Escrow Problems

Mortgage transfers are often accompanied by an increase in your monthly payments. And although terms of the loan don't change, there's a good chance that the amount required for deposit into your escrow account will.

It's difficult to know whether you're being asked to pay too much into your escrow account. Because insurance and tax bills come due at different times of the year, lenders are allowed to keep a cushion in the account. That means the amount you pay into escrow each month will be more than the total of your tax and insurance bills divided by 12. Many contracts permit lenders to keep a cushion covering up to two months, the maximum allowed under the Real Estate Settlement Procedures Act (RESPA). Lenders may use a combined total to calculate the cushion or view taxes


Lenders must pay interest on funds held in escrow accounts in California, Connecticut, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Oregon, Rhode Island, Utah, Vermont and Wisconsin.

and insurance as separate accounts.

Keep track of what is in your account. You should get periodic statements of exactly how much is in there and when payments are made from it. If it appears that the amount is too much, ask for an escrow reanalysis.

If you have a problem that you haven't been able to get fixed, find out from the original lender the name of the secondary-market firm—like Fannie Mae or Freddie Mac—that bought your loan. These giants have a strong interest in the proper servicing of the loans they buy and resell; they want to know about problems with servicing firms that do business with them (for contact information, see the box on page 226).

Your servicer must respond within 20 business days and must abide by certain other procedures. When the National Affordable Housing Act was passed in 1990, certain provisions were added to RESPA dealing with complaint resolution. Among them: a stipulation that under certain conditions an aggrieved consumer may recover actual damages up to $1,000.

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