Home > Mortgages > What to Do If Your Bank Doesn’t Pay Your Real Estate Taxes

Comments 1 Comment

A common feature of many mortgage loans is the escrow account. This is money held by your lender for the purpose of paying the periodic bills for real estate taxes and/or homeowners insurance. Unlike utilities or groceries, the bill for taxes or insurance come only a couple of times a year. Since these bills can be difficult to budget, a lender will establish a savings account to hold monthly contributions from you, building a fund that will be available for the bill when it comes. The escrow account may be optional with the lender, but it certainly helps with the monthly budget.

For example, your mortgage payment of principal and interest may be $1,500 a month. You may also deposit an additional $500.00 into the escrow account every month. This translates to $6,000 a year into the account. Your real estate tax might be $4,750 a year payable in two installments of $2,375 and your homeowners insurance might be an additional $1,250 a year payable in one big bill. The money will be in the escrow account to pay the bills when they come due.

Under federal regulations — Real Estate Settlement Procedures Act (RESPA) — the lender holding your escrow account has to send you an accounting once a year explaining what they thought was going to be paid out of the account, what they actually paid out of the account, and what they predict will be due to be paid out of your account next year. This occurs on the anniversary date of your loan. The accounting will show the monthly deposits into the account and the periodic disbursements out of the account. It is important to review this statement when you get it to make sure you understand where your money is going. From there, you can check with your town’s tax collector or your insurance company to see if the bill that was paid is correct.

So what can you do when the escrow account is mishandled? And what can you do if the mortgage company doesn’t pay your taxes on time or the insurance company cancels your insurance for non-payment?

Contact Your Lender

Although the temptation to make a telephone call is great, you should always communicate in writing. You might start with a simple phone call to get basic information, but a letter sent in the mail or by fax creates a record and evidence in case a complaint is required later. Keep copies of everything you write. You can find a sample letter form on the HUD website. If you have suffered any damage as the result of the lender not paying a bill out the escrow, you can recover your actual damages. The lender should pay late fees and other costs for their failure.

Follow Up By Filing an Agency Complaint

A number of government agencies have jurisdiction over the problem. Check the HUD website to see where a Federal complaint can be filed, as well as state and local agencies.

File a Formal Mortgage Complaint

The Consumer Finance Protection Bureau (CFPB) allows you to file a formal mortgage complaint online.

If All Else Fails, See a Lawyer

RESPA provides that you can recover your damages and attorneys fees and costs in a private lawsuit for a violation. HUD has a page set up to answer to common questions, if you want to read more.

Unpaid real estate taxes can potentially damage your credit. That’s why it’s always crucial to follow up to ensure they’ve been paid, and to check your credit reports for listings related to unpaid taxes. You can see your free annual credit reports from each of the three major credit reporting agencies. You can also obtain a free credit report summary, updated monthly, on Credit.com.

More on Mortgages & Homebuying:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • http://www.yamanoor.com/ Yamanoor Srihari

    What would be most beneficial is a place where we can see what lenders have misbehaved and how. If one exists, please point out for everyone’s benefit.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team