Refinance (error by them)

[Kellydelly]

We re-fied about a year ago (closed mid February) and in August we got the dreaded escrow shortage letter from the bank. The payment they wanted from us was only around $400, though. I don't remember how much our monthly payment changed, but it wasn't an awful lot. Now we are waiting for the lovely escrow overage check they will likely send us . The re-fi was handled by inept people from the bank so we weren't surprised to find that the escrow was screwed up.

 

[sweetdana]

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.

It is a 2 month cushion. .. and yes, an escrow company (not lender) would be responsible for paying this. It is in the contract with the lender for holding the funds. (Legally require to not make late payments.)

 

[Shanan]

Last one chiming in. I do hate for anyone to have an escrow shortage but unfortunately it is common. We just bought a house October 2013 from a retired lady. Since we had separate closings I did ask my closer was the seller over 65 & yes she was. Our taxes were escrowed based on sellers over 65 exemption. I know that our escrow is going to be way short & it will be awhile before it gets recalculated so we are putting back some each month to cover the escrow shortage. We are just guessing on how much it will be short. Sorry for the shortage to OP but unfortunately escrow shortages are more the norm then not.

 

[DetroitDisney]

I am in the mortgage industry as well, and I can say that escrow shortages are very common, especially with constantly increasing property taxes. Honestly, I generally recommend folks to exclude the tax/ins from their payment to avoid any drama.

This way, you can keep on top of how much these things are. It does require you plan accordingly for large tax/ins payments though.

 

[barkley]

I am in the mortgage industry as well, and I can say that escrow shortages are very common, especially with constantly increasing property taxes. Honestly, I generally recommend folks to exclude the tax/ins from their payment to avoid any drama.

This way, you can keep on top of how much these things are. It does require you plan accordingly for large tax/ins payments though.

in our case there wasn't going to be an escrow shortage, but a huge overage.

when we were buying our current home we looked to how much the property taxes would be, and the average historical increase. the lender kept insisting our figures were wrong and wanted the escrow to be set up for 3x higher than what we knew we needed-and kept saying 'don't worry, in 6 months we'll look at what the actual need is and if you're right you can get a refund'. we didn't want a refund, we wanted our payment accurate.

we opted out of having an escrow account. we pay our taxes and insurance ourselves. there was no difference in the interest rate we were charged, and when we re-financed a year ago w/our credit union we were told it's becoming more and more common for people to do this.

not hard to do-we have our mortgage payment auto pay out of our bank account each month, and at the same time we have another amount go into what we call our 'reserve account' (savings account). each month the reserve gets 1/12th of our yearly property taxes, homeowners insurance as well as auto (paying it twice a year saves about $5 a month vs. monthly payments), and other home expenses that come up non monthly (propane, summer and winter lawn treatment, yearly generator inspection...). when the new property tax statement comes alerting us what next year's amounts will be we just adjust the auto transfer accordingly.

 

[paysensmom]

All of the paperwork was correct in the good faith estimate. The paperwork was correct when the broker sent it to the title company. Someone at the title company didn't put the entire tax amount in. They only put in the school tax. The title company sent the paperwork back to the broker where it was looked over and missed. They were already putting in a large amount for the escrow because the broker said that he liked to make sure that the escrow was funded well. (A lot of good that did us right?)
The problem has nothing to do with the property taxes increasing. I have talked to the broker and he sat down with the owner of the company on Friday and will call me on Tuesday with their "solution". I am praying that they will do something to rectify this situation. I have no issue paying to make up the difference in what we should have been paying per month (about $100) more. I have a HUGE problem having to pay nearly $2,000 for an escrow shortage on a refinance that is six months old.
The biggest thing that irritates me is paying a title company $2,000 and they did NOT do their job properly. I am not a fan of paying for incompetence.

 

[ruadisneyfan2]

I am in the mortgage industry as well, and I can say that escrow shortages are very common, especially with constantly increasing property taxes. Honestly, I generally recommend folks to exclude the tax/ins from their payment to avoid any drama.

This way, you can keep on top of how much these things are. It does require you plan accordingly for large tax/ins payments though.

That's us!
Since we bought our home in 1996, our taxes have gone from $3200 to $8800. I think mortgage companies like to escrow because if people fail to pay their taxes & lose the home, the mortgage bank has to fight for their share.


I always joke that by the time we pay off our mortgage, the monthly tax amount will be as much as our original mortgage payment. Maybe even sooner.

 

[dcfromva]

Sorry your escrow wasn't figured out correctly.

Here is a link to HUD RESPA FAQs Figuring Escrow Accounts

Without having all the figures, it would be difficult to speculate on whether or not they are figuring things properly. On first blush, it seems like there is a big discrepancy, but they are allowed to have a (maximum) 1/6th cushion (based on when the balance is at it's lowest). Without knowing how much you taxes and insurance (and whatever else is required?) are and when they are due, it would be impossible for folks on the budget board to figure this out.

I was wondering if the 2,000 discrepancy resulted from the escrow balance from your previous loan didn't get applied to your new escrow account, but was applied to the loan? Again, this is just speculation.

 

[DetroitDisney]

All of the paperwork was correct in the good faith estimate. The paperwork was correct when the broker sent it to the title company. Someone at the title company didn't put the entire tax amount in. They only put in the school tax. The title company sent the paperwork back to the broker where it was looked over and missed. They were already putting in a large amount for the escrow because the broker said that he liked to make sure that the escrow was funded well. (A lot of good that did us right?)
The problem has nothing to do with the property taxes increasing. I have talked to the broker and he sat down with the owner of the company on Friday and will call me on Tuesday with their "solution". I am praying that they will do something to rectify this situation. I have no issue paying to make up the difference in what we should have been paying per month (about $100) more. I have a HUGE problem having to pay nearly $2,000 for an escrow shortage on a refinance that is six months old.
The biggest thing that irritates me is paying a title company $2,000 and they did NOT do their job properly. I am not a fan of paying for incompetence.

The other key word here is broker.

Brokers routinely under-account for escrows to make it appear that they are giving you a lower payment than the direct lenders they are competing with (think bank, mortgage co, etc). They don't really care because they know they will not be collecting the mortgage payments, and once the loan closes they don't need to provide any client service. Certainly not all brokers are like this, but I have heard too many stories like this to count.