Escrow

[kiesta]

What is the name of your state? Tennessee

We refinanced our home. The new finance company got a pay off amount on the house. The amount was $1200 less than what our previous company showed online. We questioned the new company, and they said the amount they were told was correct. We questioned how escrow would be handled and were told that the old mortgage company would send us a check within a week, and we could just send it to the new company to open our new account. What actually happened was that the old mortgage company applied the escrow we had with them, to the pay off amount, thus the $1200 difference. The problem lies with the fact that we didn't know they were going to do this, insurance and taxes are due next month, and we don't have the $1200!! We are told by the old mortgage company that this is standard practice and perfectly legal. My question: Is it legal or standard practice, and do we have any recourse other than taking out a personal loan for the money due???? Thanks.

[Samm1970]

Yes it is legal and standard practice. Normally, mortgage companies do not net the escrow from the payoff unless you're refinancing with the same mortgage company but that doesn't mean they can't if they want to.

Did the new mortgage company set-up an escrow account for your new mortgage? If they did, they should have collected sufficient money to pay your upcoming tax & insurance bills. If they did not, then you're on your own to pay them from here on out.

Assuming the new mortgage company did not set-up a new escrow account, I'd recommend that you deposit 1/12th of your annual taxes and insurance into a separate savings account each time you write your mortgage check, so you're prepared to pay these bills when they are due. Basically, that's what you were doing when your taxes & insurance were escrowed with the old mortgage company.

[HomeGuru]

Originally Posted by kiesta

What is the name of your state? Tennessee

We refinanced our home. The new finance company got a pay off amount on the house. The amount was $1200 less than what our previous company showed online. We questioned the new company, and they said the amount they were told was correct. We questioned how escrow would be handled and were told that the old mortgage company would send us a check within a week, and we could just send it to the new company to open our new account. What actually happened was that the old mortgage company applied the escrow we had with them, to the pay off amount, thus the $1200 difference. The problem lies with the fact that we didn't know they were going to do this, insurance and taxes are due next month, and we don't have the $1200!! We are told by the old mortgage company that this is standard practice and perfectly legal. My question: Is it legal or standard practice, and do we have any recourse other than taking out a personal loan for the money due???? Thanks.

**A: when you step back and think about it, it's a wash.