Home Buying in 10003>Question Details

CDAAHIG, Home Buyer in Belleville, IL

Is it legal for a mortgage company to put my house payment in an escrow that I did not authorize without my consent?

Asked by CDAAHIG, Belleville, IL Fri Dec 13, 2013

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The way your question is worded implies there was an issue that the lender tried to correct or is in the process of correcting. You imply the lender did something wrong, perhaps not legal, but you don’t share WHY they did something. I am not saying they didn’t do something wrong, only that it is unlikely they did. Most lenders have every insignificant step reviewed by their attorney, have that decision reviewed by another attorney and then send it to an outside legal counsel to be reviewed again. My guess is they probably didn’t do anything wrong, that would require thought and they probably didn’t think much about it, just reacted to some set of circumstances and did what their guidelines said to do. Lenders react 99% of the time, rarely, rarely, very rarely every take initiative, at least that is my personal experience based on working from the inside.

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 didn’t do, then fix the problem ASAP. Good luck, I hope it works out for you,

Jim Simms
NMLS # 6395
JSimms@cmcloans.com
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.
Web Reference: http://jamessimms.com/
1 vote Thank Flag Link Mon Dec 16, 2013
I had not heard of this but myself. I did read the answers on this thread. It seems like you may have left out some information on your particular situation. Tony has a fantastic response and Javier does make a solid point. Even if represented by an Attorney we all must take some responsibility on read before we sign on the line which is dotted. Good luck.
1 vote Thank Flag Link Fri Dec 13, 2013
Your entire house payment or just taxes and insurance? If it's the entire payment I guess the big questions are, Why would they do it and what are they doing with the money?

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.

Good luck!
1 vote Thank Flag Link Fri Dec 13, 2013
Cdaahig,

Great question what you should do is speak to your attorney he or she would let you know if your mortgage Company is allowed to put your house payment in an escrow account.

Good Luck.

Brian
1 vote Thank Flag Link Fri Dec 13, 2013
When it comes to legal questions, it's always a good idea to consult with an attorney...
1 vote Thank Flag Link Fri Dec 13, 2013
Best to consult with a lawyer as regards the legality. I would recommend you speak with the mortgage company to determine the reason for the action.
0 votes Thank Flag Link Tue Dec 17, 2013
What did you find out, CDAAHIG?

I'm guessing there was a misunderstanding.
0 votes Thank Flag Link Mon Dec 16, 2013
Jim, I agree with your 100%, people need to get all facts before making all kinds of assumptions.. Lenders are extremely careful these days with making drastic changes like that especially after the Robo Signing Settlement.
0 votes Thank Flag Link Mon Dec 16, 2013
I think Javier gave you a great answer below. David also provided a great response blow. I think your first action should be to contact your lender and speak with them about, it could be just a mis-communication that could be cleared up with a phone call.

Tom Brady SFR, e-PRO, SRES, BPOR
Licensed Associate Broker
Notary Public, Retired N.Y.P.D. Lt.
631-682-8660
Tom@BradyFamilyRealty.com
http://www.BradyFamilyRealty.com
http://www.SuffolkFreeCMA.com
http://www.NassauFreeCMA.com
#1 Listing & Selling Office on Long Island
Charles Rutenberg Realty, Inc.
255 Executive Drive - Suite 208
Plainview, New York 11803
0 votes Thank Flag Link Mon Dec 16, 2013
All valid points below. Easy steps:

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.

David Rudd
Kindred Real Estate
http://www.kindredre.com
0 votes Thank Flag Link Sun Dec 15, 2013
If you are backed up on insurance or taxes or any other maintenance of the property, they can surely do this as they are protecting their asset. You can most likely pay it up to date and get this released.
0 votes Thank Flag Link Sun Dec 15, 2013
It depends. Some loan programs depending on your scenario may require you to escrow. In either case you did (if you already closed) authorize it. You accepted these terms when you signed the closing documents. Even if your Loan Officer or Loan Processor did a horrible job at disclosing the escrow account to you, your attorney should have reviewed all this for you and explain to you the terms as they read in the documents you were signing. If you didn't have an attorney, then that becomes your responsibility. After the mess we all experienced in the past several years with home loans, all the efforts put forward to make sure lenders disclose and at times over disclose to borrowers, at some point you as the consumer need to do your due diligence and make sure you read what you're signing.

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!

Javier Meneses
Senior Loan Officer
NMLS #23130
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
jmeneses@snb.com
(516) 606-9648 Cell
(516) 740-4478 Office
(516) 918-5383 Fax
0 votes Thank Flag Link Fri Dec 13, 2013
My understanding is that If you default on your taxes and/or insurance the lender can escrow those monthly fees. I would imagine you would have to review the many docs that you signed at closing,
0 votes Thank Flag Link Fri Dec 13, 2013
Your agreement with your mortgage company is a contract, so any violation is a breach of the contract, not a crime. I would suggest, if you think your mortgage company is breaking its contract with you, that you consult with an attorney to see what legal remedies you may have. Mortgage agreements are very complex and usually favor the bank, but there are protections for the consumer that an attorney would know.
0 votes Thank Flag Link Fri Dec 13, 2013
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