Umm, Can anyone help me with a mortgage question?

[Ilsa]

We refinanced our home in Dec. 2002, which means our escrow and everything was refigured, and the estimate was that the servicing company would pay our city/county taxes in Dec, when they had always paid them before.

Lo and behold, in late 2003 they paid them early, and there was no discount for paying them early and they would not be late until after 1/31/04, but the paid them in mid November. This triggered a shortage in our escrow (because it was two payments short) that they are wanting us to make up every month this year.

Granted, it is only about $94 dollars a month extra, and i expected to pay about $30-35 a month more anyway for higher insurance and a slight increase in taxes, but I'm pretty PO'ed about the mortgage company creating this problem.

I've contacted the local loan officer, and she is checking into it, but I wonder if anyone has any suggestions.

[Blue-Jay]

1. There's a possibility that I can access your account.

If you wanted to PM me the name of the mortgage company.

[ProfessorGAC]

2. Don't Know There's Much You Can Do

I'm on the board of a small community bank, and the escrow system is what it is. It's pretty hard to get them to recalculate because you're not only covering the shortage from November, but also increasing the level for this year (so you won't be short again), plus a safety margin.

You could ask what they use for the escrow growth factor (that's bank-speak for the safety margin). If the total of all these increases show that you'll exceed the provision for increased taxes and insurance, they'll adjust back down. The EDI systems all have those things programmed in.

But, if they've used to high a factor to allow for growth of taxes and increased cost of insurance, then the bump may be higher than it needs to be. You'll get all that back in the end, and they may lower the escrow after 12 months anyway, but it's worth checking into.

If that growth factor seems reasonable, then all you're seeing in the increase is the make-up, and normal valuation to assure no future shortages.
The Professor

[Ilsa]

3. I just got a call from them...

They told me a different story, that it was my taxes that had jumped not my insurance, but that doesn't look right either. I think part of the problem is that they didn't use a high enough growth factor for anything, which is why we're playing make-up for the shortage, along with the early payment.

We may be able to opt out of escrow as our LTV is below 75%. Question is, can I trust my husband (and myself, to some degree) not to spend the difference if all we are paying is P&I? I guess it all evens out at a later date.

Thanks for all the help and suggestions, though. I really appreciate it.

[ProfessorGAC]

4. Unless Your T&I Are Really High. . .

. . .the yield on that money is practically not worth worrying about. In my case, the interest i'd get back if i dissolved my escrow (which we could do as well), given the short term of everything (by definition, 11 months at most and 0 months at the lowest) would be about $3 per year.

For that "loss" i would rather just hold the system as is. That being said, my wife and i have never had a shortage, so they've always calculated our increases pretty accurately and we've always had just a little bit more in there than we needed. (Usually less than $40 after all payments, and sometimes as little as $15.) So, our folks have done well by us.

Whether you can trust your husband not to spend the difference is something i can't answer, and not sure i'd want to even if i could. Might make you mad at me if i gave the wrong answer.
The Professor

[Blue-Jay]

5. I'd strongly recommend keeping the escrow account.

Just as long as you stay on top of it. Know when your insurance is due, and call the mortgagee about two weeks in advance to make sure they paid it. Same with taxes. Also, make sure your insurance company has the correct mortgagee clause (the address where they send the bill) and that you advise your agent any time there's a change. (ie. your refinanced and there's a different loan number, or the mortgage company decides to out-source the hazard insurance function to a third party and the billing address changes)

Sure, that's money that YOU could be earning interest on instead of the bank, but it certainly is a lot less of a hassle than coming up short when the taxes are due. I suppose you could always delete insurance from escrow and leave the taxes. Most insurance companies offer monthly payment plans.

(you'd think I work in the industry or something ;) )

[trof]

6. I hate escrow.

I avoid it whenever possible.
When I pay the taxes and insurance, I damn well know they're paid.
About 3 mortgages ago, in spite of a 60% LTV, the bank INSISTED on escrowing for T&I.
You guessed it. In Feb. of the next year I get notice of a tax lien by the town. Somehow the bank "forgot" to pay the taxes. Finally got it straightened out (I thought).
When we moved and applied for a new mortgage, the tax lien was STILL on my record.
Finally got THAT straightened out.
:grr:

[skippysmom]

7. close the escrow, if you can

Here's my experience. Our lender wanted to stick us with an "escrow servicing fee" of $30/month, so we closed our account. Now I just have the money I would have paid into escrow direct deposited into my savings account, and when insurance and taxes come up I'll write the check myself.

[tigereye]

8. escrow can be a pain

but if they keep on top of it, it saves some headaches. The problem is when the taxes keep going up and they keep jacking the escrow up to compensate ( I think a certain level of escrow beyond what is required is required by law). I am now paying more in taxes per month than in principal and interest, since my mortgage will be done soon.