Escrow shortage- help me understand

mammabear

Mar 5, 2015 at 12:14pm

Some mortgage programs REQUIRE an escrow account. And yes, they need a cushion due to teh schedule of tax payments due here in NJ. Unfortunately, when you refinance, and the wrong tax numbers are used, you can easily get a shortage letter.

FYI...escrow accounts are highly regulated by law. Lenders are only allowed to keep a certain cushion. It's usually around 2 months.

mammabear

Mar 5, 2015 at 12:14pm

truegrid said:
Never had interest bearing with any escrow mortgage accounts as well - this is why I find it odd not more regulated/audited around this process.

It's actually HIGHLY regulated.

TarheelsInNj

Mar 5, 2015 at 1:40pm

mammabear said:
Some mortgage programs REQUIRE an escrow account. And yes, they need a cushion due to teh schedule of tax payments due here in NJ. Unfortunately, when you refinance, and the wrong tax numbers are used, you can easily get a shortage letter.

FYI...escrow accounts are highly regulated by law. Lenders are only allowed to keep a certain cushion. It's usually around 2 months.

Thanks, that's good to know. I was just taken by surprise because last year's escrow statement didn't have anything like this. But it may be because we refinanced mid-year.

Tom_R

Mar 5, 2015 at 1:56pm

Tarheeels,

Then follow the advice above and ask the mortgagee to stop your escrow payments, and send you the funds it presently holds.

When I realized I wasn't getting interest (about thirteen - fourteen months in) I asked Countrywide to stop; and it agreed, no questions no argument.

Even if your loan documents require non-interest escrow, ask. Tell them you want interest or a release from escrow. What can it hurt?

Good luck.

TomR

mammabear

Mar 5, 2015 at 2:16pm

Tom_R said:
Tarheeels,

Then follow the advice above and ask the mortgagee to stop your escrow payments, and send you the funds it presently holds.

When I realized I wasn't getting interest (about thirteen - fourteen months in) I asked Countrywide to stop; and it agreed, no questions no argument.

Even if your loan documents require non-interest escrow, ask. Tell them you want interest or a release from escrow. What can it hurt?

Good luck.

TomR

Tom, you need to get some updated knowledge on this. Countrywide?!? Our business is very different now.

scott_clark

Mar 5, 2015 at 2:17pm

I've had a shortage almost every year, due largely to tax hikes. Makes for a nice annual bonus check. For them.

Tom_R

Mar 5, 2015 at 2:40pm

mammabear,

What is the problem with asking?

And what does Countrywide having been my mortgagee have to do with anything?

TomR

scott_clark

Mar 5, 2015 at 2:46pm Edited

good point.

conandrob240

Mar 5, 2015 at 2:58pm

We were able to very easily decouple the escrow from the mortgage about 5 yrs ago when the escrow increase thing happened to us. NJ bank. I expected to get a "no" or at least a hassle but it was a very simple "yes" with a few forms to sign. I like being in control of insurance and taxes and love not having the $ tied in escrow. It can't hurt to ask.

ParticleMan

Mar 6, 2015 at 5:50am

Tom_R said:
mammabear,

What is the problem with asking?

And what does Countrywide having been my mortgagee have to do with anything?

TomR

I believe her point about Countrywide is that they no longer exist and have not for several years. Thus indicating how long it's been since you might have done this. But I do agree it can't hurt to ask. The worst they can do is say no.

fed123

Mar 6, 2015 at 5:58am

I am having the same issue with my mortgage company. When I called them they said it was because the due date of the payments had been switched around by the Township. I have not done any further investigation, but intend to, at some point

pearlie

Mar 6, 2015 at 6:00am

I also was able to close our escrow account and begin paying our taxes and insurance directly. It's not that hard to pay our own bills, and we got to pocket the bank's cushion (which was over $2K!). Part of the reason I did this was because there was a lot of confusion with the bank and it's much simpler to do it ourselves. Good luck.

scott_clark

Mar 6, 2015 at 6:03am

my lender outright refuses to honor my overpayment wishes. i have to call them every time i send in an extra principal payment to redirect where they applied it.

knowlton

Mar 6, 2015 at 6:26am

Scott,
Why won't they honor it?

scott_clark

Mar 6, 2015 at 6:56am

beats me. they seem only to honor it after I call them every month threatening to contact NJ DOBI. Evidently, APPLY TO PRINCIPAL on the payment doesn't register.

yahooyahoo

Mar 6, 2015 at 7:08am

wendy said:
campbell29 said:
We have never paid our taxes as part of our mortgage. I think for the first 3 months, they require it. But after 3 months have elapsed, just tell them you don't want to escrow for taxes. Then you pay the town directly every quarter. The bank should also refund you whatever they have included in escrow so far.

Good to know. I'll check it out. Thanks.

It used to be much easier to do this prior to the 2008 housing collapse. Now, many mortgage providers require escrow for property taxes even if you have substantial equity in the house. It will depend on the lender to some extent.

TarheelsInNj

Mar 6, 2015 at 7:33am

I spoke to my lender today and it appears that I "meet the qualifications," whatever that may be, so I've submitted a request for escrow deletion. Fingers crossed that's an easy process, especially with the next tax bill due 4/1.

mammabear

Mar 6, 2015 at 10:55am

Awesome @TarheelsInNJ!!

As I said, some lenders will allow you to "waive escrows" and some will not. Much of it can depend on your loan to value and credit history. In any case, in this day and age, it's much harder to opt out.

Also, FYI...if you opt to waive escrows on a new loan, the add to fees is .25. That's a standard Fannie add.

Tom_R

Mar 6, 2015 at 4:00pm

mammabear said:
Tom_R said:
Tarheeels,

Then follow the advice above and ask the mortgagee to stop your escrow payments, and send you the funds it presently holds.

When I realized I wasn't getting interest (about thirteen - fourteen months in) I asked Countrywide to stop; and it agreed, no questions no argument.

Even if your loan documents require non-interest escrow, ask. Tell them you want interest or a release from escrow. What can it hurt?

Good luck.

TomR

Tom, you need to get some updated knowledge on this. Countrywide?!? Our business is very different now.

???

dave

Mar 6, 2015 at 4:06pm

Perhaps this can help explain things

http://youtu.be/gsOy-6vlNa0

ParticleMan

Mar 7, 2015 at 10:34am

mammabear said:
Awesome @TarheelsInNJ!!

As I said, some lenders will allow you to "waive escrows" and some will not. Much of it can depend on your loan to value and credit history. In any case, in this day and age, it's much harder to opt out.

Also, FYI...if you opt to waive escrows on a new loan, the add to fees is .25. That's a standard Fannie add.

I don't mean to tell you your business, but I'm unable to find anything that indicates that the points are a fee from Fannie (or Freddie). Fannie seems to indicate that it's at the lender or servicer's discretion as to whether to allow escrow to be waived.

Can you cite something indicating that the fee is from the GSEs?

conandrob240

Mar 7, 2015 at 2:26pm

When applying for the loan, some lenders add a small amount if you want to waive escrow. But once you start the loan, in my experience, it is entirely possible and not all that uncommon to apply to remove the escrow and have it granted. At that point, they do not add any points or penalty. It doesn't hurt to ask.

mammabear

Mar 7, 2015 at 6:11pm

ParticleMan said:
mammabear said:
Awesome @TarheelsInNJ!!

As I said, some lenders will allow you to "waive escrows" and some will not. Much of it can depend on your loan to value and credit history. In any case, in this day and age, it's much harder to opt out.

Also, FYI...if you opt to waive escrows on a new loan, the add to fees is .25. That's a standard Fannie add.

I don't mean to tell you your business, but I'm unable to find anything that indicates that the points are a fee from Fannie (or Freddie). Fannie seems to indicate that it's at the lender or servicer's discretion as to whether to allow escrow to be waived.

Can you cite something indicating that the fee is from the GSEs?

Discretion to allow it is one thing. Standard add to rate is another. The escrow waiver is a LLPA (loan level price adjustment) of .25%. There are many LLPA's. That's how we come up with rates.

https://www.fanniemae.com/content/pricing/llpa-matrix.pdf

Tom_R

Mar 7, 2015 at 7:47pm

Tom_R said:
mammabear said:
Tom_R said:
Tarheeels,

Then follow the advice above and ask the mortgagee to stop your escrow payments, and send you the funds it presently holds.

When I realized I wasn't getting interest (about thirteen - fourteen months in) I asked Countrywide to stop; and it agreed, no questions no argument.

Even if your loan documents require non-interest escrow, ask. Tell them you want interest or a release from escrow. What can it hurt?

Good luck.

TomR

Tom, you need to get some updated knowledge on this. Countrywide?!? Our business is very different now.

???

jmitw

May 10, 2015 at 5:19pm

I have an escrow shortage that amounts to a $15/month increase payment to cover it...plus an additional $15 a month to maintain the current amount....yet I am being charged $115 a month extra...as there is some other monthly fee involved...it makes no sense...

Tom_R

May 10, 2015 at 7:12pm

jmitw said:
I have an escrow shortage that amounts to a $15/month increase payment to cover it...plus an additional $15 a month to maintain the current amount....yet I am being charged $115 a month extra...as there is some other monthly fee involved...it makes no sense...

Ask mammabear.

TomR

yahooyahoo

May 10, 2015 at 7:29pm Edited

Usually once per year the mortgage company will correct any shortfall/surplus in the escrow account. This is typically a one time payment to correct the shortfall and you then pay the new monthly rate.

mumstheword

May 11, 2015 at 4:36pm

I haven't had a mortgage with an escrow account in about 15 years. The last time I had one the mortgage company "forgot" to pay my house insurance bill and 6 months later I got a letter from Allstate saying my insurance had been cancelled -- 6 months ago! It was also around the same time that they announced a higher payment for a bigger escrow cushion (they wanted a $3K cushion). That's when I switched to a non-escrow mortgage. This house I'm buying requires an escrow account, but my broker tells me I can switch it after 3 months -- which is what I will be doing. I have no problem paying my taxes quarterly and my homeowners' insurance whenever it's due.

Rob_Sandow

May 11, 2015 at 5:47pm

If you have at least 25% equity in your home, and you are paying more than today's current rate, refinance and ask for a non-escrow mortgage. You pay your own insurance and taxes, and don't have an average escrow balance of several thousand dollars which the bank is essentially holding hostage. A non-escrow mortgage does not cost any more than a traditional escrow mortgage, but they like to see at least 20% equity. But since all appraisers discount about 10% from likely sale price, you will need 25-30% equity in order to qualify.

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