Mortgage escrow refund check - safe to spend?

nadams

Today I received a substantial escrow overage refund check from my mortgage company. It is also reflected in my online statements, so it looks perfectly legit.

From what I understand, when I purchased the house, they estimated my taxes and insurance to by higher than they actually were. By their estimations for next year, my escrow account was $xx.xx over what it should be right now, so they sent it back to me. They also permanently dropped my payments by $17/mo.

Now, I've only been in this house a little over a year and a half. It seems odd to me to have a significant escrow overage already. What I'm concerned with is depositing this check, spending it on things like CC's and heat and such, and then coming to find out in a few months that they're looking for money back because my escrow is too low.

Anyone have this happen to them? What should one do in this case? I'm calling the mortgage company escrow department to ask them tomorrow.

exalted512

cash it, then paypal it to exalted512@gmail.com

Please include the 3% fee for transactions as well.
-Cody

dorokusai

Nope. I would do exactly what you're planning on doing in the AM.

I have some Proac speakers available if you feel ducky

wallstreet

stick it in the bank, pay off next years Christmas hangover. You'll probably get another check next year since everyone's property value is going down the toilet.

nadams

I think what I'm going to do, after verifying with the escrow department, is open a new savings account with that check and just let it sit. I've been meaning to put some money aside for a while now anyway, so this would be a good time. From what I've read doing a few searches, some people then got readjusted the other way the following year, and had the mortgage company ask for money to fill the deficit, plus raise their payments.

What I'd like to do, is spend it on audio gear, or windows for the house, or pay off some past CC purchases. Unfortunately, I don't feel comfortable doing any of those things without knowing what next year holds . If I put it in my checking, it will get spent. At least in savings it's harder to get to.

Sami

wallstreet wrote: »

stick it in the bank, pay off next years Christmas hangover. You'll probably get another check next year since everyone's property value is going down the toilet.

Hmmm, where in Texas do you live? Prices and property values seem to still be the same in Dallas area. Even with all the foreclosures they are not dropping.

nadams, it's your money. Pay expenses if you want, the worst that could happen is they'll raise your monthly payment if you get on the low side on you escrow.

nadams

Looking at my account history, I think I see what happened. When I opened this account in May '07, they required me to put almost $850 into escrow, presumably to cover any bills that may arise before my payment schedule had built up the account. Couple that, with their estimates for the monthly escrow being high, and I ended up with a nice check this year. I'm assuming I didn't get some of it last year, because they didn't have a full years worth of payments in.

wallstreet

I'm in Mckinney. My property tax bill for this year went down 5% and the appraisal came out long before the big meltdown. I'm expecting another 5-10% next year. If the appraisal districts don't discount that much, there will be so many protests, they'll be listening to appeals for months.

BTW, this problem is why I insisted on doing my own escrow. It is honestly a rip off to let the mortgage company get interest on thousands of dollars of your money. On top of that they're always jacking with your payment. If you call them up and tell them they're taking too much, they'll just refund it after the end of the year. It drove me crazy.

Sami

Both of mine seem to be about the same as last year (Keller and Bedford). Both properties have gone up in value though (in paper of course, I'm not trying to sell).

edbert

nadams, a similar thing happened to me, except they didn't estimate enough and I owed a bunch. Our payments went up a little for a couple of years and then dropped back down to what it should have been all along. I have seen this happen before with new homes in newer neighborhoods. Sometimes it is just hard to know what the value of the house will actually be once it is finally built and the neighborhood is finished out.

Congrats on getting some money back!

nebborjk

I've received an escrow check in the past, they're legit. Mine was also accompanied by a reduction in the overall payment, which lead to being short the next year, which raised the payment (too much), which lead to another refund check.......
If you're under next year they will usually raise your next year payment to cover the difference rather than making you pony up the entire amount at once. This will depend on how short you are though.

heiney9

nadams wrote: »

Today I received a substantial escrow overage refund check from my mortgage company. It is also reflected in my online statements, so it looks perfectly legit.

From what I understand, when I purchased the house, they estimated my taxes and insurance to by higher than they actually were. By their estimations for next year, my escrow account was $xx.xx over what it should be right now, so they sent it back to me. They also permanently dropped my payments by $17/mo.

Now, I've only been in this house a little over a year and a half. It seems odd to me to have a significant escrow overage already. What I'm concerned with is depositing this check, spending it on things like CC's and heat and such, and then coming to find out in a few months that they're looking for money back because my escrow is too low.

Anyone have this happen to them? What should one do in this case? I'm calling the mortgage company escrow department to ask them tomorrow.

Yes this happened to my brother. He refinanced to get rid of PMI and pay his own taxes rather than escrow them. He received a check from the bank for the amount in his escrow. He called the bank to make sure he could cash and spend the check. They said yes go ahead it's yours. I told him (since I have been in the title insurance industry for about 8 years) that something didn't seem right as they refunded his money and PAID his taxes.

I told him to call the bank again and make sure everything was good. Again they said everything was good. He held on to the money for a about 3 months and then spent it. He wants to move into a bigger house so his house is FS and the bank in now saying he owes them that Escrow money back to the bank. They will not release the mortgage until he either pays the funds back or they will deduct it from the proceeds.

This happened almost a year later. The bank admitted to making the error but they are unwilling to take any responsibility for the mistake. He has been with this bank (in fact our whole family has a long history) for a long time. He told them he will not get a new loan or have anything to do with the bank anymore because of this mistake. He actively tried to tell them something wasn;t right and they told him everything was fine. It would be different if this was a couple months but to come back a year later is BS.

I talked to our Title attorney and she said when it comes to banks and the government they can do whatever they want when it comes to funds owed even if they admit to the mistake and it's been more than a reasonable amount of time.

Noah, I'd get something in writing from someone with authority form the bank. What happened ti my brother is the exception not the norm, but still in these times with banks changing hands and all the turmoil I'd get yourself covered.

I have since found out they hired a bunch of contract processors to handle the overload and these "contract processors" don't work there anymore and they made hundreds of these types of mistakes.

He's pissed, but there's nothing he can do about it.

H9

Sami

Even when the bank made the error in refunding the money, it's away from his escrow balance, not from them. If it is on the negative he has to pay the balance.

Like wallstreet said, you're better off electing not to do escrow. That's what I did on my second time, I'm paying the insurance and taxes myself without depositing the money on a bank account that doesn't pay me interest or screw things up.

heiney9

Sami wrote: »

Even when the bank made the error in refunding the money, it's away from his escrow balance, not from them. If it is on the negative he has to pay the balance.

Like wallstreet said, you're better off electing not to do escrow. That's what I did on my second time, I'm paying the insurance and taxes myself without depositing the money on a bank account that doesn't pay me interest or screw things up.

Three points

1) We tried twice to tell them something was wrong. They said everything was fine.

2) It's now going on a 1 1/2 years..........they should have discovered this awhile ago.

3) They are unwilling to take any responsibility. They approved the disbursement. Upon my advice he asked if they would split the amount since they are responsible for the error. They wouldn't hear of it.

I have no doubt it was an error. But what if because of the current housing market he didn't have proceeds from the sale. Then he would have to come up with it out of his pocket. Not everyone has almost $6000 sitting around.

The bank made the mistake. Called them on the mistake to alert them something wasn't right and now they are unwilling to do anything.

It's BS and it isn't right. Regardless, I was in banking 10 years before the Title Industry and we wrote off all kinds of errors, mistakes and poor accounting. It's a cost of doing business and they were unwilling to even meet us half way since it was their error form over a year ago.

H9

Sami

What should they do? Pay out of their pocket? Not going to happen. If you knew it wasn't right then he should of deposit the money on high yielding account to accrue interest.

Sounds like your brother has the money to pay for it, so there's really no problem. He doesn't get to spend that money anymore but you can't eat the cake twice. I do understand the whole situation though, this could have potentially put someone into a very bad situation, and the bank is in either case to blame, but expecting them to buy you an early shopping spree isn't realistic.

Sami

The above sounded harsh when I look at it, please don't take it that way, it wasn't meant to be.

kgingras

Sami wrote: »

Like wallstreet said, you're better off electing not to do escrow. That's what I did on my second time, I'm paying the insurance and taxes myself without depositing the money on a bank account that doesn't pay me interest or screw things up.

I agree and have done the same but it might not be possbile for all folks as I thought I have heard that if you are putting <20% down you cannot do this or it is more difficult to get out of.

phuz

This is not uncommon in Texas. When your homestead exemption takes effect and/or your property taxes drop, you will get an overage refund from your mortgage company. They estimate your taxes/insurance/etc. and if there is an overage, you get your money back.

They won't ask for any cash back, they'll just raise your monthy payment when taxes or insurance rates go back up. You're safe. Enjoy YOUR money.

Squidmon

Yeah, its safe to spend. You'll generally see that in the 1st coupla years of a new mortgage till they get the numbers right. Plus, at closing, they generally get you for 3 months or so pre-paid taxes, so that also figures into the surplus.

rdb2001

I would definitely put it in the bank and maybe spend half on cc's and put the rest away.

sucks2beme

Aren't banks fun? They've got my escrow running too high also.

About 8 years ago I refinaced through a different bank. About a year later,
they send us a bill from the original bank for $5k. Seems the closeout amount
was wrong. And the *holes had held on to the deed? How can the current
mortgage holder not have the deed? Seems it's not unusual for the transfer
to take a couple months. But over a year? I ended up paying it out of pocket.
I had some ugly conversations with the people involved. The banking
practices in this country are amazing. They run with about 99% warm bodies.
They should of let them crash.

Sami

kgingras wrote: »

I agree and have done the same but it might not be possbile for all folks as I thought I have heard that if you are putting <20% down you cannot do this or it is more difficult to get out of.

You can (could) ,the lenders just try to talk you out of it, or make up fees that you have to pay. Today it might be much more difficult than in the past, or even not possible.

disneyjoe7

This Check sorta works like Fannie Mae if a check to you.... You most share with us. If you came up short and they wanted a check from you.... You most write check and be happy with it. In other words just cut the check and shut up.

nadams

I called and talked to the escrow department. She said that if it gets adjusted the other way, I'll have the option of paying it in a lump sum, or spreading it out over the following year. From the maths I've done on my own, their figures actually look to still be over what I need. So I'm going to feel safe in depositing this check and using it for some much-needed things I haven't had the spare cash to buy.

disneyjoe7

Enjoy your check.


But let's be clear you're not going to share it right

WilliamM2

nadams wrote: »

I called and talked to the escrow department. She said that if it gets adjusted the other way, I'll have the option of paying it in a lump sum, or spreading it out over the following year. From the maths I've done on my own, their figures actually look to still be over what I need. So I'm going to feel safe in depositing this check and using it for some much-needed things I haven't had the spare cash to buy.

I only have escrow for taxes, not insurance, but that is exactly how it works for us, if it's short we can pay it with a check, or spread it out over the year.

nadams

disneyjoe7 wrote: »

Enjoy your check.


But let's be clear you're not going to share it right

While it was a lot of money for me (over one paycheck's worth), it wasn't anywhere near enough to spread the wealth

Couldn't have come at a better time for me, though. Funds have been lacking as I've been sick for the last month and not putting many hours in my part-time job.

heiney9

Sami wrote: »

The above sounded harsh when I look at it, please don't take it that way, it wasn't meant to be.

I know. I'm not nec. debating the fact that my brother is right. My point is they have to take some of the responsibility for making a mistake. It's not a matter of him knowing it was wrong. He tried to point out that maybe they made a mistake. He's not the banker or escrow officer. Is he supposed to leave that money (which they told him was HIS) in an account in perpetuity because the bank can't do it's job?

He held onto it for almost 4 months after they paid his taxes. It's their mistake so they need to have some of the burden of the responsibility.

This isn't a case of a bank making the wrong deposit to your account and you know it's not your money. It's a case of them refunding what they determined was an overage of HIS own money and then coming back over a year later and saying................"oh yeah by the way we need that money back. We made a mistake, sorry you spent it because we told you that you could and it was your money we were refunding. Oh yeah and by the way we hired some temps when business was booming and they don't work here anymore and they are the ones who made the error. You owe us the money or we will take it out of the proceeds of the sale of your house".

The bank should make it right by taking part of the hit for the mistake they made. This would be a moot point if we hadn't on 2 occasions tried to understand why we were getting the money back with them responding it's your money, the overage of your escrow account. Or if they had noticed the mistake within a reasonable amount of time.

I bet if he hadn't informed them of his intent to sell, they still wouldn't know about the mistake they made.

It's very very irritating to expect all your account holders to not make mistakes and be held to very strict guidelines, but when you try to hold the bank to same criteria it doesn't apply.

H9

madmax

I often get a refund one year and then they up the monthly amount the next year than a refund again the next. Mine are less than $150 or so. It seems to be a continual thing. Whatever the amount is you should probably keep an emergency account for the unexpected.

Sami

The best reasonable thing, although doubtful, you could expect from the bank is them to let you pay monthly. With reasonable interest or none at all. Didn't the mistake make his escrow balance to be negative?

heiney9

Sami wrote: »

The best reasonable thing, although doubtful, you could expect from the bank is them to let you pay monthly. With reasonable interest or none at all. Didn't the mistake make his escrow balance to be negative?

Eventually I'm sure that's how the bank found out. Remember this wasn't a adjustment at years end. He closed his escrow account choosing to pay taxes himself. So they closed the account, sent him a check and that's that. No more annual or semi annual notices because the account was closed and the proceeds disbursed to the rightful owner.

The banks mistake was then in the next couple months they payed his taxes out of the closed escrow account. At that point that's when we made the 2nd call after discovering his taxes were paid in full. He also still had the money parked in an account. I told him something wasn't right because the amount of his taxes plus the amount of the escrow check was way more than he should have had in escrow to begin with.

They called him the next day and said that everything was fine. So at my advice he held on to the money for another month or so and then eventually used the money.

What more is someone supposed to do? If I hadn't been familiar with the way these things are (escrow and banking, etc) we would have never questioned it to begin with.

So you go Ford and buy a car for a very low price. You tell them there must be some mistake and they assure you that's the price. You buy it and 1 1/2 later they come to you and say we didn't charge enough for the car we sold you; you now owe us $4000, it was our mistake, sorry. We won't let the car be titled to anyone until you pay us the money.

Slightly different product but the same scenario. If the bank who escrowed his taxes didn't hold the mortgage on his property they would be SOL because there is no type of lien they could place (a stupidity lien maybe) on the property. So the bank is lucky they still hold the note and were also the escrow officer. So they are attaching to the payoff. Which I'm not even sure is legal and I'm checking into it. He signed a mortgage for a specific amount you can't arbitrarily start adding stuff to the payoff. I'm sure somewhere in the 22 pages there's a clause about being able to offset stuff like this.

On principle it just sucks that they can make whatever mistakes they want over whatever period of time and have absolutely no consequences. It used to be (and I'm not that old) that you could trust your banker and your accountant. Well BS........................they are as crooked and even moreso than some of the career criminals out there.

The other irritating thing is they wouldn't even work with us. Deep down I never expected them to "eat" the whole thing even though they should have. But even a 50/50 split would have shown me that yes, we made a mistake and we are willing to take some of the responsibility for it.

H9