National Bank Cautions About Escrow Insurance Payments
The National Bank of the Virgin Islands has written to remind loan customers, whose monthly payments include an insurance component, that they are required to deposit sufficient funds each month to cover 1/12th of the annual insurance premium, in addition to the principal and interest due.
The bank outlined that the escrow insurance component is a critical part of your monthly payment, as outlined in the Bank’s commitment letters.
"Due to the implementation of an upgraded core banking system, effective July 2020, you will not be allowed to skip the insurance component of your monthly commitment. (i.e. You cannot pay principal and interest only for January and proceed to make a payment towards the month of February, unless you pay the insurance component for the month of January.) Failure to deposit sufficient funds to cover all components of your payment obligation will result in your loan falling into delinquency status," the bank stated.
Further, the bank explained that if a customer's annual homeowner’s insurance premium is $6,000, then their monthly escrow insurance component would be $500, which is essentially $6,000 divided by 12.
"Hence, if your monthly residential mortgage payment has a fixed principal and interest component of $3,000, you should be depositing at least $3,500 each month to cover your total loan payment obligation. Please note that escrow insurance payments are still required during periods of loan moratoriums on principal and/or interest," the bank stated.