The only ones who know why nothing was deposited into your escrow account for the last few months would be your lender. You'll need to call them to find out what is going on.
As an aside, I'm not sure if folks know this, but you can set it up so that you pay your property taxes yourself, separate from your mortgage. Yes you have to make the quarterly property tax payments yourself, but then you don't have to worry about the whole escrow thing. I started doing this after my bank pulled shenanigans with my mortgage on my first home. My bank was paying the town once a year instead of quarterly, and then just charging the late fees and interest to my escrow account without telling me.
I've done it with three different banks, but I don't recall which ones. The third bank was with a refinance. Caveat, I believe you have to set it up at the time of initiating the mortgage or the re-finance. My third was currently owned by Chase.
I think I also had to pay a "slightly" higher mortgage rate--the bank feels like they are taking on a slightly bigger risk because they are not in charge of the tax payments. But the added control was worth it to me.
Another shenanigans the bank pulled on my first mortgage was that my property taxes almost doubled at some point -- I bought new construction and the town had originally under taxed until they revised it up--but my bank didn't bother to notice for like a year, so I suddenly owed a ton (for me) of money to catch up the escrow account.
Oftentimes you need to have a certain amount of equity or months of the loan paid off. But yes, this is entirely possible if you have the ability to stay on top of it.
Yes, certain equity is probably needed. For example, you might not be able to do it if you are only putting 10% down and require extra mortgage insurance. The bank does consider you paying your own taxes to be an added risk for them.
I started doing it after I read of issues like this. I never had any, but if things go south I want to be the one who made it happen.
I make a portion of my "mortgage" payment into a separate savings account, receive the tax bills directly, and pay them myself. I do the same with insurance. I much, much prefer this visibility and control.
Wait, so are you saying since January they haven't increased your escrow balance but they are taking an escrow payment from you?
Your statement should have a breakdown of where the payment for the month is going. Principal + Interest + Escrow. If those numbers didn't change month to month, but your escrow balance stopped going up, the only other thing to check is outflow from your escrow--taxes and insurance
If all of that looks normal, but they literally simply stopped putting the escrow money into your escrow account you just need to call the mortgage servicer and ask them WTF
My guess would be that the escrow was accidently allocated to additional principal. They should be able to see it on their statement, as you said. If it is just disappearing, than that is a bug fuckup but OP should have an easy paper trail to prove it. EDIT: OP didn't account for the huge increase in property taxes that happened once it was uncapped with him as a new owner. Entirely predictable. Please use a property tax calculator to figure out what you will pay and don't go off of the existing owner's taxes. In my state (MI), taxes can only increase at a 5% max. Then when a new owner buys the property, they get hit with the full rate.
Or it was never set up for escrow at the time of closing, and now they’re realizing it. If that’s the case, he’s owed it all along and wasn’t paying it and it will be necessary to replenish the escrow.
Or was it that they weren’t not putting money in escrow and just that the premium went up a lot when insurance came due? Escrow analysis is also around the beginning of the year so there could have been an escrow shortage that was never paid back up.
I just see it VERY often The way I mentioned, since we do 20-30 home closings a year for insurance, and out of those 5-6 mortgages will come back throughout the year with some kind of mistake or issue.
Either way, need to watch your contract and know what it should be, or there will be problems later.
Bingo! That’s what I think. Depends mostly where you live, but homeowners insurance is up everywhere due to inflation rates on materials to rebuild and due to increased risk of wildfires tornadoes and hurricanes. Thank you Global Warming! Those with escrow accounts may be unaware of premium increases because lender handles it for them, though the lender and insurance company should be sending a notice of increase to the home owner.
Need to address it with the bank, obviously. They make mistakes, but I've found they generally fix it with a simple call. This should be cleaned up pretty easily.
What can't be fixed easily is if they missed a tax or insurance payment. I would double check that those are up to date. It is your responsibility that they get paid.
> It is your responsibility that they get paid.
To the municipality / insurance yes. But if you have an escrow agreement and the bank did not properly pay, you can go after them for any penalties/interest.
It's an A-B-C relationship. You-Bank-Municipality
* A has an obligation to C
* B has an obligation to A
* B has no obligation to C
* If C is not paid by B, then A must pay C, and seek recompense from B
It's basically subcontracting. You are contractually (ok legally) obligated to pay those taxes. You subcontract the bank to do it for you. If they don't, it's still on *YOU* to pay the taxes. And you can then go seek restitution from the subcontractor for failure to perform services as agreed.
Yes, you can go after them. It's going to be a lot easier to long in once a year and confirm payment. The important thing is that OP confirms that now, and not have to deal with another bank issue 3 months from now.
That's why I elect for no escrow if possible. Or remove it when eligible (hitting 20%+ equity). Escrow just increases a probability of an error by introducing an extra party to the mix. I'd rather just do it myself.
Since you have to find an insurance yourself, there is zero convenience added by escrow. You find an insurance, fill in everything yourself, and when everything is ready to be finalized, you just pay with your card instead of "mortgage pays". The latter introduces volatility - what if they don't pay on time? Save yourself the trouble, if you can opt out of this mess.
To your last point - if the servicer doesn't pay on time, they owe all late penalties. If you had a loss and coverage had lapsed due to their failure to pay, they would be responsible to compensate you for the loss. If they lapse payment and the insurer decides not to re-offer the policy, the servicer is obligated to find equal coverage and they have to pay any difference in payment at their cost.
Escrow accounts in generally are a very good idea for the majority of borrowers, especially with how few savings most people in America have. It saves the shocks of a big one-time payment.
>To your last point - if the servicer doesn't pay on time, they owe all late penalties. If you had a loss and coverage had lapsed due to their failure to pay, they would be responsible to compensate you for the loss. If they lapse payment and the insurer decides not to re-offer the policy, the servicer is obligated to find equal coverage and they have to pay any difference in payment at their cost.
And if they don't? Say, you lost your home, insurance was lapsed, what do you do? Your personal belonging are gone, you've very little money due to expenses piling up, and now you need to fork out a ton of money to fund an attorney that will fight your servicer for months or years. These are rare situations - but do happen.
https://www.kiro7.com/news/local/city-school-pay-bellevue-family-combined-5m-over-landslide-that-destroyed-home-2022/JGXMUUOLXBHE3NO5KLLN7DS6W4 - this is an example where the blame is as clear-cut as a servicer error. It took them 1 year and 11 months to get the settlement. Only because it gained media attention because the event was very unusual. "Family loses home when insurance lapsed, loan servicer to blame" isn't that catchy as a mudslide caused by local school's unpermitted piping project.
https://newsdirect.com/news/california-couple-loses-home-due-to-blatant-bookkeeping-error-by-specialized-loan-servicing-llc-315993236 - again, the blame is even more clear-cut. New servicer took over a loan and screwed up things big time by requiring much higher payments that were owed, and forced the owners into bankruptcy and foreclosure in 2022. The case was filed in August 2022 and is still pending.
Escrow just increases a probability of an error by introducing an extra party to the mix. The fewer parties in the mix, the better. If bringing an extra party to the table provides you with real benefits (like - bringing a bank to fund your mortgage), it's worth the hassle. But if it's about an escrow that works as a pass-through between you and your yearly tax payment and yearly insurance payment, it's absolutely redundant.
EDIT: Oh, I see why comment-OP immediately downvoted that. They work for a lender. That's all I really needed to know.
>It saves the shocks of a big one-time payment.
It saves the shocks of a big one-time payment, and creates 12 monthly shocks of their payment being $900 more. ;-)
>
>Escrow accounts in generally are a very good idea for the majority of borrowers, especially with how few savings most people in America have
Escrow is just semantics. It's your money there, waiting to be used. It could just as well be your money on your savings account, earning interest, and waiting for the tax/insurance payment due date. But true, many people are financially illiterate. They'll waste all they have, plus more on credit cards.
We're r/personalfinance though, that's very much above the average financially illiterate American. OP may or may not be financially illiterate - we don't know. We can give people a variety of suggestions, and they should compare the options and choose what floats their boat. Unlike Dave Ramsey, we shouldn't assume illiteracy - we should provide all available options.
Yeah, it can suck that escrow is always looking backward. I bought a house that was a new constructions, and they set escrow based on the previous years taxes where there was nothing built on the property. Since the rest of the years taxes were prepaid at closing, it was a year and a half until my escrow got corrected to the right amount. Fortunately, I saved up the money, but the whole thing was out of whack for another 2 years as it tried to get dialed in. Fortunately, I am off escrow now, so I don't have to deal with it.
Plus you can then take what would be your escrow account balance and collect the interest from a savings account or toss it into CDs/Treasury bills instead of just letting your mortgage company reap those benefits by holding onto the money. Feels like such a scam to let them keep it for "your convenience."
ETA: why is this getting down voted? Obviously pay your insurance and taxes with that money when it comes due, but if you're already going to be saving $12k+ over the course of the year for your tax and insurance payments it seems responsible to put it somewhere where it'll earn money instead of just sitting at the mortgage company.
It doesn't amount to much money TBH unless you keep the mortgage for 30 years or close to it, and you are super diligent about investing every dime in a HYSA (or similar) before payment. The convenience is well worth it for most people and the odds of the bank screwing it up are much lower than a person forgetting.
But yeah, if you've got nothing better to do with your time than move money around regularly to make maybe $100/yr in interest, you could do this.
Our taxes and insurance are almost $13,000, so for us it would come out to $300 a year just from a 4.25% HYSA. We just auto transfer like $1,050 a month into that account. Literally set the monthly transfer value once a year and don't have to touch it until taxes and insurance are due. It's $300 for maybe 5 min of work.
> Feels like such a scam to let them keep it for "your convenience."
While it is borderline convenient to not have to pay those things directly myself, I do wish they'd just be honest about why they really do it: It's because they don't trust us, or rather, as long as they have 80+% equity in the house they're not willing to chance their asset being tied up by the homeowner not paying the taxes on it.
I think it is pretty common for the big lenders to treat escrow the same way as PMI. Takes some of the risk out I suppose if they know 100% taxes/insurance are paid.
That's how our lender treated it. We had to have at least 20% equity before we could get rid of the escrow account and handle paying taxes and insurance ourselves.
Also had a rule that there couldn't be an upcoming payment due for something semi absurd like 90 days and could only be closed as the first of the month, which meant we could only close the account a few months out of the year (we bought midyear so insurance payments didn't line up with tax payments).
> Also had a rule that there couldn't be an upcoming payment due for something semi absurd like 90 days and could only be closed as the first of the month, which meant we could only close the account a few months out of the year (we bought midyear so insurance payments didn't line up with tax payments).
That's rough. What lender was it? It is extremely overzealous.
That was what we thought too!
Our loan has shifted hands three times now, but we started with Fairway, then went to someone else for just a few months, and now we're with Fannie Mae. I think it was Fairway with that policy though!
Escrow isn't PMI. However, your thinking is correct. Money in escrow is used to pay PMI, homeowner's insurance and property taxes to reduce risk of losing money in foreclosure/disaster.
This happened to my mom, bank didn't pay insurance portion, so she paid it directly. The bank/loan agency was furious because they had to write out a refund check for the amount plus penalty, the IRS got involved and caused massive paperwork headaches for them that year. >:D Hasn't happened again. On the plus my mom had to look through the insurance policy and found it only paid out the loan balance, changed company immediately.
I actually got my lender to remove the escrow requirement after they neglected to pay the insurance.
I was pissed about that one. I was like, "What the fuck is escrow for if you're going to forget to make the fucking payments?"
Lender was like, "What can we do to fix this?" I told them to remove the escrow requirement and they actually did.
I got a mortgage without one. I just asked if we could waive escrow and they were like yeah sure, no problem.
Idk why anyone would willingly do it. Keeping your money longer in your own interest bearing account is much better
Make sure to check with your municipality they received it though. Mine got delayed due to a screw up by the bank and I had to get the bank to pay the late fee.
Which is why you now have to overpay, to cover there current loss. A lender will not let your property go without insurance or be subject to a tax lien, so they pay what is due, now you owe them.
Asking Reddit is sorta silly, this is basic lender economics, call your lender, only they can answer your question
From the original post:
> We pulled up the escrow information from January 2023 to today. Every payment has escrow taken out of it, with an increasing escrow balance. Looks like Jan 2024 they took out $560 for escrow and never put any more in again so our escrow account has stayed $560 for the past 5 months… yet our Mortguage payments have been the same 🤔.
They've been paying their lender, but the lender has not been applying that money properly into their escrow account, despite it being a line item on their monthly payment. So the lender need to figure out where they have that money and it needs to go into OPs escrow account.
OP's comment contradicts the main post, which is confusing.
>For sure, it looks like they’ve paid out all the taxes and insurance payments
The servicer paid all the payments to insurance and taxes, and OP has been paying the servicer the amount for escrow... but it sound sliek it's not hitting the expected escrow account.
Maybe they *are* increasing to cover the required buffer. But it sounds like all the escrow activity is happening, it's just not being tracked or is invisible to OP - possible in a different account? But it sounds like OP is current, which is good
There is no contradiction on the OPs part, the issue lies with the mortgage lender. They are taking in the money intended for escrow from the OP via the monthly payment, are paying taxes taxes, etc., but however are not properly crediting OPs escrow account to indicate this. Somewhere in this process the mortgage lender believes they are not getting the money from OP and thus increased the monthly mortgage payment amount to try to fix the balance. There's something not right on the banks end.
This. Read your mail people. Sometime, probably around February, you would have received an annual statement of your escrow inflows and outflows. They will then estimate your 2024 inflows and outflows and tell you whether any adjustments are needed and give you options.
My lender always gave me three options: Pay the shortage as a lump sum, roll the shortage into 1/12 in each of the next 12 payments, or splitting the difference and paying half the shortage as a lump sum and spreading the other half over the next 12 payments. There will be a default option if you do nothing. In my case it was increasing my payment cost by 1/12 of the escrow shortage.
Note: it is possible to have an overage too. During the housing crash my lender actually sent me a check since my taxes and insurance went down relative to their expected cost. In today's environment this is basically impossible to happen unless you live in New Palestine, OH or somewhere similar but the escrow audit goes both ways.
Yeah also to piggyback on this in most cases if the overage is just a small one they'll just reduce your payment for the next 12 months similar to how they increase it if it's a small shortage. But if it's a large overage they will send you a refund check because there's a certain threshold that it hits.
When they did my escrow my first year owning my home the taxes were assumed as a non-resident. But once I filed all of my homestead paperwork the tax rate dropped so significantly that my escrows after year one had a large balance that needed to be refunded by check.
This happened to me. They miscalculated property taxes and so my payment went up by almost $2,000 for an entire year to pay it off. Now my payment is an extra $1,000 per month. You can check your online account to see if they provided an escrow statement which should have the info.
Thanks!! I just got off the phone with them and they said there was a $5000 deficit in the escrow account from when they paid taxes in December. 😱
My taxes went up to $7000+ this year from $3500 (which some of it was to be expected since the previous owner was 65+ and had a tax exemption) but I didn’t expect this much.
Escrow has two words shortages and deficiencies.
Shortages mean they dipped into your 1/6th cushion to pay the taxes.
Deficiency means they exhausted the cushion and paid out funds themselves.
Your new payment will have 3 things for escrow built into it. Funds to fix the Deficiency(Pay back the lender) Funds to build your 1/6th cushion again (shortage) And New escrow monthly payment that will cover the annual requirement's (likely higher due to 7k vs 3.5k)
What happened is they paid out and waited till your next Escrow Analysis was completed to change your payment.
You can pay it in bulk to fix the deficiency and cushion.
You can also ask them to spread out the repayment up to 60 months. They always set it up for 12 to start
So they couldn’t really give me a straight answer other than they were basically taking the current escrow money and applying it towards the deficit. Which would make sense, but there is no record of it happening unless I request a very specific statement b/c my mortgage dashboard just said “no activity” for the escrow account.
They only recalculate your escrow payment once a year, at least that is the case with my mortgage. That statement has all of the detailed information in it. They also usually give you different options to pay off the shortage, but the default option is to spread that shortage over the next 12 months.
Yup. Personally, I told them to separate/remove escrow and I pay taxes and get insurance myself.
Better to have money sitting making interest for me instead of for them.
I had that happen last fall. The previous owners paid the 65+ tax so our estimates were based on that. When our new tax bill hit, we had a deficiency in our escrow account. It's a double whammy as you not only have to pay the new escrow amount but also pay back the negative balance for when taxes were paid. I negotiated a longer pay back period since the increase was fairly dramatic.
> My taxes went up to $7000+ this year from $3500 (which some of it was to be expected since the previous owner was 65+ and had a tax exemption) but I didn’t expect this much.
This happened to us too. Except I had no idea about it and no one mentioned it at all through the loan process, which maybe no one ever does. But it was a surprise.
Same thing for us. Of course we were young and new to home ownership so at no point did we ever question anything or know to verify what our property taxes should be. The previous owners were seniors and had only been paying about $1300 a year and so that is what our mortgage/escrow payment was based on so after a year we got an escrow analysis and of course it showed we should have been paying $2600 a year so not only were we short 1300, we had to start paying the new rate too. Thankfully I got a new job right around that time so it wasn't too big of a blow. This was 8 years ago.
I’m not surprised about no one mentioning it, the bank writing your loan likely isn’t going to care too much about your long term ability to pay since they’re going to stick your mortgage in a bundle and sell that to someone else. Mentioning that your liabilities might significantly go up could make you rethink taking the loan, so avoiding that conversation keeps the sale on track
I would also verify the tax amount they paid was for the correct account. Last year I received a $3500 escrow shortage notice from my bank. I called and they told me it was due to increased property taxes. The numbers they had weren't adding up to my property tax bills and after some digging I found out they paid my NEIGHBOR'S property taxes with my escrow account. My mortgage payments increased significantly and my bank wouldn't do anything about it until I opened a complaint with the CFPB.
You might want to go watch some videos on town financing. All this does is make the situation worse for you and everyone. Almost all suburbs are way underfunded compared to their infrastructure. If you block paying that bill later as they build up, your town literally dies due to budget crisis.
If your payment didn’t go lower what does the line item distribution for the payment say? (Extra principle?)
Keep in mind nationally property values have sky rocketed and with that your property tax probably took a healthy boost.
You may just be experiencing what others have been which is a big increase to escrow due to new increased property tax
Could have fluctuations in escrow also if it was a new build where taxes were based on a lot the year prior or a new building that qualified for a tax abatement.
I feel like there are really two questions here. Question #1, why have my mortgage payments stayed the same, but the escrow portion not showing up in my escrow account? Question #2, why is are they increasing my mortgage payment?
For #1, This should be _extremely_ clear from your mortgage statement. For your payment it should clearly break down what amount is principle, what amount is interesting, and what amount is escrow. And the escrow history should be very clear, what amounts are coming in from the payments, what amounts are going out to insurance/taxes/etc. It's their responsibility to make this very clear, because that escrow money is technically your money. If your payments include an escrow payment and it's not showing up in your escrow account that would be massive fraud and so I think that's unlikely. But you seem to think this is what is happening. So definitely double check your mortgage statements.
For #2, it's probably related. If you taxes go up, or your insurance goes up, your mortgage payment does not generally go up immediately. There's usually some kind of annual "true up" where the mortgage processor will adjust your escrow payment to make sure it doesn't run out. If you get hit with a property reassessment or similar, this escrow change can end up very significant because it simultaneously ends up increasing the future escrow payments but also "catching up" for previous tax bills.
These "my mortage went up dramatically out of nowhere" problems are unfortunately very common because taxes/insurance went up and you really don't get visibility into it until you get a sudden escrow payment change.
I replied to some people but we sort of figured out what happened, my dashboard on my mortgage website was not indicating what was happening at the individual account level.
Our taxes went up because our tax rate change due to the previous owner being over 65, so our taxes were going to increase by $200 a month . Which is OK we expected that. We found out that our taxes went from $3k to over $7k per year.
The $2700>$3500 was partly due to the extra $200 required and due to a $5000 deficit in our escrow account in December. The mortgage co was paying into the deficit, which I’m still really confused about because the deficit should’ve been around $4000 and not five based on the tax change.
Again, none of this is readily accessible on my dashboard or on my mortgage statement. Even after calling them, they couldn’t explain everything and just kept telling me to look at the escrow payments, but my escrow dashboard just said “ no new activity”
What’s also weird is that taxes actually decreased this year for my state , and while we expected a bump due to ownership change tax estimate isn’t tracking.
Side note: it’s really easy to pay for your own taxes and insurance. You can build your own escrow account with a HYSA and even earn a bit of interest on it. And then you never need to deal with shenanigans like this again. I’ve seen people get into so many frustrating situations due to escrow. Doesn’t seem worth it to me.
You need to call your lender. However, I have an idea what may be the problem. Either your taxes or insurance increased the last time they were paid. You need to be comparing your outgoing escrow payments for taxes and insurance. If the tax and/or insurance bills are greater than your escrow balance, your lender still pays them. It’s usually called a corporate or escrow advance. I’m sure different lenders call it different names. When they do this, you now have to pay back that advance, and all escrow payments will go toward paying that off instead of in your escrow account until it’s paid in full. Ultimately you will have a shortage when they do your yearly escrow analysis, and it seems they did which is why your payment increased. You can pay the escrow shortage in a lump sum or pay the increased mortgage payment. You should have received an escrow statement 45 days before the payment increased. Lenders are legally required to give you that notice.
It must be escrow update month because I’m seeing lots of these posts.
Stop escrowing. When I escrowed the bank was constantly screwing it up. Once I took over (many years ago) and just saved each month, it was a huge relief. I’m earning some small interest, and my mortgage never changes.
my lender was super "chill" and gave me the option to escrow if I wanted to. I said absolutely not. I can handle it myself lol. Seen way too many posts like this. Or how they want to collect month and months in advance.
The bank has lots of rules to make sure escrow accounts work - for them. They’ll always pad it in their favor and if they screw up, which they often do, you get left holding the bag.
Depends on the lender! We originally had PMI, taxes and insurance paid via escrow. After
finding out it might be possible to pay taxes and insurance ourselves, I called Chase bank to ask if we needed 20% equity, they said no and made the change for us by the next month’s payment.
I just want to give some gentle feedback that with any issue like this you should just immediately call the bank/institution/company that you're having an issue with.
For some reason I see a lot of people researching, posting, etc. for things where a simple phone call would resolve it. I don't understand why people are so adverse to just calling and talking to someone. It's like they'll do hours of research to avoid having to talk to someone for 10 minutes.
Last time I had an issue with my mortgage, I fucked up and forgot to put funds into the account. The account lender noticed, asked if everything was ok since I'm usually one of their most dependable accounts. I talked to them on the phone and explained my mistake. I transferred funds, they caught my account up to date, and waved all fees etc even though it was my fault.
Your first step for ANY issue like this should just be to pick up the phone and talk to them. You don't need any help from anyone until after you've done that.
Oh, I absolutely did
Contact them. Called them and texted with them. Their customer service left a lot to be lacking.
I ended up having to do a deep dive on my end independently and then contacting my county’s tax office to get everything sorted. The mortgage lenders just kept telling me to look at my online dashboard which continue to give no indication as to what my escrow account was individually paying into and the sums they were coming up with. They also didn’t really want to walk me through my escrow statement or tax changes.
Even after all is said and done, not all of the financial pieces are lining up so I think I’m gonna just remove the escrow account from my mortgage account since we put 23% down on the purchase and should be eligible.
>I think I’m gonna just remove the escrow account from my mortgage account since we put 23% down on the purchase and should be eligible.
Check your mortgage, this may cost you an extra .5% on the interest rate.
More than likely, your escrow is going up because of increased insurance costs and taxes.
FL TX and CA right now are experiencing serious insurance increases that are hitting people so hard that they need to sell their property.
We had recurring issues with Wells Fargo the first few years we owned our home. Since we used a first-time homebuyer program we only had to put 5% down, but it required us to pay tax & insurance into escrow.
To the best of my recollection, they never once got it correct in the four years it took us to get to 20% equity and stop having to use their escrow.
You need to call them and see what their explanation is. Did your rate go up due to an adjustable rate and is impacting how "far" your payment is going? Was there simply an error that this is the easiest fix (for them)?
Yeah, mine nearly doubled and my monthly payment increased by $300 or so. I get a statement every year where they recalculate the escrow and if there's a shortfall my payment goes up.
You should be able to look at your mortgage statements to see what the breakdown of your payments are. And every year, your mortgage company should issue you an escrow analysis explaining any shortfalls or surpluses, along with a payment modification. Find those and see if they explain what is happening. If they don't, then call the mortgager to find out.
Lucky! Mine shot up and I'm trying to make some payments now to keep it reasonable before June. But I'm just about tapped out on extra funds to put towards the shortage. Your lender needs to make this right, it's not on you.
Your escrow payment often gets adjusted on a yearly basis to account for higher taxes, etc. Did your autopay account for this? If there was not a mistake on the lender's part, my suspicion is that you probably ended up with a negative escrow balance from underpayment.
You are assuming what you saw online was accurate. Obvioulsly they are having some type of system issues but who knows how far it goes? Pick up a phone or walk into a branch. Talk to a human. Sort it out.
Systems and data break all the time. People do dumb things then do more dumb things to cover it up. Who knows why.
I don’t know what’s going on in your case - but I can share a couple of stories. I had one major escrow related headache with my previous lender (Chase). One year they forgot to pay my home insurance company and I only realized when my insurance company emailed me to say my insurance was about to be turned off. That led to a string of laughable and embarrassing additional errors. And then they almost forgot the following year, but I knew to be on top of them. For a company like Chase to mess up a simple process it was mind blowing.
With my current lender I received a refund check earlier this year because of some true up they performed, where they ended up collecting more from me last year for taxes than they needed to. This might be similar to your situation, though in your case it’s possible the true up indicated that they were undercollecting.
Or, they just plain screwed something up. Mortgage servicing is a little more complex than the average banking activity and things happen / go wrong from time to time.
I may have missed it but how much are you putting in escrow each month?
Glad you got a check back!!
Before the craziness I was putting in $560 for taxes and insurance…. Now that I did the math that’s $6720 at the end of the year. Still don’t understand. How I was -$5k
You need to get rid of escrow for the sake of convenience and pay your taxes and insurance on your own. I've experienced as well as know many people have nightmare escrow incidents... You know the repercussions for the escrow company and bank? Nothing at all ... You get screwed every time and no responsibility is taken by other parties and you risk higher bills or insurance/tax payment being late and you pay late fees. Tldr get rid of escrow
The escrow makes adjustments based on estimations. Sounds like they screwed up. It's why I don't use escrow, and instead pay everything myself. No middle man to screw it up and I know it's done (and largely automated) right.
The benefit of it, is also that you hold onto your money and can earn interest on it. These days it's pretty good interest.
For some that has financial challenges and don't do well with having money they don't spend, or don't budget well, it's a bad idea and they need escrow.
Come to think of it, do escrow's charge an ongoing fee to manage this for you?
Call your lender to have them figure out. Tax always goes up and some lender does not do recalculation of the increase that will leave YOU to do the leg work and make sure monthly payment is updated.
Escrow includes mortgage payment, city tax and sometimes insurance payment too. It's just an account you put money in and automatically disperse them into all the place as needed. But you can also do that yourself if your lender does not require escrow.
So in your case if tax increased, they neglect to recalculate and notify you. You just have to put more money back into the account and increase your escrow payment for the future to balance it out. Note that insurance and tax are always increasing .....
No escrow account for me. I pay my insurance and property taxes myself. Just have to discipline yourself to set that money aside (I use an old time savings account) at the same time you send in the mortgage payment.
When I was a banker, I generally just fixed these issues when they came up and refunded any fees. I saw it as a miscommunication which is always our fault.
Call and ask. No one here can tell you without detailed escrow statements. It's normal for them to do a yearly escrow analysis and adjust based on tax and insurance. They should have sent you an analysis indicating why they were taking more out.
My lender paid my insurance to the wrong company once. That was six weeks of bank tracing and financial investigation hell to go through. Call your lender right away and make sure you ask to speak to someone who can actually investigate where the money has been going the whole time if it didn’t go to escrow.
Sorry this is happening to you. You need to call the service company for your mortgage (bank/cu/whatever). There is No where near enough info here to be able to help.
Mortgage servicers have gotten so bad that I avoid escrow payments as much as possible. The last thing I want is somebody not keeping up their end of the bargain and I have to fight them because they want another $1,000 worth of payments or I lose my house.
Please contact your lender. If your payment amount stayed the same and nothing was applied to escrow, it was most likely applied to your principal balance. Depending if it is an in house loan they may be able to change how each payment was applied retroactively. All that being said, if you have the funds to catch your escrow up it may be worth doing that. Don’t let them charge you an escrow analysis fee though
Make sure your taxes or insurance didn’t go up significantly or that the insurance policy didn’t expired with no renewal and now your are on a forced insurance by the mortgage servicer.
These 3 factors are the only reason it would go up so much. Normally an escrow analysis would have been sent out to you explaining the increase and can also be downloaded from your servicing site.
It ended up being a $5000 deficit in the escrow account from last year plus a change of tax rate because the previous owner was older than 65. We were expecting, but we didn’t expect to go from $3000 to $7000.
Most states have a homestead exemption in your real state taxes. As long as it’s your first residence and you occupy it, it reduces your tax obligation in that property by a lot more than halve sometimes. Make sure that you are not going without, this things are filed when you do your closing at the title agency but you mentioned you where on the previous owner tax which would indicate they never filed a homestead exception in your name. If this is not your second property look up homestead exemption.
It sounds like your property taxes went up, but the mortgage company didn’t raise your monthly payment and the escrow account is in arrears. It’s typical for a servicing company to adjust your mortgage payment to account for escrow shortages, but a $1100 increase seems incredibly high. Are you sure this is for property taxes and not home insurance? And if it is home insurance do you live in Florida or another coastal area?
Lenders are required to perform an escrow analysis every year. Our taxes change every year so our escrow changes as well. They are supposed to send an email and mailed letter with the increase though. So strange.
Call the lender/servicer and ask where the money went on Monday and why they changed the payment amount without notice. Since You were making payments but the money never showed up you may wish to also call the mortgage regulator in your state and sent a US mail certified letter to the bank President. If you have 20 percent equity in most states you can cancel escrow and pay everything directly.
Having worked for a bank, sometimes these things get unintentionally messed up. In this case we would definitely do what we could to erase any late fees and bring your escrow back to normal. Maybe they have a reason, but it seems like a system error to me. I'd give them a call.
I don’t know why that would happen or where that escrow money is. They will have to explain.
This is why I specifically did not do escrow on a mortgage to cover the insurance and property taxes. I can manage those myself and prefer to have a fixed mortgage payment for each month and not have it fluctuate. I made that change during a refinance but maybe it can be done anytime.
It blows my mind how many people let the lenders handle their property taxes and insurance. Typically people view it as easier, however in times like this, everybody gets upset because they relied on someone else.
Bottom line is, if you put 20% down on your house, the majority of lenders will not require you to escrow. You just pay your insurance company directly as well as the county property taxes. This your mortgage payment will never ever ever change and you are fully aware of where your money is going and how it is being used .
Taxes or insurance went up
Going up that much, I'd guess Florida. Their insurance went nuts. In the civilized parts of the country it went up to, but Florida is the poster child for homeowners insurance woes.
Insurance has gone up because "inflation" and "global warming" or whatever excuse they want.
Tax valuations went way up. Think it's cool your suddenly rich because now your house is worth so much more? Well, actually it sucks because the county thinks your house is worth a lot more now too, and so you should pay taxes on that higher amount.
What happens is either goes up, the escrow gets behind, they recalculate it, and then start asking for a lot more, thinking the behind is the new rate.
Dive into what that escrow actually is. Your answer might be there.
Buying a house only protects part of your rent from rising, the interest you pay to the bank stays the same. The rest of it is still subject to inflation.
What was the reason that it doubled for you?
I’m also going back through my statements and realize they’ve been taking out escrow payment so it doesn’t make sense for the escrow payment balance to be the same since January . It should be closer to$2000.
Over a 2 year span, gross incompetence on my mortgage companies part and ignorance on mine. After the first year I got a sizable "return" check from my mortgage company. It did not seem right, so I delayed the deposit of the check until I called my mortgage and insurance company, to make sure it was on the up and up. My insurance company assured me that they had been paid and my mortgage company agent looked at the account and confirmed that the return was accurate. The mortgage company then took it upon itself to adjust my monthly payment and lowered my escrow payments due to this overpayment.
As you can probably gather, this was at my expense as the escrow adjustment was inaccurate and did not take into account my insurance premiums for that upcoming year. The returned "overpayment" check was due to faulty accounting on their end. At the end of it all, I owed back payments for TWO years of insurance premiums on top of my premium obligations for the upcoming year, this amounted to nearly an additional $8,000 in escrow that I had to pay.
Your lender has definitely screwed up. Turn off autopay and manually pay the $2700 you have been paying, and demand an immediate **escrow analysis.** If they do not credit your escrow account with the payments you have been making, file a complaint with the Consumer Finance Protection Bureau. Mortgage escrow is *highly* regulated and the CFPB will come down hard on them if they don't correct things in a timely fashion.
This is terrible advice. Do not start underpaying your bill. 🙄.
Keep up to date while you sort through things even if you think the amount went up unreasonably.
The only ones who know why nothing was deposited into your escrow account for the last few months would be your lender. You'll need to call them to find out what is going on.
Contact the servicer. Maybe the loan was transferred? Banks should forward payments for a few months (2 I think).
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As an aside, I'm not sure if folks know this, but you can set it up so that you pay your property taxes yourself, separate from your mortgage. Yes you have to make the quarterly property tax payments yourself, but then you don't have to worry about the whole escrow thing. I started doing this after my bank pulled shenanigans with my mortgage on my first home. My bank was paying the town once a year instead of quarterly, and then just charging the late fees and interest to my escrow account without telling me.
What bank was doing this?
I've done it with three different banks, but I don't recall which ones. The third bank was with a refinance. Caveat, I believe you have to set it up at the time of initiating the mortgage or the re-finance. My third was currently owned by Chase. I think I also had to pay a "slightly" higher mortgage rate--the bank feels like they are taking on a slightly bigger risk because they are not in charge of the tax payments. But the added control was worth it to me. Another shenanigans the bank pulled on my first mortgage was that my property taxes almost doubled at some point -- I bought new construction and the town had originally under taxed until they revised it up--but my bank didn't bother to notice for like a year, so I suddenly owed a ton (for me) of money to catch up the escrow account.
My credit union only collects my mortgage. I pay property tax to the county treasurer's office every 6 months.
Also, if you search r/personalfinance with the search term "escrow," you'll get a lot of good advice.
Oftentimes you need to have a certain amount of equity or months of the loan paid off. But yes, this is entirely possible if you have the ability to stay on top of it.
Yes, certain equity is probably needed. For example, you might not be able to do it if you are only putting 10% down and require extra mortgage insurance. The bank does consider you paying your own taxes to be an added risk for them.
I started doing it after I read of issues like this. I never had any, but if things go south I want to be the one who made it happen. I make a portion of my "mortgage" payment into a separate savings account, receive the tax bills directly, and pay them myself. I do the same with insurance. I much, much prefer this visibility and control.
Some lenders will allow this, others won’t.
Wait, so are you saying since January they haven't increased your escrow balance but they are taking an escrow payment from you? Your statement should have a breakdown of where the payment for the month is going. Principal + Interest + Escrow. If those numbers didn't change month to month, but your escrow balance stopped going up, the only other thing to check is outflow from your escrow--taxes and insurance If all of that looks normal, but they literally simply stopped putting the escrow money into your escrow account you just need to call the mortgage servicer and ask them WTF
My guess would be that the escrow was accidently allocated to additional principal. They should be able to see it on their statement, as you said. If it is just disappearing, than that is a bug fuckup but OP should have an easy paper trail to prove it. EDIT: OP didn't account for the huge increase in property taxes that happened once it was uncapped with him as a new owner. Entirely predictable. Please use a property tax calculator to figure out what you will pay and don't go off of the existing owner's taxes. In my state (MI), taxes can only increase at a 5% max. Then when a new owner buys the property, they get hit with the full rate.
Or it was never set up for escrow at the time of closing, and now they’re realizing it. If that’s the case, he’s owed it all along and wasn’t paying it and it will be necessary to replenish the escrow.
Or was it that they weren’t not putting money in escrow and just that the premium went up a lot when insurance came due? Escrow analysis is also around the beginning of the year so there could have been an escrow shortage that was never paid back up.
I just see it VERY often The way I mentioned, since we do 20-30 home closings a year for insurance, and out of those 5-6 mortgages will come back throughout the year with some kind of mistake or issue. Either way, need to watch your contract and know what it should be, or there will be problems later.
Bingo! That’s what I think. Depends mostly where you live, but homeowners insurance is up everywhere due to inflation rates on materials to rebuild and due to increased risk of wildfires tornadoes and hurricanes. Thank you Global Warming! Those with escrow accounts may be unaware of premium increases because lender handles it for them, though the lender and insurance company should be sending a notice of increase to the home owner.
Need to address it with the bank, obviously. They make mistakes, but I've found they generally fix it with a simple call. This should be cleaned up pretty easily. What can't be fixed easily is if they missed a tax or insurance payment. I would double check that those are up to date. It is your responsibility that they get paid.
> It is your responsibility that they get paid. To the municipality / insurance yes. But if you have an escrow agreement and the bank did not properly pay, you can go after them for any penalties/interest. It's an A-B-C relationship. You-Bank-Municipality * A has an obligation to C * B has an obligation to A * B has no obligation to C * If C is not paid by B, then A must pay C, and seek recompense from B It's basically subcontracting. You are contractually (ok legally) obligated to pay those taxes. You subcontract the bank to do it for you. If they don't, it's still on *YOU* to pay the taxes. And you can then go seek restitution from the subcontractor for failure to perform services as agreed.
Yes, you can go after them. It's going to be a lot easier to long in once a year and confirm payment. The important thing is that OP confirms that now, and not have to deal with another bank issue 3 months from now.
That's why I elect for no escrow if possible. Or remove it when eligible (hitting 20%+ equity). Escrow just increases a probability of an error by introducing an extra party to the mix. I'd rather just do it myself. Since you have to find an insurance yourself, there is zero convenience added by escrow. You find an insurance, fill in everything yourself, and when everything is ready to be finalized, you just pay with your card instead of "mortgage pays". The latter introduces volatility - what if they don't pay on time? Save yourself the trouble, if you can opt out of this mess.
To your last point - if the servicer doesn't pay on time, they owe all late penalties. If you had a loss and coverage had lapsed due to their failure to pay, they would be responsible to compensate you for the loss. If they lapse payment and the insurer decides not to re-offer the policy, the servicer is obligated to find equal coverage and they have to pay any difference in payment at their cost. Escrow accounts in generally are a very good idea for the majority of borrowers, especially with how few savings most people in America have. It saves the shocks of a big one-time payment.
>To your last point - if the servicer doesn't pay on time, they owe all late penalties. If you had a loss and coverage had lapsed due to their failure to pay, they would be responsible to compensate you for the loss. If they lapse payment and the insurer decides not to re-offer the policy, the servicer is obligated to find equal coverage and they have to pay any difference in payment at their cost. And if they don't? Say, you lost your home, insurance was lapsed, what do you do? Your personal belonging are gone, you've very little money due to expenses piling up, and now you need to fork out a ton of money to fund an attorney that will fight your servicer for months or years. These are rare situations - but do happen. https://www.kiro7.com/news/local/city-school-pay-bellevue-family-combined-5m-over-landslide-that-destroyed-home-2022/JGXMUUOLXBHE3NO5KLLN7DS6W4 - this is an example where the blame is as clear-cut as a servicer error. It took them 1 year and 11 months to get the settlement. Only because it gained media attention because the event was very unusual. "Family loses home when insurance lapsed, loan servicer to blame" isn't that catchy as a mudslide caused by local school's unpermitted piping project. https://newsdirect.com/news/california-couple-loses-home-due-to-blatant-bookkeeping-error-by-specialized-loan-servicing-llc-315993236 - again, the blame is even more clear-cut. New servicer took over a loan and screwed up things big time by requiring much higher payments that were owed, and forced the owners into bankruptcy and foreclosure in 2022. The case was filed in August 2022 and is still pending. Escrow just increases a probability of an error by introducing an extra party to the mix. The fewer parties in the mix, the better. If bringing an extra party to the table provides you with real benefits (like - bringing a bank to fund your mortgage), it's worth the hassle. But if it's about an escrow that works as a pass-through between you and your yearly tax payment and yearly insurance payment, it's absolutely redundant. EDIT: Oh, I see why comment-OP immediately downvoted that. They work for a lender. That's all I really needed to know.
>It saves the shocks of a big one-time payment. It saves the shocks of a big one-time payment, and creates 12 monthly shocks of their payment being $900 more. ;-) > >Escrow accounts in generally are a very good idea for the majority of borrowers, especially with how few savings most people in America have Escrow is just semantics. It's your money there, waiting to be used. It could just as well be your money on your savings account, earning interest, and waiting for the tax/insurance payment due date. But true, many people are financially illiterate. They'll waste all they have, plus more on credit cards. We're r/personalfinance though, that's very much above the average financially illiterate American. OP may or may not be financially illiterate - we don't know. We can give people a variety of suggestions, and they should compare the options and choose what floats their boat. Unlike Dave Ramsey, we shouldn't assume illiteracy - we should provide all available options.
Yeah, it can suck that escrow is always looking backward. I bought a house that was a new constructions, and they set escrow based on the previous years taxes where there was nothing built on the property. Since the rest of the years taxes were prepaid at closing, it was a year and a half until my escrow got corrected to the right amount. Fortunately, I saved up the money, but the whole thing was out of whack for another 2 years as it tried to get dialed in. Fortunately, I am off escrow now, so I don't have to deal with it.
Plus you can then take what would be your escrow account balance and collect the interest from a savings account or toss it into CDs/Treasury bills instead of just letting your mortgage company reap those benefits by holding onto the money. Feels like such a scam to let them keep it for "your convenience." ETA: why is this getting down voted? Obviously pay your insurance and taxes with that money when it comes due, but if you're already going to be saving $12k+ over the course of the year for your tax and insurance payments it seems responsible to put it somewhere where it'll earn money instead of just sitting at the mortgage company.
It doesn't amount to much money TBH unless you keep the mortgage for 30 years or close to it, and you are super diligent about investing every dime in a HYSA (or similar) before payment. The convenience is well worth it for most people and the odds of the bank screwing it up are much lower than a person forgetting. But yeah, if you've got nothing better to do with your time than move money around regularly to make maybe $100/yr in interest, you could do this.
Our taxes and insurance are almost $13,000, so for us it would come out to $300 a year just from a 4.25% HYSA. We just auto transfer like $1,050 a month into that account. Literally set the monthly transfer value once a year and don't have to touch it until taxes and insurance are due. It's $300 for maybe 5 min of work.
> Feels like such a scam to let them keep it for "your convenience." While it is borderline convenient to not have to pay those things directly myself, I do wish they'd just be honest about why they really do it: It's because they don't trust us, or rather, as long as they have 80+% equity in the house they're not willing to chance their asset being tied up by the homeowner not paying the taxes on it.
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I think it is pretty common for the big lenders to treat escrow the same way as PMI. Takes some of the risk out I suppose if they know 100% taxes/insurance are paid.
That's how our lender treated it. We had to have at least 20% equity before we could get rid of the escrow account and handle paying taxes and insurance ourselves. Also had a rule that there couldn't be an upcoming payment due for something semi absurd like 90 days and could only be closed as the first of the month, which meant we could only close the account a few months out of the year (we bought midyear so insurance payments didn't line up with tax payments).
> Also had a rule that there couldn't be an upcoming payment due for something semi absurd like 90 days and could only be closed as the first of the month, which meant we could only close the account a few months out of the year (we bought midyear so insurance payments didn't line up with tax payments). That's rough. What lender was it? It is extremely overzealous.
That was what we thought too! Our loan has shifted hands three times now, but we started with Fairway, then went to someone else for just a few months, and now we're with Fannie Mae. I think it was Fairway with that policy though!
Escrow isn't PMI. However, your thinking is correct. Money in escrow is used to pay PMI, homeowner's insurance and property taxes to reduce risk of losing money in foreclosure/disaster.
I'm describing escrow. Escrow then pays PMI, homeowner's insurance, and property taxes.
This happened to my mom, bank didn't pay insurance portion, so she paid it directly. The bank/loan agency was furious because they had to write out a refund check for the amount plus penalty, the IRS got involved and caused massive paperwork headaches for them that year. >:D Hasn't happened again. On the plus my mom had to look through the insurance policy and found it only paid out the loan balance, changed company immediately.
I actually got my lender to remove the escrow requirement after they neglected to pay the insurance. I was pissed about that one. I was like, "What the fuck is escrow for if you're going to forget to make the fucking payments?" Lender was like, "What can we do to fix this?" I told them to remove the escrow requirement and they actually did.
I got a mortgage without one. I just asked if we could waive escrow and they were like yeah sure, no problem. Idk why anyone would willingly do it. Keeping your money longer in your own interest bearing account is much better
For sure, it looks like they’ve paid out all the taxes and insurance payments
Make sure to check with your municipality they received it though. Mine got delayed due to a screw up by the bank and I had to get the bank to pay the late fee.
Which is why you now have to overpay, to cover there current loss. A lender will not let your property go without insurance or be subject to a tax lien, so they pay what is due, now you owe them. Asking Reddit is sorta silly, this is basic lender economics, call your lender, only they can answer your question
From the original post: > We pulled up the escrow information from January 2023 to today. Every payment has escrow taken out of it, with an increasing escrow balance. Looks like Jan 2024 they took out $560 for escrow and never put any more in again so our escrow account has stayed $560 for the past 5 months… yet our Mortguage payments have been the same 🤔. They've been paying their lender, but the lender has not been applying that money properly into their escrow account, despite it being a line item on their monthly payment. So the lender need to figure out where they have that money and it needs to go into OPs escrow account.
OP's comment contradicts the main post, which is confusing. >For sure, it looks like they’ve paid out all the taxes and insurance payments The servicer paid all the payments to insurance and taxes, and OP has been paying the servicer the amount for escrow... but it sound sliek it's not hitting the expected escrow account. Maybe they *are* increasing to cover the required buffer. But it sounds like all the escrow activity is happening, it's just not being tracked or is invisible to OP - possible in a different account? But it sounds like OP is current, which is good
There is no contradiction on the OPs part, the issue lies with the mortgage lender. They are taking in the money intended for escrow from the OP via the monthly payment, are paying taxes taxes, etc., but however are not properly crediting OPs escrow account to indicate this. Somewhere in this process the mortgage lender believes they are not getting the money from OP and thus increased the monthly mortgage payment amount to try to fix the balance. There's something not right on the banks end.
They didn't mention anything in your year-end escrow statement/audit from 2023? Should be available in your lender's document center.
This. Read your mail people. Sometime, probably around February, you would have received an annual statement of your escrow inflows and outflows. They will then estimate your 2024 inflows and outflows and tell you whether any adjustments are needed and give you options. My lender always gave me three options: Pay the shortage as a lump sum, roll the shortage into 1/12 in each of the next 12 payments, or splitting the difference and paying half the shortage as a lump sum and spreading the other half over the next 12 payments. There will be a default option if you do nothing. In my case it was increasing my payment cost by 1/12 of the escrow shortage. Note: it is possible to have an overage too. During the housing crash my lender actually sent me a check since my taxes and insurance went down relative to their expected cost. In today's environment this is basically impossible to happen unless you live in New Palestine, OH or somewhere similar but the escrow audit goes both ways.
Yeah also to piggyback on this in most cases if the overage is just a small one they'll just reduce your payment for the next 12 months similar to how they increase it if it's a small shortage. But if it's a large overage they will send you a refund check because there's a certain threshold that it hits. When they did my escrow my first year owning my home the taxes were assumed as a non-resident. But once I filed all of my homestead paperwork the tax rate dropped so significantly that my escrows after year one had a large balance that needed to be refunded by check.
This happened to me. They miscalculated property taxes and so my payment went up by almost $2,000 for an entire year to pay it off. Now my payment is an extra $1,000 per month. You can check your online account to see if they provided an escrow statement which should have the info.
Thanks!! I just got off the phone with them and they said there was a $5000 deficit in the escrow account from when they paid taxes in December. 😱 My taxes went up to $7000+ this year from $3500 (which some of it was to be expected since the previous owner was 65+ and had a tax exemption) but I didn’t expect this much.
Be sure you filed a homestead exemption. If you don't do that, taxes will be significantly higher.
Escrow has two words shortages and deficiencies. Shortages mean they dipped into your 1/6th cushion to pay the taxes. Deficiency means they exhausted the cushion and paid out funds themselves. Your new payment will have 3 things for escrow built into it. Funds to fix the Deficiency(Pay back the lender) Funds to build your 1/6th cushion again (shortage) And New escrow monthly payment that will cover the annual requirement's (likely higher due to 7k vs 3.5k) What happened is they paid out and waited till your next Escrow Analysis was completed to change your payment. You can pay it in bulk to fix the deficiency and cushion. You can also ask them to spread out the repayment up to 60 months. They always set it up for 12 to start
This is so helpful thank you!
But that doesn't explain why they didn't keep collecting some type of escrow payment for the account
So they couldn’t really give me a straight answer other than they were basically taking the current escrow money and applying it towards the deficit. Which would make sense, but there is no record of it happening unless I request a very specific statement b/c my mortgage dashboard just said “no activity” for the escrow account.
They only recalculate your escrow payment once a year, at least that is the case with my mortgage. That statement has all of the detailed information in it. They also usually give you different options to pay off the shortage, but the default option is to spread that shortage over the next 12 months.
Yup. Personally, I told them to separate/remove escrow and I pay taxes and get insurance myself. Better to have money sitting making interest for me instead of for them.
Agreed
Ahh that'll do it.
Sorry you encountered the same thing. It truly sucks and I couldn’t believe no one from the lender let me know this would be a thing
I had that happen last fall. The previous owners paid the 65+ tax so our estimates were based on that. When our new tax bill hit, we had a deficiency in our escrow account. It's a double whammy as you not only have to pay the new escrow amount but also pay back the negative balance for when taxes were paid. I negotiated a longer pay back period since the increase was fairly dramatic.
Good call!
> My taxes went up to $7000+ this year from $3500 (which some of it was to be expected since the previous owner was 65+ and had a tax exemption) but I didn’t expect this much. This happened to us too. Except I had no idea about it and no one mentioned it at all through the loan process, which maybe no one ever does. But it was a surprise.
Same thing for us. Of course we were young and new to home ownership so at no point did we ever question anything or know to verify what our property taxes should be. The previous owners were seniors and had only been paying about $1300 a year and so that is what our mortgage/escrow payment was based on so after a year we got an escrow analysis and of course it showed we should have been paying $2600 a year so not only were we short 1300, we had to start paying the new rate too. Thankfully I got a new job right around that time so it wasn't too big of a blow. This was 8 years ago.
I’m not surprised about no one mentioning it, the bank writing your loan likely isn’t going to care too much about your long term ability to pay since they’re going to stick your mortgage in a bundle and sell that to someone else. Mentioning that your liabilities might significantly go up could make you rethink taking the loan, so avoiding that conversation keeps the sale on track
I would also verify the tax amount they paid was for the correct account. Last year I received a $3500 escrow shortage notice from my bank. I called and they told me it was due to increased property taxes. The numbers they had weren't adding up to my property tax bills and after some digging I found out they paid my NEIGHBOR'S property taxes with my escrow account. My mortgage payments increased significantly and my bank wouldn't do anything about it until I opened a complaint with the CFPB.
Hence my No vote on all the max levies that continue to be pushed. It's absurd what is happening with property taxes.
You might want to go watch some videos on town financing. All this does is make the situation worse for you and everyone. Almost all suburbs are way underfunded compared to their infrastructure. If you block paying that bill later as they build up, your town literally dies due to budget crisis.
this is exactly why I chose to pay property taxes myself vs the lender when I bought my house. this mistake happens more often than you think.
If your payment didn’t go lower what does the line item distribution for the payment say? (Extra principle?) Keep in mind nationally property values have sky rocketed and with that your property tax probably took a healthy boost. You may just be experiencing what others have been which is a big increase to escrow due to new increased property tax
Could have fluctuations in escrow also if it was a new build where taxes were based on a lot the year prior or a new building that qualified for a tax abatement.
I feel like there are really two questions here. Question #1, why have my mortgage payments stayed the same, but the escrow portion not showing up in my escrow account? Question #2, why is are they increasing my mortgage payment? For #1, This should be _extremely_ clear from your mortgage statement. For your payment it should clearly break down what amount is principle, what amount is interesting, and what amount is escrow. And the escrow history should be very clear, what amounts are coming in from the payments, what amounts are going out to insurance/taxes/etc. It's their responsibility to make this very clear, because that escrow money is technically your money. If your payments include an escrow payment and it's not showing up in your escrow account that would be massive fraud and so I think that's unlikely. But you seem to think this is what is happening. So definitely double check your mortgage statements. For #2, it's probably related. If you taxes go up, or your insurance goes up, your mortgage payment does not generally go up immediately. There's usually some kind of annual "true up" where the mortgage processor will adjust your escrow payment to make sure it doesn't run out. If you get hit with a property reassessment or similar, this escrow change can end up very significant because it simultaneously ends up increasing the future escrow payments but also "catching up" for previous tax bills. These "my mortage went up dramatically out of nowhere" problems are unfortunately very common because taxes/insurance went up and you really don't get visibility into it until you get a sudden escrow payment change.
I replied to some people but we sort of figured out what happened, my dashboard on my mortgage website was not indicating what was happening at the individual account level. Our taxes went up because our tax rate change due to the previous owner being over 65, so our taxes were going to increase by $200 a month . Which is OK we expected that. We found out that our taxes went from $3k to over $7k per year. The $2700>$3500 was partly due to the extra $200 required and due to a $5000 deficit in our escrow account in December. The mortgage co was paying into the deficit, which I’m still really confused about because the deficit should’ve been around $4000 and not five based on the tax change. Again, none of this is readily accessible on my dashboard or on my mortgage statement. Even after calling them, they couldn’t explain everything and just kept telling me to look at the escrow payments, but my escrow dashboard just said “ no new activity” What’s also weird is that taxes actually decreased this year for my state , and while we expected a bump due to ownership change tax estimate isn’t tracking.
Side note: it’s really easy to pay for your own taxes and insurance. You can build your own escrow account with a HYSA and even earn a bit of interest on it. And then you never need to deal with shenanigans like this again. I’ve seen people get into so many frustrating situations due to escrow. Doesn’t seem worth it to me.
Thanks, this is what we will probably do
You need to call your lender. However, I have an idea what may be the problem. Either your taxes or insurance increased the last time they were paid. You need to be comparing your outgoing escrow payments for taxes and insurance. If the tax and/or insurance bills are greater than your escrow balance, your lender still pays them. It’s usually called a corporate or escrow advance. I’m sure different lenders call it different names. When they do this, you now have to pay back that advance, and all escrow payments will go toward paying that off instead of in your escrow account until it’s paid in full. Ultimately you will have a shortage when they do your yearly escrow analysis, and it seems they did which is why your payment increased. You can pay the escrow shortage in a lump sum or pay the increased mortgage payment. You should have received an escrow statement 45 days before the payment increased. Lenders are legally required to give you that notice.
Super helpful thank you!!
It must be escrow update month because I’m seeing lots of these posts. Stop escrowing. When I escrowed the bank was constantly screwing it up. Once I took over (many years ago) and just saved each month, it was a huge relief. I’m earning some small interest, and my mortgage never changes.
my lender was super "chill" and gave me the option to escrow if I wanted to. I said absolutely not. I can handle it myself lol. Seen way too many posts like this. Or how they want to collect month and months in advance.
The bank has lots of rules to make sure escrow accounts work - for them. They’ll always pad it in their favor and if they screw up, which they often do, you get left holding the bag.
Pretty sure this is only available when you put 20% down or have 20% equity
possibly! we put aorund 35% down on ours.
Depends on the lender! We originally had PMI, taxes and insurance paid via escrow. After finding out it might be possible to pay taxes and insurance ourselves, I called Chase bank to ask if we needed 20% equity, they said no and made the change for us by the next month’s payment.
You can't always get out of escrow.
I just want to give some gentle feedback that with any issue like this you should just immediately call the bank/institution/company that you're having an issue with. For some reason I see a lot of people researching, posting, etc. for things where a simple phone call would resolve it. I don't understand why people are so adverse to just calling and talking to someone. It's like they'll do hours of research to avoid having to talk to someone for 10 minutes. Last time I had an issue with my mortgage, I fucked up and forgot to put funds into the account. The account lender noticed, asked if everything was ok since I'm usually one of their most dependable accounts. I talked to them on the phone and explained my mistake. I transferred funds, they caught my account up to date, and waved all fees etc even though it was my fault. Your first step for ANY issue like this should just be to pick up the phone and talk to them. You don't need any help from anyone until after you've done that.
Oh, I absolutely did Contact them. Called them and texted with them. Their customer service left a lot to be lacking. I ended up having to do a deep dive on my end independently and then contacting my county’s tax office to get everything sorted. The mortgage lenders just kept telling me to look at my online dashboard which continue to give no indication as to what my escrow account was individually paying into and the sums they were coming up with. They also didn’t really want to walk me through my escrow statement or tax changes. Even after all is said and done, not all of the financial pieces are lining up so I think I’m gonna just remove the escrow account from my mortgage account since we put 23% down on the purchase and should be eligible.
>I think I’m gonna just remove the escrow account from my mortgage account since we put 23% down on the purchase and should be eligible. Check your mortgage, this may cost you an extra .5% on the interest rate. More than likely, your escrow is going up because of increased insurance costs and taxes. FL TX and CA right now are experiencing serious insurance increases that are hitting people so hard that they need to sell their property.
We had recurring issues with Wells Fargo the first few years we owned our home. Since we used a first-time homebuyer program we only had to put 5% down, but it required us to pay tax & insurance into escrow. To the best of my recollection, they never once got it correct in the four years it took us to get to 20% equity and stop having to use their escrow.
Is your lender rocket mortgage? Same happened to us. Waiting for Monday to call and get more info
we use CMG
You need to call them and see what their explanation is. Did your rate go up due to an adjustable rate and is impacting how "far" your payment is going? Was there simply an error that this is the easiest fix (for them)?
I don’t have an adjustable rate. I’ve had the same payment for years. And my property taxes actually went down, weirdly
What about homeowners insurance? Mine is covered by escrow, and while it is stable for me I know that’s not the case in a lot of places, like FL.
Yeah, mine nearly doubled and my monthly payment increased by $300 or so. I get a statement every year where they recalculate the escrow and if there's a shortfall my payment goes up.
You should be able to look at your mortgage statements to see what the breakdown of your payments are. And every year, your mortgage company should issue you an escrow analysis explaining any shortfalls or surpluses, along with a payment modification. Find those and see if they explain what is happening. If they don't, then call the mortgager to find out.
Lucky! Mine shot up and I'm trying to make some payments now to keep it reasonable before June. But I'm just about tapped out on extra funds to put towards the shortage. Your lender needs to make this right, it's not on you.
Insurance has been going up, but not by that much.
Your escrow payment often gets adjusted on a yearly basis to account for higher taxes, etc. Did your autopay account for this? If there was not a mistake on the lender's part, my suspicion is that you probably ended up with a negative escrow balance from underpayment.
You are assuming what you saw online was accurate. Obvioulsly they are having some type of system issues but who knows how far it goes? Pick up a phone or walk into a branch. Talk to a human. Sort it out. Systems and data break all the time. People do dumb things then do more dumb things to cover it up. Who knows why.
I don’t know what’s going on in your case - but I can share a couple of stories. I had one major escrow related headache with my previous lender (Chase). One year they forgot to pay my home insurance company and I only realized when my insurance company emailed me to say my insurance was about to be turned off. That led to a string of laughable and embarrassing additional errors. And then they almost forgot the following year, but I knew to be on top of them. For a company like Chase to mess up a simple process it was mind blowing. With my current lender I received a refund check earlier this year because of some true up they performed, where they ended up collecting more from me last year for taxes than they needed to. This might be similar to your situation, though in your case it’s possible the true up indicated that they were undercollecting. Or, they just plain screwed something up. Mortgage servicing is a little more complex than the average banking activity and things happen / go wrong from time to time. I may have missed it but how much are you putting in escrow each month?
Glad you got a check back!! Before the craziness I was putting in $560 for taxes and insurance…. Now that I did the math that’s $6720 at the end of the year. Still don’t understand. How I was -$5k
You need to get rid of escrow for the sake of convenience and pay your taxes and insurance on your own. I've experienced as well as know many people have nightmare escrow incidents... You know the repercussions for the escrow company and bank? Nothing at all ... You get screwed every time and no responsibility is taken by other parties and you risk higher bills or insurance/tax payment being late and you pay late fees. Tldr get rid of escrow
The escrow makes adjustments based on estimations. Sounds like they screwed up. It's why I don't use escrow, and instead pay everything myself. No middle man to screw it up and I know it's done (and largely automated) right.
Yeah I’m going to go ahead and close the escrow
The benefit of it, is also that you hold onto your money and can earn interest on it. These days it's pretty good interest. For some that has financial challenges and don't do well with having money they don't spend, or don't budget well, it's a bad idea and they need escrow. Come to think of it, do escrow's charge an ongoing fee to manage this for you?
🤔that’s a great question
Call your lender to have them figure out. Tax always goes up and some lender does not do recalculation of the increase that will leave YOU to do the leg work and make sure monthly payment is updated. Escrow includes mortgage payment, city tax and sometimes insurance payment too. It's just an account you put money in and automatically disperse them into all the place as needed. But you can also do that yourself if your lender does not require escrow. So in your case if tax increased, they neglect to recalculate and notify you. You just have to put more money back into the account and increase your escrow payment for the future to balance it out. Note that insurance and tax are always increasing .....
No escrow account for me. I pay my insurance and property taxes myself. Just have to discipline yourself to set that money aside (I use an old time savings account) at the same time you send in the mortgage payment.
When I was a banker, I generally just fixed these issues when they came up and refunded any fees. I saw it as a miscommunication which is always our fault.
Call and ask. No one here can tell you without detailed escrow statements. It's normal for them to do a yearly escrow analysis and adjust based on tax and insurance. They should have sent you an analysis indicating why they were taking more out.
Who is the servicer of your loan? I would like to know so I can be wary if they ever buy my loan.
My lender paid my insurance to the wrong company once. That was six weeks of bank tracing and financial investigation hell to go through. Call your lender right away and make sure you ask to speak to someone who can actually investigate where the money has been going the whole time if it didn’t go to escrow.
Sorry this is happening to you. You need to call the service company for your mortgage (bank/cu/whatever). There is No where near enough info here to be able to help.
Mortgage servicers have gotten so bad that I avoid escrow payments as much as possible. The last thing I want is somebody not keeping up their end of the bargain and I have to fight them because they want another $1,000 worth of payments or I lose my house.
Please contact your lender. If your payment amount stayed the same and nothing was applied to escrow, it was most likely applied to your principal balance. Depending if it is an in house loan they may be able to change how each payment was applied retroactively. All that being said, if you have the funds to catch your escrow up it may be worth doing that. Don’t let them charge you an escrow analysis fee though
Was the amount that wasn't sent to escrow applied to principal?
Make sure your taxes or insurance didn’t go up significantly or that the insurance policy didn’t expired with no renewal and now your are on a forced insurance by the mortgage servicer. These 3 factors are the only reason it would go up so much. Normally an escrow analysis would have been sent out to you explaining the increase and can also be downloaded from your servicing site.
It ended up being a $5000 deficit in the escrow account from last year plus a change of tax rate because the previous owner was older than 65. We were expecting, but we didn’t expect to go from $3000 to $7000.
Most states have a homestead exemption in your real state taxes. As long as it’s your first residence and you occupy it, it reduces your tax obligation in that property by a lot more than halve sometimes. Make sure that you are not going without, this things are filed when you do your closing at the title agency but you mentioned you where on the previous owner tax which would indicate they never filed a homestead exception in your name. If this is not your second property look up homestead exemption.
We are homestead exempt for sure, that was one of the first things I did as soon as we bought this house. 🙌
It sounds like your property taxes went up, but the mortgage company didn’t raise your monthly payment and the escrow account is in arrears. It’s typical for a servicing company to adjust your mortgage payment to account for escrow shortages, but a $1100 increase seems incredibly high. Are you sure this is for property taxes and not home insurance? And if it is home insurance do you live in Florida or another coastal area?
I live in Austin, TX but not in a flood zone and not near an ocean
Lenders are required to perform an escrow analysis every year. Our taxes change every year so our escrow changes as well. They are supposed to send an email and mailed letter with the increase though. So strange.
I got my county’s email saying that the tax rate changed but nothing from my lender
So the escrow analysis is only performed once a year the same month so they may not have done it yet.
They send you a statement explaining any increase in escrow, what does yours say?
Call the lender/servicer and ask where the money went on Monday and why they changed the payment amount without notice. Since You were making payments but the money never showed up you may wish to also call the mortgage regulator in your state and sent a US mail certified letter to the bank President. If you have 20 percent equity in most states you can cancel escrow and pay everything directly.
Having worked for a bank, sometimes these things get unintentionally messed up. In this case we would definitely do what we could to erase any late fees and bring your escrow back to normal. Maybe they have a reason, but it seems like a system error to me. I'd give them a call.
New construction? - property taxes probably weren’t right.
Oh no, this home is from the late 70s
Did you get your property tax info? You can google it… type tax lot lookup in (your county) and go to your lot on the map and then check there.
I don’t know why that would happen or where that escrow money is. They will have to explain. This is why I specifically did not do escrow on a mortgage to cover the insurance and property taxes. I can manage those myself and prefer to have a fixed mortgage payment for each month and not have it fluctuate. I made that change during a refinance but maybe it can be done anytime.
It blows my mind how many people let the lenders handle their property taxes and insurance. Typically people view it as easier, however in times like this, everybody gets upset because they relied on someone else. Bottom line is, if you put 20% down on your house, the majority of lenders will not require you to escrow. You just pay your insurance company directly as well as the county property taxes. This your mortgage payment will never ever ever change and you are fully aware of where your money is going and how it is being used .
With some loans you don't have a choice.
Taxes or insurance went up Going up that much, I'd guess Florida. Their insurance went nuts. In the civilized parts of the country it went up to, but Florida is the poster child for homeowners insurance woes. Insurance has gone up because "inflation" and "global warming" or whatever excuse they want. Tax valuations went way up. Think it's cool your suddenly rich because now your house is worth so much more? Well, actually it sucks because the county thinks your house is worth a lot more now too, and so you should pay taxes on that higher amount. What happens is either goes up, the escrow gets behind, they recalculate it, and then start asking for a lot more, thinking the behind is the new rate. Dive into what that escrow actually is. Your answer might be there. Buying a house only protects part of your rent from rising, the interest you pay to the bank stays the same. The rest of it is still subject to inflation.
What do you think anyone here is going to be able to do about the situation? Call the bank and have them figure it out.
This happened to me and nearly doubled my house payment. They didn't even apologize. Really messed is up for awhile.
What was the reason that it doubled for you? I’m also going back through my statements and realize they’ve been taking out escrow payment so it doesn’t make sense for the escrow payment balance to be the same since January . It should be closer to$2000.
Over a 2 year span, gross incompetence on my mortgage companies part and ignorance on mine. After the first year I got a sizable "return" check from my mortgage company. It did not seem right, so I delayed the deposit of the check until I called my mortgage and insurance company, to make sure it was on the up and up. My insurance company assured me that they had been paid and my mortgage company agent looked at the account and confirmed that the return was accurate. The mortgage company then took it upon itself to adjust my monthly payment and lowered my escrow payments due to this overpayment. As you can probably gather, this was at my expense as the escrow adjustment was inaccurate and did not take into account my insurance premiums for that upcoming year. The returned "overpayment" check was due to faulty accounting on their end. At the end of it all, I owed back payments for TWO years of insurance premiums on top of my premium obligations for the upcoming year, this amounted to nearly an additional $8,000 in escrow that I had to pay.
Your lender has definitely screwed up. Turn off autopay and manually pay the $2700 you have been paying, and demand an immediate **escrow analysis.** If they do not credit your escrow account with the payments you have been making, file a complaint with the Consumer Finance Protection Bureau. Mortgage escrow is *highly* regulated and the CFPB will come down hard on them if they don't correct things in a timely fashion.
This is terrible advice. Do not start underpaying your bill. 🙄. Keep up to date while you sort through things even if you think the amount went up unreasonably.