Forced Escrow Accounts Frustrate Homeowners

by Becky Oliver, Fox 4 News, Dallas-Fort Worth
Monday, February 21st, 2011

DALLAS - Just when you thought it couldn’t get any worse, 2011 will likely be the worst year in the foreclosure crisis. Experts say 1.2 million homes will hit the auction block. 

FOX 4 has been covering the mortgage mess for years. We’ve told you about angry homeowners having problems with loan modifications, endless calls to lenders with no answers, unregulated mortgage servicers, and now force-placed escrow accounts.

Texas homeowners have the option of paying their own property taxes but some who selected that route are finding themselves in a tangled mess that is difficult to undo.

75-year old Lou Montanaro thought he’d be spending his golden years in paradise. He has a beautiful home on two acres with lots of space to enjoy. Instead, he is spending sleepless nights worrying about his mortgage and holding on to what he has worked so hard to have.

“It’s horrible,” said Montanaro. “It’s horrible the institutions that we so trusted are just not the institutions I remember.”

Montanaro’s beef is with Chase Bank, his mortgage lender. Since 2004 he’s been paying his property taxes quarterly to Collin County but last year Chase paid his taxes after he was late on a payment. Then Chase set up a forced escrow account. Montanaro said, with the inclusion of the amount placed in escrow for taxes his mortgage payment then tripled. He’s kept meticulous records but the documents have turned in to a convoluted mess.

“It’s just flabbergasting,” Montanaro told FOX 4. “I could never even figure out some of the things they did here.”

Gloria Price is a successful businesswoman. Her lender, Bank of America, also set up a forced escrow account.

“It has drained us, mentally and financially!!” said Price. “Our life has been a nightmare because of this.”

Price said she applied for two tax exemptions with Dallas County. But there was some confusion about what taxes were owed when Bank of America doubled her monthly mortgage payment. Then in November Price learned Bank of America paid her 2010 taxes, which were not due until Jan. 31, in full.

“I don’t need you to pay my 2010 taxes,” said Price. “Give me my money.”

Real estate attorney Jack Peacock said mortgage companies can set up forced escrow accounts but encourages homeowners to fight it if they have a history of paying their taxes on time.

So, if a homeowner pays their own property taxes, why would a lender want to step in and do it for them? Peacock said there are a lot of reasons. A lender collects money from the homeowner and puts it in an escrow account (similar to a savings account) until the taxes are due. That money collects interest. If a home goes in to foreclosure the county tax office gets paid first and then the lender.

Bertha Andrews said she has never gotten behind on her mortgage payments. Last summer when we first met Andrews, the widow was struggling to save her home while caring for her 95-year-old mother. Andrews had a tax deferral from Dallas County because she is over 65, which means her taxes wouldn’t have to be paid until her house is sold. But her mortgage lender, Ocwen Financial Services, paid the back taxes of around $3,500 and tacked it on to her mortgage payment due.

“I didn’t understand it,” said Andrews. “I didn’t understand it.”

Andrews couldn’t fight anymore. She goes down as a foreclosure casualty in 2011, now living in an apartment complex for seniors. Andrews walked away from her home after paying eight years on her mortgage.

“The final straw was when I had sent in all my receipts and they didn't respond to them,” said Andrews.

Ocwen didn’t respond to FOX 4 either, even after Andrews gave the company permission to talk to us about her mortgage. Ocwen auctioned off her house on Feb. 1.

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