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Home >> Lending >> Home Mortgage
Escrow Increases, Can I Lose My House
My escrow increased significantly (over $700.00) nine months into the loan. The change occured due to a property tax bill that was received by the servicer, which was based on prior tax assessment value 1/08 vs purchase price 5/08. The difference between the two is $80,000. As a result of this, although I pay my 30 fixed rate mortgage monthly on time, I am being charged late fees, threatened with default, and my credit is ruined. I am unemployed at this time and cannot afford any extra money. Can I lose my home? I don't qualify for a modification because I am unemployed. Over all, the property value now, as of 1/2010, has decreased $84,000 since the purchase, and the property taxes have decreased. Whose responsibility was it that this should not have happened at the loan inception? If I would have been aware at the loan inception, my payment would increase this much, I could have declined this house and kept looking. Everyone I contact, title company, loan servicer, home funding, loan owner, all shift blame to the other. Meanwhile I am the one drowning.
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 This is called "escrow shock" as you have described it. Taxes are assessed on the empty lot and that is the matter on which you were billed. That is correct under the disclosure laws lenders follow for both Truth in Lending and Real Estate Settlement Procedures Act.
At one time, the lender was required to disclose only what he estimated was going to be billed, and that was what was escrowed. The estimate was based on the facts they had, which was a tax bill on unimproved property. Many lenders began providing a notice that when the property was reassessed as improved property (i.e. with the house) that the payments would increase. The rules were amended to encourage lenders to do this and to allow voluntary payments in advance, for this increase, but this was guidance, and not a requirement. The bottom line is, the originator of your loan could have disclosed this to you when you made your loan, but there was no requirement to do so.
Speak with your current lender and explain your circumstances. They have options. If you are behind on just the escrow, but can pay the principal and interest, they may be more willing to work with you. The loan could be renewed to a manageable payment that includes all the monthly items. If your unemployment makes repayment uncertain, they will be hesitant to do this as it would appear they were trying to delay or hide a problem loan. They cannot do that.
The mortgage payments are what you need to focus on, not who should have told you the taxes could increase. There was no requirement for the latter.
Published on BankingQuestions.com 2/02/10
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