Some people might consider them a windfall, a little extra cash they hadn't expected and could put to good use.

Diane McNamara is not one of those people.

Her lender, CitiMortgage Inc., has sent her large checks each of the last two years because, according to her reading of her most recent statement, she is being "over-escrowed."

How much? Last year, the refund was $600. This year, it is a whopping $2,000.

The size of the 2009 credit was not only astounding, McNamara says, "it really angered me, so I did some research."

She invited me to verify the numbers - the mortgage is on an investment property in Manayunk - and then asked me to imagine if this percentage of "held" funds were multiplied by 50 million loans.

Now that's a windfall.

I shared her research with a few experts, but before I get to their thoughts, let me explain what escrow is.

Section 10 of the federal Real Estate Settlement Procedures Act limits the amount that a lender may require a borrower to hold in an escrow account for paying taxes, hazard insurance, and other charges related to the property in question.

The lender also is asked to provide initial and annual escrow-account statements. Each month, the borrower is required to pay into the escrow account no more than one-twelfth of the total of all disbursements payable during the year, plus an amount necessary to cover shortages.

In addition, the lender may require a cushion, limited to no more than one-sixth (two months) of the total disbursements for the year. An annual account analysis is required, with immediate notification of shortages (to be paid in a lump sum or monthly).

Excesses above $50 must be refunded.

The lender decides whether the borrower must maintain an escrow account. HUD rules limit only the maximum amount. State law or mortgage documents can allow for a lesser amount. About 15 years ago, there was a push to get lenders to pay interest on escrow-account balances, but it went nowhere.

McNamara asked CitiMortgage the tough questions about her particular case, and I contacted CitiMortgage on her behalf.

Philadelphia mortgage broker Fred Glick says it looks as if the lender is "taking the right amount of money per month. I don't understand why she is getting so much back."

Holden Lewis, columnist for, agrees.

"After her taxes are taken out in February and insurance is taken out in March, she has an outstanding balance in her escrow account of $390.60, which is one-sixth of her total annual payments taken out of escrow," Lewis says.

"The law doesn't say that the escrow account must contain a balance equal to one-sixth of the annual payments out of the account," he says. "It says that, as the balance accumulates, the maximum cushion is one-sixth of the expected payments out of the account."

My advice: Be proactive, like McNamara. You might be lending your lender money, interest-free. And we do that already. It's called a bailout.