It is a good idea to take a close look at what your mortgage
lender is charging in regard to your escrow fund. Some bankruptcy
lawyers have found that some banks are overcharging escrow
expenses. In fact federal investigators are now looking into this
alleged practice.
Although it is not known how much money banks have allegedly
stolen from borrowers by overcharging, it appears that the amount
may be in the hundreds of millions of dollars. The
New York Post has found that there could be over $150,000,000
in overcharges just from cases it reviewed from 2011. In New York,
the Office of the United States Bankruptcy Trustee is reviewing
Chapter 13 Bankruptcy cases for escrow overcharges by banks.
This is now the banks have been allegedly taking money out of
the pockets of struggling homeowners. Many homeowners are required
by their lenders to pay their property taxes and homeowners
insurance premiums through their lenders. This is done by the
homeowner making payments for taxes and insurance to their mortgage
lenders, which are in addition to their payments for the mortgage.
These expenses are added to the monthly mortgage payments and made
in one lump sum payment each month. When the homeowner falls behind
in payments the lender or its servicing company or its attorney
then requires not only payment of the past due payments, which
include payments for taxes and insurance, but also payments for the
escrow items, which are taxes and insurance. Thus the lender
collects twice for taxes and insurance and only pays those expenses
once, pocketing the difference. It is believed that this little
scheme, on average, has allegedly stolen about $2,000 from each
home owner. In addition, many homeowners in distress falls behind
in their mortgage on more than one occasiion. This provides an
opportunity for the lender or its servicing agent or attorney to
help themselves to additional money that they are they are not
entitled to.
So far this allegedly problem has been found with loans from
Wells Fargo and GMAC Mortgage, but it appears to be a wide spread
problem. We will see how much this alleged bank activity is
investigated, and what if anything comes of it. While we are
waiting for investigators to do their job, do your own
investigation and carefully review your mortgage and escrow
statements for errors and outright theft.