1. What is Aggregate Adjustment?

Aggregate adjustment is a calculation used in escrow accounting to determine the difference between the required cushion amount and the lowest balance maintained in the escrow account. This adjustment helps ensure proper escrow fund management and compliance with regulatory requirements.

2. How Does the Calculator Work?

The calculator uses the aggregate adjustment formula:

Where:

• \( Cushion \) — The required minimum balance or cushion amount in the escrow account
• \( Lowest\ Balance \) — The actual lowest balance maintained in the escrow account during the specified period

Explanation: The calculation determines whether the escrow account maintained sufficient funds above the required cushion level throughout the accounting period.

3. Importance of Aggregate Adjustment

Details: Proper aggregate adjustment calculation is crucial for escrow account management, ensuring compliance with RESPA (Real Estate Settlement Procedures Act) requirements, preventing escrow shortages, and maintaining adequate funds for property-related expenses such as taxes and insurance.

4. Using the Calculator

Tips: Enter the required cushion amount and the actual lowest balance maintained in the escrow account. Both values must be positive currency amounts. The calculator will determine the aggregate adjustment needed.

5. Frequently Asked Questions (FAQ)

Q1: What is an escrow cushion?
A: An escrow cushion is the maximum amount that can be maintained in an escrow account, typically limited to one-sixth of the total annual escrow payments by RESPA regulations.

Q2: When is aggregate adjustment required?
A: Aggregate adjustment is typically calculated during escrow analysis to ensure the account maintains the proper cushion and to determine if any refunds or additional collections are needed.

Q3: What does a positive adjustment indicate?
A: A positive adjustment indicates that the lowest balance was below the required cushion, potentially requiring additional funds to be collected to maintain proper escrow levels.

Q4: What does a negative adjustment indicate?
A: A negative adjustment indicates that the lowest balance exceeded the required cushion, which may result in a refund to the borrower if the excess exceeds regulatory limits.

Q5: Are there regulatory limits on escrow cushions?
A: Yes, RESPA limits escrow cushions to a maximum of one-sixth of the total annual escrow payments, which is approximately two months' worth of escrow payments.