Federal Mortgage Law · 24% of the SAFE examhard
Correct answer: Spread the shortage repayment over at least 12 months
Shortage rules: if the shortage is EQUAL TO or GREATER THAN one month's escrow payment ($400), the servicer must spread repayment over AT LEAST 12 months. The $800 shortage = 2× the monthly payment, so the 12-month minimum applies. The servicer adds ~$67/month ($800 ÷ 12) to the escrow payment. Demanding a lump sum would violate RESPA. The servicer CAN offer a longer spread (e.g., 24 months) but cannot shorten below 12.
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