Expert Q&A Archive
Can a mortgage company automatically put you into an escrow account?
Can a mortgage company automatically put you into an escrow account? My loan was bought by Chase in July 07; my taxes & insurance, mortgage were paid by my builder six months in advance. The previous mortgage holder sold the account to Chase in July 07 and Chase has reported me being delinquent for June, July and August taxes. I paid the previous mortgage holder on time June, July and August. I advised Chase, and they at that point said that the previous mortgage holder would forward all monies to them. My taxes are due Nov - Feb 28 or every year. During the holidays I was advised that an account analysis was done and my mortgage was adjusted to a higher note (via a phone conversation on Jan 10, 2009). I was not given the opportunity to pay my taxes for 08 because Chase Brokerage Company contacted my assessor’s office at the beginning of Nov. 08 and asked for the balance of my taxes and paid them immediately. I am just now finding out that my credit report has yet been hit again negatively for Nov., Dec. and Jan. because I was under the impression of my regular mortgage payment. Chase never contacted me until I made in inquiry about my credit report in Dec. when I was trying to purchase furniture and was declined.
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The bad news, per my understanding, is that creditors are not obligated to contact you in regard to amounts owing (although they should be required to). It sounds strange, but clients generally sign documents that state we understand the terms of the payments (including taxes) and agree to pay regardless if the underlying creditor notifies us.
The good news is, according to the Fair Credit Reporting Act, Section 623, there are no requirements be it lenders or creditors to report negative information to the credit reporting agencies. What this means is you have an opportunity to get the bad mark removed.
Call your lender, get the "right" person on the phone, explain the miscommunications and request that you work together to get the credit matter resolved and off your credit record. Be sure to take a deep breath, be patient and try not to fly off the handle. We all know you have been wronged here, but killing them with kindness will go much farther these days than being irate. If you find that you are getting nowhere with the person on the phone, try again later. But let them know you would love to get the matter resolved--in the sweetest way possible.
[Editor's Note: The Fair Credit Reporting Act also allows you to correct inaccurate information in your credit report. The Federal Trade Commission published an article entitled “How to Dispute Credit Reporting Errors” in FTC Facts for Consumers in September 2008. It can be found at www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21shtm
Chapter 4 of the Wi$eUp curriculum—Credit in a Money World—discusses various aspects of credit, including credit reports.]
Delores Lenzy - Jones, CPA, CIA:
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I would contact Chase and Chase Brokerage Company to explain the situation. They should be able to correct the escrow account and send a letter to the credit rating agencies to change late payment history. Also, it's important to review contracts associated with the escrow account. Ultimately, the loan or associated contract with government payment.
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There are specific requirements lenders must handle when it comes to mortgage servicing accounts, under a federal law called RESPA. You can learn more at the Department of Housing and Urban Development (HUD) website here: http://www.hud.gov/offices/hsg/sfh/res/respafaq.cfm.In addition, there are requirements under the Fair Credit Reporting Act that credit reporting agencies and lenders must follow when it comes to investigating disputed information.
Because this sounds like a complicated and important matter, I would recommend you talk with a consumer law attorney (www.naca.net) in your area who is experienced in both laws.
Gail V. Marquet:
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This can happen [when] mortgages are sold. Although it doesn't seem right for the consumer, particularly in this instance, it is the way most mortgage companies conduct business to ensure the property taxes and insurance are paid promptly on the property.