I am in the second year of my 30 year mortgage. I opted to have the bank handle the insurance and property tax payments using an escrow account.
At around the second year mark, the bank sent me a letter saying they are raising the monthly payment (by about 10%) to avoid a possible shortfall in the escrow account. Now, neither the taxes nor insurance have risen and in the cashflow analysis sent by the bank the escrow account never goes negative, the lowest balance by around $400.
My question is, is there any way I can opt out of this payment increase? It is a bit annoying to be forced to set that money apart and it feels a bit disingenuous on the part of the bank: if nothing has changed, then why does the escrow payment need to change? Is this something banks commonly do?