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Mortgage Payment Increase/Escrow Shortage - Illegal?

Discussion in 'Ask the Attorneys?' started by MelShock, May 30, 2012.

  1. MelShock

    MelShock LoanSafe Member

    I purchased my home through DR Horton and The MBA Group was my original lender. I purchased my home in October 2010. I’ve been making payments of approximately $2,044, on time, which included my tax escrow. </SPAN>

    In September 2011, I received a check for approximately $3,000 from GMAC Mortgage due to an escrow overage. This brought my mortgage payments to $2,041. Last week from the date of this letter, I received another letter from GMAC Mortgage, indicating that there was a shortage in my escrow account. They instructed me to send in a payment of $3,717.34, or my mortgage payments would increase to $2,617.58 due to the escrow shortfall. If paying the $3,717.34 was an option then my mortgage payments will be $2,307.81. </SPAN>

    After some “investigating,†it was brought to my attention that there may have been an error on the closing documents, specifically when calculating the property taxes. I am told the calculations for the property taxes should have been collected at 2%, instead of 1%. </SPAN>

    I am now in a dire situation of not only having to basically pay the initial overage amount, but also dealing with a much higher mortgage payment different from what was originally instructed for me to pay at the signing of my loan documents.
    Mistakes happen, but this issue will become a huge financial burden on me and causes me to seriously reevaluate my homeownership. Should there be a disclosure of an error, an advance in funds/pay the remaining shortage necessary by way of the MBA Group that will adjust my mortgage payment to where it apparently should have been at the time of purchase would resolve this inaccuracy and settle the amount of the overage check that was erroneously sent to me because my estimated future escrow bills were grossly underestimated.

    Is this legal?!?!
  2. Cat Damiano

    Cat Damiano Mortgage Wars

    Hi MelShock,

    Welcome to the forum and thank you for joining.........

    Section 10 of RESPA sets limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance and other charges related to the property. RESPA does not require lenders to impose an escrow account on borrowers; however, certain government loan programs or lenders may require escrow accounts as a condition of the loan.
    During the course of the loan, RESPA prohibits a lender from charging excessive amounts for the escrow account. Each month the lender may require a borrower to pay into the escrow account no more than 1/12 of the total of all disbursements payable during the year, plus an amount necessary to pay for any shortage in the account. In addition, the lender may require a cushion, not to exceed an amount equal to 1/6 of the total disbursements for the year.

    The lender must perform an escrow account analysis once during the year and notify borrowers of any shortage. Any excess of $50 or more must be returned to the borrower.

    HUD RESPA FAQs by Consumers about Escrow Accounts

    For an escrow complaint against the servicer you can file with HUD here;

    Filing a RESPA complaintPersons who believe a settlement service provider has violated RESPA in an area in which the Department has enforcement authority (primarily sections 6, 8 and 9), may wish to file a complaint. The complaint should outline the violation and identify the violators by name, address and phone number. Complainants should also provide their own name and phone number for follow up questions from HUD. Requests for confidentiality will be honored. Complaints should be sent to:
    <center>[TABLE="width: 75%"]
    <tbody style="border-top-width: 0px; border-top-style: solid; border-top-color: rgb(204, 204, 204); ">[TR]
    [TD]Director, Office of RESPA and Interstate Land Sales
    U.S. Department of Housing and Urban Development
    Room 9154
    451 7th Street, SW
    Washington, DC 20410
    Phone: (202) 708-0502[/TD]
  3. MelShock

    MelShock LoanSafe Member

    Thank you for your reply. FYI - The lender did two escrow analysis’s</SPAN></SPAN> in a 6 month period.
  4. TomEason

    TomEason LoanSafe Guide Staff Member


    Thanks for your posts. While Cat gives good info, you might also check with your escrow/title company/closing agent. It would seem to me they're clearly at fault for collecting the wrong amount at closing.

    Since the closing agent/title/escrow company made an error when prorating the property tax due at closing, their E&O insurance carrier will likely pay for you for the title company's error. If they don't, I would sue the title company. You'd easily win, although I doubt you'd have to go that far.

    Good luck.

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