property taxes and mortgage company defaults

I started getting cancellation notices from my homeowner's insurance company when the mortgage company didn't pay them. I paid the insurance, then straightened it out with the mortgage company, which wasn't easy.

If you have the discipline to save for taxes and insurance, it is better to do it yourself.

-- Doug

I believe this is why those tax payments are actually put into an escrow account by at least some lenders. I though all, but apparently just some. Also, I don't believe they would give you an option to pay taxes yourself 'cause if you don't pay the taxes AND default on your mortgage the bank will get stuck with your house and the tax debt.

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On our last mortgage, we were allowed to pay the taxes and insurance ourselves, without escrow. The lender said they offer the option if you put at least 20% down. Also, our daughter was not required to have an escrow. Both of these are in Texas.

-- Doug

I had a similar experience. I had two units in the same complex, with two mortgages from the same bank. Somehow, the tax got credited to one unit, both payments, and I got late notices on the second unit from the town tax dept. It took till the third time this happened that I wrote the bank and said I'd be paying my own taxes on both properties. Until then, they were adjusting the withholding every two or three months, even though the tax only changed annually. Just a real pain in the neck. My current mortgages both allow me to pay my own taxes, which mean I am keeping whatever interest I earn before the payment is due, and I can choose which year to make the payment for Q1 (i.e to pay in December or January). JOE

This is a point worth expanding on. There can be income tax advantages to this. One year, you pay the current year's property taxes in January and the following year's property taxes in December of the current year. This allows you to deduct both year's property taxes in the current year.

The next year, you don't pay any property taxes and take a standard deduction. In some cases, this can maximize your tax deductions. It doesn't do you any good if two year's property taxes and other deductions do not exceed standard deduction. It also doesn't do you any good if you are subject to AMT since property taxes are not deductible on the AMT.

-- Doug

huntinvest.com wrote on [Tue, 18 Sep 2007 11:48:51 -0500]:

I think you may be missing the point that the mortgage company's escrow checks to the tax agency are bouncing, not the homeowners.

An escrow account is not the property of the mortgage company, but is held by them in trust for the benefit of the borrower. If the borrower paid enough to cover the taxes and the escrow account has insufficient funds to pay the taxes, then it would seem that embezzlement or theft has occurred.

Dave

I believe that was the point of the article, that and that taxes aren't being paid.

So has anyone been charged?

Dave

You could read the article and find out, I guess.