Scam or just stupid company? - mortgage escrow account

[biosurfer1]

I got a letter from my mortgage servicing company the other day stating my mortgage payment was going up $400/month!

I started looking at the letter and its going up for two reasons. First, all the houses in the area have recovered in price and my appraised value shot back up to the max prop 13 limit. In reality this was only about $75/month and expected. No problem there.

Second, they tell me they WAY, WAY under estimated my escrow payment last year and now I have to make up the shortfall. I probably should have caught their mistake last year but after refinancing in 2012 and getting a refund from my escrow account last January, I figured they had it pretty close. Now that I look back, I realize they were way wrong.

They estimated my escrow account payment should be $198/month based on who knows what. My property takes have NEVER been below $3000 so right there they were way off and that didn't include insurance.

Is this some sort of scam I'm not seeing? They are not charging interest on the shortfall and have spaced out the repayment over 36 months but this is bullcrap. This isn't a $10 or $20 difference in payment, its 33%+ more!

Thoughts?

[GH85Carrera]

You just have to make up what you did not have to pay for last year. It sounds like the money is owed you just got a year of deferred payments. It sucks that they are were that far off. I bet just one dummy employee does not know how to do their own job.

Check with the county on what property taxes are actually owed and paid. Make sure they did not hire another dummy that can't do math.

[fintstone]

Exactly, they are your bills. They predict escrow based on your previous expenses (bills,) not on a crystal ball. It is always catching up. If you overpay (taxes or insurance actually go down), then you get it back.

Just make sure that they have not paid accidently paid the same thing twice (insurance or taxes).

[flipper35]

Maybe. We had a similar situation but when we kept pushing about it we found out they had "lost" the check that was to go for our taxes. Twice. We switched banks immediately and a few months later we did receive one of the "lost" checks since we were caught up on taxes. The person in charge of our account did get fired over it. We aren't sure if it was lost or if some embezzling was going on.

I am sure I didn't explain that in a comprehensible way, but you get the idea. Make sure they show you the paper trail.

[Dantilla]

This is why I refuse to let a mortgage company use an escrow account.

I pay insurance and property tax myself, so I know it is paid on time, and don't have to put up with the incompetence of some paper-shuffler who doesn't really care.

[Rick Lee]

Escrows are pretty easy to double check. Taxes and insurance are firm numbers that show up in statements you get once or twice a year from your county and insurance co. The law requires banks to do an annual escrow analysis and refund overages. So it's not unthinkable that they have to collect shortages. It's happened to a me a few times and they send a letter saying I can mail them a lump sum check for the amount they fronted me or just tack on that amount/12 to each payment going forward. They don't get to charge fees for it; their benefit is the huge pool of interest they collect on escrowed funds between the annual or semi-annual tax and insurance payments.

[biosurfer1]

Dan- trust me, if I could do the taxes/insurance myself I would but they require it.

Rick - that is basically what happened to me. I guess I'm dumbfounded at how a company could be so stupid at math. Any moron could see that I paid $3000ish for property taxes alone in 2013, so how could the escrow monthly payment be $198??

[Dantilla]

Originally Posted by biosurfer1

Dan- trust me, if I could do the taxes/insurance myself I would but they require it.

Understood.

When I financed a property a few years ago, I was told verbally I could finance without escrow accounts. When I went in to sign closing docs, surprise, surprise, the terms included lender escrow.

I put the pen down, said I would not sign.

I was about to walk out. The mortgage agent made a few frantic phone calls, and new docs without escrow were faxed within ten minutes, so I signed.
I don't know if it was a screw-up, or if they intentionally tell the customer what they want to hear, knowing most people will sign whatever is put in front of them.
If I'm told up front that lender requires escrow accounts, I won't go any further with them. Plenty of lenders out there.

Sorry for the crap they put you through.

[biosurfer1]

Talked with the mortgage company this morning and of course, no one has any idea what the hell they are talking about. They kept telling me over and over "We made the estimate based on the fact you only paid $16xx in taxes in 2013" and I kept telling them over and over "That's not true, I paid $32xx" in taxes.

The acknowledge everyone makes two property tax payments, they acknowledge they paid $16xx to the county in December 2013 (1 payment) but no one seems to get that there are 2 payments per year and can't answer the question of why they base their estimate on 1 payment.

I guess I'm more frustrated that they let the escrow account go more than $3300 in the hole and never said a word, then they send a letter that says oops, we didn't estimate correctly, here's a huge bill.

Only good news is the CS rep said I can send a request to remove them from managing the escrow account, but of course everything needs to be up to date, so I'll be writing a big check and getting them the hell off it. I'm sure they will come up with some BS about why I can't but hopefully I won't have to deal with this again.

[fintstone]

Sounds like they gave you an interest-free loan for a year.

[MBAtarga]

Originally Posted by fintstone

sounds like they gave you an interest-free loan for a year.

^ +1

[Tobra]

Originally Posted by Dantilla

This is why I refuse to let a mortgage company use an escrow account.

I pay insurance and property tax myself, so I know it is paid on time, and don't have to put up with the incompetence of some paper-shuffler who doesn't really care.

I prefer not to loan them money for free myself.

[Dantilla]

The final straw for me was a fixer-upper house I decided to keep for a while, and financed it with an escrow account.
After a few months, I got a nasty-gram from the lender, charging me several hundred dollars extra every month, for letting the insurance lapse.

Huh?

Took a few nasty-grams from me to explain that the reason for escrow is that they are responsible for taxes & insurance!
Finally got it straightened out, but never again will I let a mortgage company be responsible for my taxes and insurance.

[biosurfer1]

Originally Posted by fintstone

Sounds like they gave you an interest-free loan for a year.

Yep, the problem is I wasn't told they were doing it nor did I ask them to. The funny thing is they require the escrow account because they don't trust the customer to make sure they are paid correctly on their "investment" and clearly they dont know what the #!@# they are doing.

Interesting part is even if I had noticed, there is no way for me to add extra payments to the escrow account. I can add principal payments, but for escrow I have to call and tell them how to do their job.

6 years of no problem tax/insurance payments on my own, 1st year of them doing it and I get this.

[fintstone]

Therein lies your problem. I have had similar happen to me as well). It is not unusual the first couple of years as they may have computed the annual amount needed before the second installment of property taxes came out, or you may have already made one of the payments when your financing went through, etc.. No one is perfect. That is why you need to check /review it every year yourself (you found the problem easily yourself once you looked). At least the mistake was in your favor (they loaned you money for free vice the opposite). Also, figuring it low makes it easier to qualify when financing/refinancing (if you were close).

[Porsche-O-Phile]

Can you just waive escrow and take care of the taxes yourself?

[biosurfer1]

Originally Posted by Porsche-O-Phile

Can you just waive escrow and take care of the taxes yourself?

Working on that...hopefully yes, but its possible they won't allow it. I sort of understand why too...if I stop paying property taxes and then foreclose, the bank is then responsible for them since they stay with the property, not the owner.

I'm also not 100% but I've read its possible the county has first rights on debt so if the house were to be sold at auction, the bank would get even less money since the county would get paid before anyone else.