This is a very strange story and those of our readers who have a mortgage and escrow their real estate taxes should be aware of what can go wrong.
One day, our client receives a letter from the people who are servicing his mortgage. The letter tells him that there is a shortage in the escrow account and that he needs to make it up immediately ($6,000) and that the next 12 months of escrow will increase by $500 per month. At this point, what would you have done? Would you have paid it?
I found this very unusual so I called the mortgage company and was told that the county tax had risen from $4,000 to $10,000, which brought about the shortage and the increases. Still not being satisfied, I called the County Tax people and heard the following shocking response: “You did not pay the school tax in October so we added it plus a $550 penalty to your County Tax”. The problem is that it should have been paid by the mortgage servicing company and in fact, their year-end tax statements show that it was paid. Now, someone wants us to pay it a second time.
I call up the mortgage servicer and no one there can figure out what happened or what to do about it. Then I write a letter to the President of the company explaining what has happened. I get a call back from his executive assistant. She has called the county and received a revised tax bill. She says her company will pay the penalty. They also revise the escrow increase that had already been billed.
Very nice, but I am still wondering what happened to the School Tax that they showed as paid.
And then, another client at the same mortgage company, but in a different county had the same problem. Knowing to contact the President’s executive assistant fixed everything right away.
But now, this is no longer an isolated error. My mind has figured out an entire viable scenario to defraud the mortgagees. But when I inquire, no one is answering. Alas, I will never know.
I can assure you that both of my clients would have believed the bank and paid the extra money. How can a bank be wrong? Honestly, wouldn’t you have paid it too?
Howard Lipset, CPA
Progressive Management, Inc.