It is important to stay current on all mortgage payments for the short term. First, contact your lender to verify the accuracy of the escrow increase. They should tell you exactly what payments they made from your escrow account (taxes and insurance or anything else?) and show you exactly what money came into the account. From that, you should be able to verify that there was, indeed, a difference from their projection that results in a shortage. Chances are that your property taxes have increased. Hopefully, you have secured your own affordable insurance and they did not do it for you at a higher-than-needed rate. Assuming they indeed underestimated the escrow needed, you will have to cover the cost. Think of it as a jump in your tax and/or insurance bills. If you think you will have difficulty making mortgage payments, it may be a good idea to request a loan modification from your lender or a mortgage refinance from another lender. Be sure to agree only to terms that you will be able to handle in the future. Don't agree to a modification that you can't afford. When inquiring about refinancing, check whether your financial institution charges closing costs. These may be small, but before signing, always be aware of added costs when changing your original loan. The federal government has established a new loan modification program. You can get more information about mortgage modification through the Home Affordable Modification Program at http://makinghomeaffordable.gov. Another way to address your mortgage costs is to carefully reexamine all of your household expenses to see if there are ways to increase income or reduce expenses, or both. For additional assistance and information about budgeting and paying your mortgage, also consider contacting a nonprofit credit counseling agency with certified housing counselors. We would like your feedback on this Personal Finance Frequently Asked Question.

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