Mortgage Impound Trouble

[Dindo]

YOUR STATE NAME - CALIFORNIA

When we purchased our home seven months ago, I asked to have an impound account set up so we could budget for the year and know exactly what our housing cost would be each month. Recently, I received a notice from our lender that our impound account was short funds and that our payment would be going up $150/month. I had a cap on what I was willing to pay for my mortgage and paid points plus put additional down to get to a comfortable monthly payment. The error occurred in the property tax calculation. Given that there were no changes in tax rates nor property re assessments from the time we purchased our home, I could not understand how this error could occur. Had I known that our payment would be $150 higher, I would not have purchased our home. Whether accidental or intentional, I've been mislead. I sent a letter via registered mail to our mortgage broker who called back and said the lender is responsible for determining the impound. When I called my lender, they pointed to the mortgage broker stating they only work with info that is provided to them from the broker. I feel both parties may be partially at fault. With nobody wanting to take ownership of this error, I'd like to know what my legal options are? If I want to make a claim against my brokers E & O policy, what steps must I take to gather this information? I can't afford an attorney to mitigate this problem.

 

[HomeGuru]

YOUR STATE NAME - CALIFORNIA

When we purchased our home seven months ago, I asked to have an impound account set up so we could budget for the year and know exactly what our housing cost would be each month. Recently, I received a notice from our lender that our impound account was short funds and that our payment would be going up $150/month. I had a cap on what I was willing to pay for my mortgage and paid points plus put additional down to get to a comfortable monthly payment. The error occurred in the property tax calculation. Given that there were no changes in tax rates nor property re assessments from the time we purchased our home, I could not understand how this error could occur. Had I known that our payment would be $150 higher, I would not have purchased our home. Whether accidental or intentional, I've been mislead. I sent a letter via registered mail to our mortgage broker who called back and said the lender is responsible for determining the impound. When I called my lender, they pointed to the mortgage broker stating they only work with info that is provided to them from the broker. I feel both parties may be partially at fault. With nobody wanting to take ownership of this error, I'd like to know what my legal options are? If I want to make a claim against my brokers E & O policy, what steps must I take to gather this information? I can't afford an attorney to mitigate this problem.

**A: although the mortgage broker and the lender messed up, it is your own responsibility to double check what your actual montly payment should be.
I don't buy your story here.
Here is why: your monthy payment including impounds should be P&I AND a prorated amount for hazard insurance and real property taxes.
You do not need a lender or mortgage broker to take the total real property taxes for the year and divide by 12 to get the estimated monthly impound amount.
You were able to calculate this on your own.
You had a chance prior to closing to review the numbers. The $150 per month is for payment of your taxes. It would not matter if it was paid outside of escrow or included in your monthly mortgage payment as impound amount. Did you get a Good Faith Estimate?

 

[HUD-1]

If your GFE was off substantially, then you may have a disclosure violation. More likely, it is an escrow account snafu. The account may not have been properly funded at closing. Check out your escrow analysis statement carefully. There is this nasty thing called a "cushion". It must equal two months Insurance and Tax payments at the lowest point during the year. If your cushion should be $1,000, but is projected to be only $500 at the lowest point during the year, then the borrower must either fully fund the escrow account in a single payment or over several months. Was this request for $150/month a result of an escrow analysis? Is it temporary or permanent?

 

[Dindo]

If your GFE was off substantially, then you may have a disclosure violation. More likely, it is an escrow account snafu. The account may not have been properly funded at closing. Check out your escrow analysis statement carefully. There is this nasty thing called a "cushion". It must equal two months Insurance and Tax payments at the lowest point during the year. If your cushion should be $1,000, but is projected to be only $500 at the lowest point during the year, then the borrower must either fully fund the escrow account in a single payment or over several months. Was this request for $150/month a result of an escrow analysis? Is it temporary or permanent?

I spoke with our lender this afternoon and had them fax over our GFE. Surprisingly, our broker did not make a copy for us after we signed the document. The GFE was dated after our home appraisal came in. Although the appraisal showed our actual tax amount, the GFE was estimated $1,000 below the actual tax bill. Before we closed, I specifically told our broker how much we wanted to pay (taxes included). After paying points to reduce our loan, and putting 28% down, I thought that would be enough. Do I have any recourse? This impound adjustment is not a temporary fix it until the reserves are built up. It's permanent! I do not work in the real estate profession. Had I known then what I know now, yes, I would double and triple check the GFE before signing it.

 

[HUD-1]

If you want, you can make a complaint regarding the bad estimate on the GFE. Unfortunately, the GFE is only an estimate and consumers have no right to sue if the charges you have to pay at closing are higher than those listed on the GFE.(If your HUD-1 settlement statement was incorrect, that may be a different story.) However, if this lender has a pattern of giving low estimates to customers in an effort to get business, they may face sanctions by the feds. That of course doesn't put any money in your pocket.

If you think you may want to file a complaint, first go to www.hud.gov, search for RESPA and read up on the requirements.

Finally, $1000 per year is $83 per month. What is the other $70? In the end, the borrower must pay all taxes and insurance due and fully fund the 2 month cushion in the escrow account.

 

[HomeGuru]

Read your HUD-1 and your mortgage docs. I bet that info regarding the no or low taxes are there in black and white.
And as HUD-1 the contributor states, the GFE is only an estimate. That is why it is call a Good Faith Estimate.