We have received notice the property tax on a residential property has been lowered. Of course this will require a change in the escrow calculations going forward. We have received a check from the county for the difference in the original tax amount paid and the current reduced tax amount. Can we apply this refund to the escrow account and calculate the surplus at the annual review or are we required to refund the borrower for the same amount upon notification of the change in tax amount?

I would immediately issue a short-year statement, send the surplus to the customer and lower their escrow payment.