Refinance (error by them)

[paysensmom]

We refinanced in August. The bank just sent us the dreaded escrow shortage letter. I called the company that handled our refinance and we tracked the error. The title company (so the guy says) only put our school tax on the paperwork. Then the refinance company missed that error and it all went through. Fast forward to right now and by February 1st we either pay $1893 and our payment will still go up $100 (I understand that it must go up because they didnt factor all of the taxes.) or our payments go back to just $5 short of what they were before the refinance. This is a rental property so we refinanced to get a smaller payment and hope to sell within a year. (We are military and renting to prior military and we have an assumable VA loan).

So, my question is, is there anything we can do besides scream from mountain tops which title company and refinance company not to use?

The biggest issue I have is that we paid the title company $2,000 and they didnt do their job properly. The refinance company made money off of us as well and they also didnt find the error and processed the loan with incorrect numbers and we are the ones now paying for it.

Do we have any recourse?

 

[mrsklamc]

I don't think so, but I'm certainly no expert. Maybe someone will chime in with better news.

 

[daughtersrus]

We refinanced in August. The bank just sent us the dreaded escrow shortage letter. I called the company that handled our refinance and we tracked the error. The title company (so the guy says) only put our school tax on the paperwork. Then the refinance company missed that error and it all went through. Fast forward to right now and by February 1st we either pay $1893 and our payment will still go up $100 (I understand that it must go up because they didnt factor all of the taxes.) or our payments go back to just $5 short of what they were before the refinance. This is a rental property so we refinanced to get a smaller payment and hope to sell within a year. (We are military and renting to prior military and we have an assumable VA loan).

So, my question is, is there anything we can do besides scream from mountain tops which title company and refinance company not to use?

The biggest issue I have is that we paid the title company $2,000 and they didnt do their job properly. The refinance company made money off of us as well and they also didnt find the error and processed the loan with incorrect numbers and we are the ones now paying for it.

Do we have any recourse?

You may be able to spread the shortage over a longer period of time. We had a problem with our escrow and Wells Fargo spread the shortage over 36 months with no interest.

 

[aprilchem]

I'd also say maybe not, since you are both at fault (them for the error, you for not checking the escrow amounts to make sure they're calculated correctly).

 

[Gracie09]

Read the paper work you signed when you refinanced. My guess is there is an indemnification in there protecting the title and closing company from something just like this. It sucks but this is why you personally should always go over the numbers when closing. We did and found an error, not a huge ant of money, but enough to have it redone

 

[sweetdana]

You may be able to spread the shortage over a longer period of time. We had a problem with our escrow and Wells Fargo spread the shortage over 36 months with no interest.

This is incorrect.. I am an UW and have worked at a mortg co for well over 10 yrs.
Your options are limited to none. Most lenders will not "extend " an escrow over 12 months, and prolly not on a recent closing. There is a small chance if the lender is also the company who generated the loan, but if you used a broker, this is reduced to nearly 0. As the lender did not make there error.

Usually you will skip your 1st payment to help out though. IE if you close 01/15 your 1st payment will be usually due 03/14 not 02/01. So that should help out. maybe not the full amount but should cover some of the funds due!

Also you can look at seeing about cheaper HOI, to reduce the over all escrow account amt. IE if you can cut 300$ off your HOI the blow will be a little less hard.
OP I am so sorry, this happens a lot with brokers

 

[kymom99]

I used to keep an escrow account, but refinanced years ago without one. I haven't regretted it. One interseting thing i was told by a mortgage broker though, you get a better interest rate WITH an escrow account. Only very slightly better, but still..Strange but true.

 

[sweetdana]

I used to keep an escrow account, but refinanced years ago without one. I haven't regretted it. One interseting thing i was told by a mortgage broker though, you get a better interest rate WITH an escrow account. Only very slightly better, but still..Strange but true.

It is .25 of a discount point. The reason is, an escrow company (not the lender) holds the funds and pays the lender the fee to collect the interest through the live of the esc account. It is not a better rate, unless you use that 1/4 of a point to buy the rate down.

(NY it is illeg to charge this, so they lose fee and it is free)

chances are you are required to keep the esc account for 12 months. (or pay the lender the .25 of a point on the loan to take it off..

 

[crisi]

Read the paper work you signed when you refinanced. My guess is there is an indemnification in there protecting the title and closing company from something just like this. It sucks but this is why you personally should always go over the numbers when closing. We did and found an error, not a huge ant of money, but enough to have it redone

Yep. In all those pieces of paper you signed there was one that released the title company from liability in the case of a mistake.

 

[hsmamato2]

this is the exact reason I refi'd and now escrow,and pay my own taxes... I kept getting shortage/fix it notices,and I got sick of it. Guess what? I know exactly what my tax bill is, and I escrow my own money. when it's due,I pay it. Simple. And we got a great rate at refi too..so....to OP...this stuff happens all the time, I don't think you can do anything except pay it,since it's taxes you owe anyway (in essence, you weren't paying them before, time to pay the piper) I've been there,I didn't like it either.

 

[Swimalie]

It is .25 of a discount point. The reason is, an escrow company (not the lender) holds the funds and pays the lender the fee to collect the interest through the live of the esc account. It is not a better rate, unless you use that 1/4 of a point to buy the rate down.

(NY it is illeg to charge this, so they lose fee and it is free)

chances are you are required to keep the esc account for 12 months. (or pay the lender the .25 of a point on the loan to take it off..

Not always a fee or higher rate for not using their escrow. We have had 5 mortgages and will not go with a lender that charges a fee nor a higher amount to not escrow.

 

[Shelly F - Ohio]

SO this is money you were required to pay but didn't. So now you owe it. Its not like the title company cheated you out of money or took money from you. It just happens to be money you were required to pay and have not. It will only increase our escrow for the year. No biggie. Since it was money you should have paid to begin with.

 

[paysensmom]

It isn't just what we would have paid. We would have paid almost $100 more per month (I have never argued that I know we should pay that). That has been since August, so 7 payments. They also want how ever many months cushion. They aren't asking for $700, they are asking nearly $2,000!!!! I could live with $700, not $2,000. I talked to the broker and he said that the plus side is our total loan amount is almost $2,000 smaller because of this error. BIG DEAL, that isn't benefitting my family right now.

 

[kymom99]

The way my broker explained it was that people who do not escrow are a higher risk for foreclosure. Same as if you have a lower credit score and they charge a higher rate. Not any kind of fee.

 

[supersnoop]

How much equity do you have in the property? Since it's a rental, I assume you have over 20%. Most mortgage companies will allow you to opt out of escrow based on equity (irrespective of rate). That would eliminate the cushion they're requiring you to fund.

 

[tvguy]

I agree with those who say you have to pay it.
But your numbers don't add up. If the correct escrow amount only increases your payment by $100 a month, and you refinanced 5 months ago, that only adds up to $500. $1893 over 5 months you are behind adds up to $378 more a month.

 

[manning]

Gotta watch those finance companies. I refinanced with a different bank. Closing almost came to a halt. The original bank applied the escrow money to the loan balance. The new bank realized it was not our mistake and allowed us to close and we went right to the county and paid the taxes. And the old bank paid the late charges.

It pays to have your lawyer at the closing.

 

[crisi]

It isn't just what we would have paid. We would have paid almost $100 more per month (I have never argued that I know we should pay that). That has been since August, so 7 payments. They also want how ever many months cushion. They aren't asking for $700, they are asking nearly $2,000!!!! I could live with $700, not $2,000. I talked to the broker and he said that the plus side is our total loan amount is almost $2,000 smaller because of this error. BIG DEAL, that isn't benefitting my family right now.

Unfortunately, those things should have been caught AT or BEFORE closing - you closed on a loan $2000 less, and now that amount needs to be made up. You signed paperwork that had all the amounts itemized out, and agreed to them, and released the title company from fault (and probably everyone else involved). Every closing I've done (five), they've faxed me (well, emailed the last few) the closing paperwork a day or two early to look over.

If it makes you feel better, its no different than had your furnace gone out - you'd need to come up with thousands right away. Or any of the other zillon things that hit the checkbook as a homeowner. With homeownership, having that emergency fund is critical - because SOMETHING always comes up.

When we first built this house - fifteen years ago - the bank escrowed taxes based off the bare lot. And then, the bank had the wrong address on the mailings, so we never got any of the notices that we were behind on our mortgage or that our escrow amount had been adjusted. Until the foreclose paperwork arrived certified mail - they made sure I got that! I think that was $6k. Payable within 30 days or they'd start foreclosing. I did my share of ranting, but I had to write a check for $6k to the bank within 30 days.

 

[Debbie7452]

There's a limit on how much cushion is allowed by law. You might check on that aspect. I agree that you are stuck paying the money.

My mortgage lender(B of A) forgot to pay my school taxes one year. By the time I figured it out, we owed a hefty penalty. It may seem obvious they were responsible for paying the penalty money, but I had to fight tooth and nail to get reimbursed that money. It took 18 months and many hours of phone calls before I prevailed. We refinanced and went with a different lender.

 

[GatorMomInNC]

SO this is money you were required to pay but didn't. So now you owe it. Its not like the title company cheated you out of money or took money from you. It just happens to be money you were required to pay and have not. It will only increase our escrow for the year. No biggie. Since it was money you should have paid to begin with.

I think the issue is that he wasn't told about this at the closing. Couldn't plan out with the payments were going to be over the year. In fact perhaps OP would not have gone with this loan if he had known the actual monthly payments would be higher, especially sinc it is a rental property.