Real Estate Settlement Procedures Act (RESPA)
Escrow Account FAQs
My escrow account payments went up, rather than down. Why?
There could be a couple of reasons why your servicer is charging more for your escrow account. First, your bills may have gone up and the account changed to reflect that. Or, the servicer has changed the amount of cushion to the maximum amount allowed by RESPA. Check your statement from the servicer. You may also want to check your loan documents to figure out what is the appropriate cushion. If the mortgage loan documents are silent on the amount of the cushion or pre-accrual practices, then the RESPA "two month" limits apply, unless state law provides for a lower amount.
What is the disbursement date for paying escrow account items?
The disbursement date means the date on which the lender actually pays an escrow item from the escrow account. However, the lender must pay the items in a timely manner, that is, on or before the deadline to avoid a penalty. This is required as long as the borrower's payment is not more than 30 days overdue. Borrowers should review their annual escrow statement to make certain the lender did not make late payments and charge any penalties to the borrower's account.
I got a notice from the county that my lender did not pay my taxes on time and the county is assessing a penalty. Do I have to pay this bill?
Send the bill to the lender. The lender should pay the penalty for failing to pay the taxes on time as long you were current in your mortgage payments. If the lender refuses, you may follow-up with a lender complaint letter and then file a complaint with HUD.
Are lenders required to pay taxes on an annual basis if a discount is offered to the consumer?
NO. The Department published a new rule in the Federal Register in January 1998. The rule clarifies what a lender should do when a taxing jurisdiction offers a choice of payment on an installment basis or an annual basis. If there is a discount to the consumer when disbursing on an annual basis or there is an additional charge for disbursing on an installment basis, the lender may disburse on an annual basis. Otherwise, the lender should disburse tax payments on an installment basis. The borrower and the lender may mutually agree to another disbursement basis or date. The Department encourages lenders to follow the preference of the borrower.
What steps should I take if the lender does not pay my hazard insurance on time or at all and my insurance is cancelled?
As long as your mortgage payment is not more than 30 days late, Section 6 of RESPA requires the lender to make escrow account disbursements on time. You should contact your lender immediately and send a copy of the bill. Some lenders list a special address and/or fax number for insurance and tax bills. Keep checking with the insurance company to make certain the bill is paid. You may wish to pay the insurance company directly to avoid cancellation of your policy and then seek a refund from your lender. Keep copies of all your correspondence and payments.
After contacting your lender (you may use our sample complaint letter), if your complaint is not resolved satisfactorily, you may file a complaint with HUD. You may also wish to consult an attorney with regard to bringing a private lawsuit under Section 6 of RESPA, particularly if you incur any damages due to the lender's negligence.
I got a notice that my hazard insurance has been cancelled. My lender force-placed hazard insurance with a different company and it costs a lot more. Can a lender do this?
As long as your mortgage payment is not more than 30 days late, Section 6 of RESPA requires the lender to make escrow payments, for taxes, insurance, etc., in a timely manner. You should write a complaint letter to your lender. If your lender does not refund the difference or otherwise resolve your complaint satisfactorily, you may wish to file a complaint with HUD or the Consumer Protection Office of your State Attorney General's Office. You may also wish to consult an attorney.
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