing trust in the management of the escrow account. This detailed accounting over the past year is essential for the homeowner or borrower to evaluate their financial obligations accurately.

In contrast, while information about future loan payments, insurance premiums, or loan terms might be relevant in different contexts, they do not encapsulate the primary function of the Annual Escrow Statement. This statement focuses on summarizing and evaluating the financial activities and balances for the past year.