Senior Exemption and Freeze

[Fergus]

What is the name of your state? IL
We purchased a home in May 2003 with a 30 year mortgage and called the mortgage broker to see if we could afford a 15 year in March 2004. He gave us a number that was a push, but we could live with it. We rec'd a statement from the lender last month stating we were $5,717 underfunded in our escrow account. We have since learned that the broker failed to provide the escrow numbers based on assessed property taxes and rather understated them because he did not take into consideration the previous paid taxes included a senior citizen exemption and a senior freeze exemption from the previous owner.
Is the mortgage broker responsible to research actual taxes or can he simply use paid taxes from a previous year?
THANKS!

[seniorjudge]

Q: Is the mortgage broker responsible to research actual taxes or can he simply use paid taxes from a previous year?

A: My guess is that they can use last year's taxes (at least until the current year's taxes are determined). It is very difficult to find out from tax collectors the amount of taxes that are not due yet.

[Fergus]

IL. Is this so, even if in the previous year's taxes the taxes paid were $1,000 less than what was assessed because of the previous owner's Senior Citizen Exemption and her Senior Freeze Exemption. The accurate picture was there in the previous taxes - just up a few lines of the tax bill. Is this question clear? I know that they can't "guess" what will happen....but, it seems to me like they should review the previous year's taxes to see if any exemptions applied to the amount paid.

[PghREA]

He should have taken the assessed value of the property times the millage rate for each of the taxing bodies to get a better estimate of the taxes due.

However, this requires a calculator and possibly a few phone calls and a little bit more time than just checking to see what was paid last year.

However, the taxes due are your responsibility.

[seniorjudge]

Originally Posted by PghREA

He should have taken the assessed value of the property times the millage rate for each of the taxing bodies to get a better estimate of the taxes due.

However, this requires a calculator and possibly a few phone calls and a little bit more time than just checking to see what was paid last year.

However, the taxes due are your responsibility.

Yes, a mistake by a third party does not relieve you of paying your bills.

[Fergus]

Yes, I have paid and know that I am responsible for the taxes, whatever they are. My question is - does he have a due diligence to use that old calculator in figuring the refinancing? We would not have refinanced had the payment been calculated accurately reflecting the correct tax amount. It feels like a bait & switch....is my question clear yet?

[PghREA]

Originally Posted by Fergus

Yes, I have paid and know that I am responsible for the taxes, whatever they are. My question is - does he have a due diligence to use that old calculator in figuring the refinancing? We would not have refinanced had the payment been calculated accurately reflecting the correct tax amount. It feels like a bait & switch....is my question clear yet?

It is not bait and switch since YOU were the one to call the mortgage broker about a 15 yr mortgage instead of the 30 yr mortgage. The broker made a mistake in calculating the taxes - he did not purposely miscalculate the taxes to lure you into taking the 15 yr mortgage (why would he when you obviously would be paying much more in interest over a 30 yr period.)

[seniorjudge]

Originally Posted by Fergus

Yes, I have paid and know that I am responsible for the taxes, whatever they are. My question is - does he have a due diligence to use that old calculator in figuring the refinancing? We would not have refinanced had the payment been calculated accurately reflecting the correct tax amount. It feels like a bait & switch....is my question clear yet?

I have a low opinion of a lot of mortgage lenders and I believe every word you are saying.

But it would be a tad difficult for you to go into court and blame someone else for not figuring YOUR taxes (which you are assumed to know).

Refinance again and use a different lender.

[Fergus]

Because being a broker - he doesn't benefit from the years of interest paid to a lender. But earns his fees in actually doing the refinancing. He was well aware of our cut-off point in terms of what we could afford. So, it feels as if he did not take out the calculator because we would have simply settled into the 30 year mortgage we had gotten through him in the prior year.
I do appreciate your thoughts - thanks!

[Samm1970]

Because being a broker - he doesn't benefit from the years of interest paid to a lender. But earns his fees in actually doing the refinancing. He was well aware of our cut-off point in terms of what we could afford. So, it feels as if he did not take out the calculator because we would have simply settled into the 30 year mortgage we had gotten through him in the prior year.

You were aware of what you could afford too. You could've advocated for yourself and checked with the county on future changes to your taxes. If it were me handling your mortgage and I knew you had a maximum payment objective, I might have discussed the possibilty of future hikes in taxes so this was taken into consideration in your decision. But that's on a good day. Can't say I'd think of this every time.

It's possible he ommitted this information on purpose when going over the numbers with you in order to get you to close. The problem is trying to prove it. You also have a responsibility in this too.

If you can't afford the new payment, refinance back to a 30 year mortgage and chalk it up as a lesson learned. Next time, you'll know to investigate the taxes on your own rather than depending on someone else to do it. It's very conceivable this was an honest mistake/oversite.

BTW, whether a broker or a banker - makes no difference. Banker's don't care about how much interest will be earned either. They only care about the commission they'll receive from closing the loan. It's not like they'll receive a residual income for selling a 30 year mortgage vs 15 year. They still have a responsibilty to ensure there is a benefit to the borrower, which many mortgage people don't do.

Case in point. I just got off the phone with one of my past customers who recently discussed refinancing her mortgage with another mortgage broker that solicited her. The other mortgage broker was insistent that refinancing would be a benefit to her. I reviewed the terms of her current loan and concluded the opposite was true. My customer purchased her home 1 year ago with 2% down payment. I got her a 30 year fixed rate mortgage at 5.625%, no prepayment penalty, NO mortgage insurance. This is a special loan I can offer in my area only. Rates are higher now. Her value is not currently adequate to avoid private mortgage insurance so she'd end up with a higher rate and mortgage insurance or an option arm that would result in negative amortization. So there are a lot of predators out there. Thank God she called me first before she went ahead.