Can a mortgage service company increase payment due to the tax escrow having a negative balance?
Our mortgage was just purchased by a new servicing company and the tax escrow has a negative balance due to a recent increase in our city taxes. The service company did not call or send a notice showing a negative balance on the escrow account they simply raised the amount of the monthly payment by $36. The escrow is $200 to the negative and the balance was added to our loan meaning that we are paying $160 in interest on a balance we were not aware of. We always pay the negative balance without having an automatic modification by the company. Is this legal?
Yes they can. In fact many companies will overestimate the escrow in advance of an increase as to not hit you with a big surprise increase. In my case I do not escrow and rather pay the taxes and insurance independently. Typically in order to do that, you'll have to address that when you first take out the loan and most banks won't allow it unless you have at least 20% down payment.
This new mortgage servicing company raised the monthly payment without sending an escrow statement indicating a negative balance. The increase is based on an estimated negative balance, not an actual negative balance. We had no down payment.
Then they are simply doing what I was stating earlier. Estimating the tax increase. If they are wrong then you would get the credit in the following year. Typically taxes go up not down. If the loan is already issued then you have to escrow.
You bet they can, read your mortgage note. They have to pay those taxes for you and so the money has to come from somewhere. It is unfortunate when you don't get adequate warning so you can budget.
You might be able to have them modify the payment if you contact them and tell them you will send a check for the negative balance. Some companies will work with you.
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