[Help with managing] Escrow

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[Help with managing] Escrow

Postby almeida » Sat Aug 31, 2013 2:57 pm

My mortgage has an escrow account attached to it. My taxes and homeowners insurance both went up this year (surprise, surprise). I learned about the increases months ago when the tax bills went out and I assume the bank has known for a while too. I have been waiting for some kind of notice from the bank informing me that my monthly payment is going up but, so far, they haven't sent anything. Also, the website still tells me that my next payment amount is the same amount it has always been. Because they haven't told me otherwise, I've been paying the same amount I've always paid, which is my required payment plus a little extra to pay off the loan faster. When I checked my loan activity today, I noticed that some of my most recent extra payment went to principal and some went to escrow. Is the bank allowed to do that? Are they required to notify me that my escrow payment went up? Is it possible to get out of escrow and just handle the payments myself? Thanks for the help.
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Re: [Help with managing] Escrow

Postby LadyGeek » Sat Aug 31, 2013 3:27 pm

First, I retitled your thread. If you want to change it, just edit the Subject line in Post #.
almeida wrote:... I assume the bank has known for a while too.

This is the key point. Do you know absolutely for sure that your tax assessment was communicated to whoever pays the escrow? When I had an escrow account, there were explicit instructions on how to forward insurance and tax assessment bills. Normally, there's plenty of advance notice that you can get the paperwork forwarded in time for payment.

Remember that you are the one responsible for the payments, not the bank. Since you haven't checked for some time, you may be late. You need to be proactive and contact the bank - more probably it's being handled by a 3rd party.

As to getting out of escrow, I was able to do that once I paid down my mortgage below the 80 % LTV (Loan to Value) ratio. This also got me off the PMI (Private Mortgage Insurance) hook.
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Re: [Help with managing] Escrow

Postby Grt2bOutdoors » Sat Aug 31, 2013 7:47 pm

If the mortgage required an escrow account, then it is the responsibility of the mortgage servicer to collect the principal,interest,taxes and insurance (PITI), calculate the escrow and usually it will hold a minimum/maximum of 2 months taxes and insurance as a reserve or escrow. The servicer may have contacted you - each year they prepare an escrow analysis showing the overage/underage in the account and will either refund you the amount greater than 2 months insurance/taxes or will advise you of the increase/decrease in your required escrow amount. The advice is usually sent via snail mail, not e-mail - it may just be that the mail never reached your mail box (lost).

The servicer is within their rights to collect the new escrow amount plus principal and interest, even if you did not receive the letter. If you were deficient in sending the correct amount, you would be hit with a penalty for insufficient payment. Given that scenario, be thankful that did not happen to you because you happened to send a prepayment amount. My advice is to give the mortgage company a call and inform them you did not receive the escrow analysis and advice indicating the payment was increasing, and you would like a copy. That is, after you verify they have the correct mailing address.
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Re: [Help with managing] Escrow

Postby Alskar » Sat Aug 31, 2013 11:45 pm

almeida wrote:My mortgage has an escrow account attached to it. My taxes and homeowners insurance both went up this year (surprise, surprise). I learned about the increases months ago when the tax bills went out and I assume the bank has known for a while too. I have been waiting for some kind of notice from the bank informing me that my monthly payment is going up but, so far, they haven't sent anything. Also, the website still tells me that my next payment amount is the same amount it has always been. Because they haven't told me otherwise, I've been paying the same amount I've always paid, which is my required payment plus a little extra to pay off the loan faster. When I checked my loan activity today, I noticed that some of my most recent extra payment went to principal and some went to escrow. Is the bank allowed to do that? Are they required to notify me that my escrow payment went up? Is it possible to get out of escrow and just handle the payments myself? Thanks for the help.

I had this type of thing happen over and over again. Even worse, my county gives a 3% discount if one's property tax bill is paid in full by the due date. The escrow company failed to make the deadline a few times and it cost me hundreds of dollars which they refused to take any responsibility for.

To answer your question: Yes, they're supposed to tell you when they need to increase your escrow withholding. In my experience, they seldom do. I believe they have the right to direct funds to your escrow account if the balance is projected to be too low to meet your obligations for insurance, tax and such.

Eventually I realized that I'm more reliable than the escrow company so when I refinanced I refused to setup an escrow account. I now keep my "escrow" money in a reward checking account earning 2.25% APY. I pay my insurance and property taxes on time and my blood pressure is lower. Now every year my mortgage processor threatens to sign me up for insurance because they think I haven't paid my insurance when I have. Every year I have to send them proof of insurance even though my policy is the same as it always was. Escrow company's seem to be really disorganized.

I tried to be "let out" of the escrow on my mortgage but that didn't go over so well. You may need to do a zero cost refinance through First Internet Bank (http://www.firstib.com to get out of the escrow.

Good luck!
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Re: [Help with managing] Escrow

Postby almeida » Mon Sep 02, 2013 1:28 pm

My most recent mortgage statement came electronically on August 30 for the payment that's due October 1. It still shows the original total due with no mention of requiring larger escrow payments. In May, I received by mail a summary of escrow activity. It shows the new tax amount, but not the new insurance amount because the letter came before the yearly policy renewal date. The letter doesn't say anything about larger escrow payments either. The insurance company's website shows that it is fully paid and I'll double check with the town tomorrow when they reopen to make sure my taxes are current too. I'll also call the bank and find out what happened with my recent payments and to ask about getting out of escrow. I'd much rather handle it myself. Thanks for the advice and information.
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Re: [Help with managing] Escrow

Postby almeida » Tue Sep 03, 2013 8:16 am

My loan was transferred from the bank to a servicing company in May, which is the time that the servicing company usually does a yearly escrow analysis. Because the loan had just been transferred, it was put on hold for some period of time. Because it was on hold, the analysis was not done. Because the analysis wasn't done, my the payments to escrow are still based on last year's taxes and insurance and are significantly below what they should be. As a result, my escrow account went negative, so they dipped into my extra principal payment in August to cover the difference. (It turns out they didn't do this for September payment because the escrow balance wasn't negative.) After explaining all of that to me, they gave me the option to undo what they did and instead reapply the full amount of my extra payment toward principal as of the date I made the payment. I took that option, obviously. I also requested an escrow analysis so they'd get the correct payment amount going forward. The bank does not typically allow borrows to get of escrow, unfortunately. The servicer put in a request for me anyway, but I'm not hopeful. What a pain. You'd think if they require escrow, they'd run analyses more often to make sure people are paying enough. Oh well.
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Re: [Help with managing] Escrow

Postby LadyGeek » Tue Sep 03, 2013 3:24 pm

The best you can do is consider it a "learning experience" and move on. The next thing you want to do is to test your negotiating skills. Take a look at what just happened.

The escrow company didn't manage your account correctly and put your insurance and property tax payments at risk. As a result, you are requesting to do this on your own.

Follow-up on the servicing company's request to remove you from the escrow requirement. You need to be proactive here- they have no incentive to do this for you (it takes away their business).

If it's rejected, find out why. Then, correct the situation and ask again. Without further impediments, your request should be granted.

I got my flood insurance requirement dropped by simply asking the mortgage company how to go about the process. Once it was completed (via a survey and FEMA approval), I submitted the documentation to the mortgage company and they acceded to my request. My point is that being proactive helps - it costs nothing to ask.
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Re: [Help with managing] Escrow

Postby almeida » Tue Dec 31, 2013 10:34 pm

After a few phone calls and a couple written requests, the bank let me out of escrow. The process was a little bumpy because they notified me that my escrow was cancelled after I had already sent a payment that included an amount for escrow. I had to file another written request to get that amount refunded instead of applied to principal. It was a little bizarre because I had to provide proof that I made the payment even though their systems showed the payment was cleared. Very strange. In the end, I got my freedom and now have a separate savings account set up for my taxes and insurance. The bank, by the way, is First Place Bank. As i said before, they say that they don't typically let people out of escrow, but they didn't fight too hard after I filed the paperwork.
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