Servicing Newslink Q&A: LERETA’s Chief Strategy Officer Randy Kozlowski

MBA NewsLink recently interviewed LERETA Chief Strategy Officer Randy Kozlowski about escrow management.

MBA NewsLink: LERETA recently released its annual Escrow Awareness Survey. What are some of the biggest takeaways from this year’s findings?

Randy Kozlowski: This year’s survey reinforced what many in the industry already know—rising property taxes and homeowners’ insurance costs are having a significant impact on borrowers. Nearly 70% of respondents saw an increase in their monthly mortgage payment over the past two years due to rising taxes and insurance premiums. Additionally, 60% of homeowners were either surprised by their escrow changes or didn’t fully understand why their payments increased. This underscores a major challenge for servicers in effectively communicating these adjustments.

We’re in an environment right now where affordability is already a major concern for homeowners due to rising interest rates and home prices. The fact that escrow payments are also increasing—sometimes significantly—adds another layer of financial strain and in some cases is pushing DTIs to the point where mortgage deals are falling through. According to ICE, nearly a third of the average single-family mortgage payment was made up of property taxes and home insurance this year, the highest rate since 2014. Since 2020, average home prices have risen by more than 29%, resulting in many homeowners seeing double-digit tax increases. Additionally, homeowners’ insurance premiums have been steadily increasing nationwide—home insurance costs were up 23% year-over-year in 2024.  

Borrowers may not expect their monthly mortgage payment to change, especially if they have a fixed-rate loan, so when they receive a notice of an escrow shortage, and their mortgage payment goes up unexpectedly, it can lead to frustration and even financial hardship. In fact, this year’s survey saw an increase in the number of homeowners who are concerned about making their mortgage payment if their monthly pay amount increased. Almost half of respondents said it would be a hardship if their mortgage payment went up by 25%, and 50% said it would be a hardship if their monthly payment increased by only 10%.

MBA NewsLink: Are servicers taking this challenge seriously and what can they do to help borrowers understand and deal with these issues?

As I mentioned earlier, servicers are keenly aware of this problem and are working hard to help their borrowers. But they are caught in the middle: They don’t control taxes or insurance costs; they just collect them. And so, they often take the brunt of the blame from irate borrowers. As our surveys have shown, many borrowers don’t understand how escrow works, and in truth, the calculations can be confusing and hard to explain. I’m sure most servicers would agree that some of their longest and most difficult interactions with their borrowers involved escrow accounts. Last year, 60% of the call volume at our outsourced call centers had to do with escrow accounts.

Of course, higher overall mortgage payments can become a bigger burden on borrowers and increase the risk of default.  So far, this has been manageable for the industry, since the average borrower is sitting on record levels of equity. But concerns are growing about first time borrowers who came in at the top of the market and had to stretch to qualify. Similarly, older borrowers on a fixed income and/or reverse mortgage holders may be at risk due to the climbing tax and insurance costs.

What the best servicers are doing is proactively engaging with customers, explaining potential changes and offering guidance on how they can manage rising costs. Proactive communication is key to reducing confusion and preventing negative borrower experiences.

Servicers are trying to gauge what’s coming and not wait until an escrow shortage occurs before informing borrowers about potential increases. It’s not easy to do it with precision, given that there are thousands of taxing agencies with different tax reporting deadlines and the rapidly changing insurance environment. But servicers can provide regular updates on property tax trends and insurance premium changes in general, using clear, borrower-friendly language.

Additionally, offering digital tools or self-service portals where homeowners can review escrow projections, understand their options and even receive recommendations for cost-saving strategies can go a long way.

MBA NewsLink: What does this mean for our industry as a whole?

The industry must evolve beyond simply managing escrow accounts—it must focus on borrower engagement and financial wellness. Rising escrow costs are not likely to go away anytime soon, so servicers that invest in better education, digital solutions and proactive outreach will ultimately improve retention and customer satisfaction. Borrowers want transparency and support, and the servicers that prioritize that will stand out in today’s market.

Escrow management is becoming an increasingly critical part of the borrower experience. Servicers who embrace a more consumer-centric approach—through education, technology and transparency—will be best positioned to navigate these challenges while building stronger customer relationships.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)