Federal Mortgage Law · 24% of the SAFE exameasy
Correct answer: Deficiency = the account currently has a negative balance; Shortage = a projected shortfall at next analysis
These are distinct concepts under RESPA. DEFICIENCY: the escrow account has a negative balance RIGHT NOW (the servicer has already paid out more than collected). SHORTAGE: the account balance is projected to fall short at the NEXT annual low point (not yet negative, but heading there). Deficiency can require faster repayment (30 days or 2-month spread minimum). Shortage must be spread over at least 12 months. Knowing this distinction is essential for RESPA compliance questions.
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