What is Aggregate accounting adjustment when closing on a home?

Answer 1

Aggregate adjustment is simply a formula lenders use to make sure they are only collecting the maximum amount of "cushion" allowed by law. In most cases, that's a prorated 2 months of your combined taxes and insurance.

When we close on your loan, you have your insurance due at one time, and your property taxes being paid out once or twice a year, depending on your state. I, as the loan officer, will look at everything and assume that if 6 months of your taxes are due at this time, we'd need to put in X months of your taxes and insurance at time of closing to make sure they have 8 months of your taxes, leaving the 2 month cushion. But, there's also insurance money in the account, which again depending on when that is paid, might be leaving the bank with more than 2 months cushion when your escrow account hits it's lowest point of the year.

The aggregate adjustment would be a credit to you, at time of closing, for whatever amount your account would be in excess of the 2 month cushion when projecting the escrow collection and payouts over the first 12 months.

Answer 2

Aggregate Adjustment

Answer 3

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RE:
What is Aggregate accounting adjustment when closing on a home?

Answer 4

It will only appear if you are paying extra on each payment for an Escrow for taxes and/or insurance.

What they do is divide the annual taxes and insurance by 12 for your monthly amount for escrow. Then they multiply the insurance by 2 or 3 months, and the taxes by a variable number of months depending on when they are next due. That's the amount they initially estimate withholding.

Then they run the escrow projection out for a year, adding in the amount paid in each month, and deducting out the projected payments. Then they look at the lowest balance over that year, and if it is "too high" according to federal guidelines based on the taxes and insurance, they rebate you the difference.

I call it "the voodoo number" because I've never met a loan officer that really understands how it's calculated anyway.

Answer 5

Yes, there are certain topics that if I delve into them, it'll put me on the bummer path for the remainder of the day. I pass on those.