ALL of the Covenants in your mortgage are important and must be adhered to or the mortgagee is considered to be in a default status. When that occurs the lender is REQUIRED to protect the asset. Borrowers are delusional if they think lenders can do whatever they want; lenders must follow the rules even if the borrower does not. So if you did something that violated the covenants in the mortgage the lender is required to do something in response.
The way your question is worded gives me the impression that you have either been late making payments, not paid taxes or insurance in a timely manner or violated one of the other Covenants in the mortgage. Any of those things could eventually force the lender to take some sort of action. If you do not know why they did what they did ask them in writing. If you know what they did is in response to something you did or didnâ€™t do, then fix the problem ASAP. Good luck, I hope it works out for you,
NMLS # 6395
Financing Kentucky One Home at a Time
I answer questions about financing real estate based on my decades of experience dealing with mortgage underwriters. This answer is my personal opinion, has not been reviewed or approved by the company I work for. I do not offer legal or tax advice, if you need answers from an attorney or CPA find one knowledgeable in your local market.
If it's only the taxes and insurance then there could be a number of reasons.
When you first take out the loan there are a number of disclosures relating to the escrow of taxes and insurance. With all the additional disclosure regulations the government has added in recent years, it's darn near impossible not to know if you have an escrow account or not. It is clearly written out on the Good Faith Estimate when you apply and on the HUD-1 Settlement Statement you sign at closing.
If you took out an FHA or VA loan then there is no option to pay your taxes and insurance on your own. They must be escrowed. Also, if you did a conventional loan with less than 20% down then you need to have an escrow account.
If you DID put 20% on a conventional loan and requested an escrow waiver, then the lender can approve or deny this request. If you had no escrow account before but now they have begun escrowing, then you need to get to the bottom of it. Like Janet said, if the lender finds out your taxes aren't being paid or you let your insurance lapse, then they have the right to "force" coverage into place and require an escrow account. This should be clearly spelled out in your loan documents labelled "Mortgage".
Of course, it is possible that it's all a clerical error or misunderstanding. I would recommend you call your lender and ask what is up. It may be able to be solved with a 10 minute phone call.
If that does not work then you can call an attorney.
Tom Brady SFR, e-PRO, SRES, BPOR
Licensed Associate Broker
Notary Public, Retired N.Y.P.D. Lt.
#1 Listing & Selling Office on Long Island
Charles Rutenberg Realty, Inc.
255 Executive Drive - Suite 208
Plainview, New York 11803
1) Contact lender and ask what part of contract states escrow reserve is required
2) Review the contract
3) If it does not require ask them to remove
Many contracts require this reserve to get the best rates. My hunch is it may be in your contract, just not something that was properly explained to you.
Kindred Real Estate
At the end of the day, escrow accounts are not the worst thing in the world.
If my response was helpful, consider clicking BEST ANSWER!
Senior Loan Officer
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
(516) 606-9648 Cell
(516) 740-4478 Office
(516) 918-5383 Fax