Calculating the Aggregate Adjustment
Answer by David Dickinson, BOL Guru Guru Bios
Question: How is the aggregate adjustment calculated? Does it kick in when the escrow exceeds 1/5 of the annual amount of the escrow?
Answer: This is pretty complicated to explain in a typed post. I teach a webinar for BOL on single item and aggregate analysis calculations. It takes about 20 minutes of verbal communication to fully explain this portion. You can view more information and purchase the webinar at the BOL Banker Store.
Here's a short portion of the manual I use in this webinar. I bolded the portion specifically about the aggregate adjustment.
The amounts that a lender may require to be placed in an escrow account are determined by conducting a single item analysis, (projecting each expense separately – hazard insurance, taxes, etc.), an aggregate analysis (projecting all combined expenses) and then calculating an aggregate analysis adjustment (subtracting the difference between the beginning balance of the aggregate analysis and the sum of the beginning balances of the single item analyses). On the surface it would appear that the sum of the beginning balances of the single item analyses and the beginning balances of the aggregate analysis should be the same. However, there will normally be an adjustment to the single item analyses summation although occasionally, the adjustment is zero. Hence the confusion concerning escrow analysis.
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