That would be a great question to ask your attorney. Sure seems that it would be logical to apply it to the amount owed, rather than sit in “never never land”, but since laws vary from state to state and there are no attorneys here, guessing your best bet is contacting yours.
Mortgage companies review your escrow account once a year. There are rules that mortgage companies must follow in terms of how much can be held in your escrow account. If there is a shortage, they ask for payment, or add it to your monthly payment to make it up. If there is an overage, they must refund it. I suggest talking to the lender again, this time a supervisor.