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Home >> Lending >> Home Mortgage
Mortgage Payment Problem
I am having a problem with my mortgage lender. I have a positive escrow balance, but the lender is demanding that I increase the balance so that I have a full year's worth of taxes in my escrow account. They have increased my monthly escrow payment for $90, so that I can catch up to their target for my escrow balance.
My payment is $500. It should be $410. Can they force me to pay the over/short; is this legal? They are saying that I have to have one year's worth of taxes in escrow in advance. What about the RESPA act?
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 RESPA is a law that restricts what escrow amounts may be charged and held. Your documents for your loan should specify if the lender will be allowed to hold up to a one-sixth cushion in reserve. That is the maximum amount they can hold over what is expected to be paid out.
You should also have received a statement from your loan servicer taking you month by month through what was in the account to start with, adding your monthly escrow payments and showing the projected disbursements. That ending balance could be less than what they want to hold on deposit, but again is no more than one-sixth of what they'll be paying out.
The bank, depending on that ending balance, has the option of charging you a one time amount to bring the starting balance to where it needs to be, or they can spread that amount over your next year's payments. This is what they are required to do. If they don't, and they pay your account into a negative, they are in effect providing you with an interest free loan for your taxes and insurance payment. Banks are not in the business of doing that. In a nutshell, yes, they absolutely can charge you an additional amount, but within regulatory guidelines.
Published on BankingQuestions.com 10/16/08
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