My husband and I purchased our first home and closed jun29,2007. Everything was escrowed?

Question

our payment was 1,424.84. Saturday we recieved a letter from Amtrust Bank, annual escrow accouont disclosure statement, It says that this is not a bill but there is an escrow shortage and the new payment beginning on 12/01/07 will be 1,909.30--How can we have a shortage? Is our payment going up 500.00 a month, it says the shortage amount is 4,382.65. Can someone help me understand? Thanks

I live in Galveston County, Texas

Answer 1

call Amtrust and ask them to explain their escrow shortage statement.

My offhand bet is that the payment that should have been made from the closing has not been received, or was credited improperly, and thus is not shown in the statement.

This will show up as a discrepancy between your settlement statement and their escrow statement.

If that's so, finding the source of the error will require that both the closing agency and Amtrust look for the missing funds.

***
Other possible causes:

your insurance company failed to provide proof of insurance naming AmTrust as mortgage holder and so AmTrust forced a policy onto you [as permitted in the mortgage instrument] -- those "forced" policies are very expensive (and usually written by an affiliate of the bank involved which I regard as a conflict of interest but apparently the attorneys general of the various states do not).

It is also possible that the taxes were improperly accounted for [someone else's tax bill posted to your escrow account], or that there was some other government assessment to the escrow account that you were not aware of and wasn't handled in the closing. [title company is supposed to catch these but they ocassionally miss and there are other odd cases that rarely happen but do once in a while].

AND, it could be that AmTrust has been applying your payments incorrectly with none of them going toward escrow.

OR, you may have been misinformed in the closing process of the amount of the payment due.

***
my estimate is that the shortage statement was generated as of 30 september -- only three months after the closing. It seems impossible to me to honestly have a shortage of over 1460 a month [3 months times 1460 = 4380] when you had a TOTAL payment of 1425.

therefore, something is seriously wrong and AmTrust is where to start.

***
FYI to all respondents. Location of property not mentioned in question. I'm in Florida. It is perfectly possible for a property in Florida to suddenly receive a much larger tax bill because of the change in ownership. In another case (Vermont), the change in ownership causes an automatic property value adjustment to the new recorded value effective on the date of the sale AND an immediate bill is sent to the new owner for the prorated taxes on the higher value. Where this happened may make a world of difference.

Answer 2

Yes, you can have a shortage. If you taxes or insurance increased and the lender did not escrow enough on a monthly basis, when the bills came due, there was not enough in your escrow account, thus a shortage. The shortage you quoted, prorated over a year is $365.00 per month. The additional money, to make up the $500 increase in payment, is to be sure there is enough in the account the next time the bills are due. Taxes and Insurance can increase from year to year normally. With new construction, this happens alot. The first year in the home the taxes are on unimproved property, the 2nd year the taxes are based on improved property. This is a huge difference.

Check your tax bill and your insurance and compare them with your initial bills. Taxes are due the 1st of November, so I bet your taxes really increased. The only way to keep your payment down is to pay the shortage amount in one lump sum. Then your payment will only increase $135.00 per month. If your taxes and insurance have not increased, someone made a mistake at the closing of your loan in June.

Trish Sublette
Beacon Financial
321-543-4517

Answer 3

One of a few things may have happened:

When you purchased the property, the taxes were not paid to date properly by the previous owner, and you ended up taking that portion of the taxes when the escrow was only calculated for your portion of the tax bill.

Or, the property assessment, or property taxes went up substantially, even then, that is a pretty big change. If you call your mortgage company, they should be able to tell you the breakdown of the escrow account and where the shortfall was.

It may also be that your insurance went up (I am assuming it is escrowed as well)

If the shortfall was from taxes not being paid by the previous owner, call the title lawyer who should have attended the closing and make sure there was not a mistake made in the taxes paid by the previous owner.

Answer 4

The Realtor has nothing to do with the lender's mistake -- if there was one, Katie.

One other thing could have happened. I only raise this because it happened to a friend of mine. I don't think it is common, however.

The bank may have used inaccurate property tax information to come up with a lower monthly payment. My friend had two lenders going against each other and she went with the one who gave her the lowest monthly payment.

Well, it turned out that they shorted the escrow account to come in lower. Then the payment went up substantially to cover the amount. She was able to get the lender to pay the difference, because she could prove that they used a lower tax rate to come up with the estimate. I don't know how she did it, but it took months.

My payment also went up $100 a couple of months after I closed, then it went down a year later. It jumped up and down for a couple of years before stabilizing.

I would not assume fraud is involved, but you need to start asking questions now. Without knowing the pruchase price and other information, I can't really begin to guess what happened.

Answer 5

escrow is the amount of money the bank collects from you and holds to pay your other responsibilities (TAXES) and protect their loan.

As I have recieved a statement similar to this (though not as shockingly large) it means the money collected by the bank is not enough to pay your property taxes. Usually this is the result of a rate hike, but $4300 is a significant nut. The actual number may not be $500 a month, but that may be what is required to catch up and pay the proper amount at the same time.

Did the tax structure in your area change signifcantly? Were property values re-assessed?

You need to find out a little more to determined where its going.

Answer 6

It happened to me and it has happened to many other of my friends. I'm not surprised. My payment went up $400 a month for about 18 months then was reduced. By the way - I think you mean your "impound account" has a shortage - not the escrow.

Answer 7

That doesn't sound right.

It may be that your real estate tax bill hit the system and showed a substantial increase.

It may be that your home owners insurance premium has been adjusted to a substantial increase.

Or both.

My advise would be to meet with your loan officer face to face to review exactly what happened, and what options you may have.

FYI,l You can contest your real estate tax bill with your County Appraiser if you think it's incorrect.

You can call your insurance rep and ask for ways to reduce your bill (higher deductible, for example).

But start with your lender to understand where the increase came in.

Good luck and best wishes

Answer 8

I would call a lawyer immediately! And your realtor and have them foot the bill!