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Seeks escrow snafu advice

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POSTED December 27, 2013 7:22 p.m.

Q:  I am at my wit’s end. This is a long story so please bear with me. (Note:For brevity sake, I am summarizing.) Peter appealed his real estate tax assessment but first the County got it wrong and then his lender compounded the problem with yet another error.  His lender has calculated last  year’s monthly escrow payment and Peter believes it is wrong. As Peter wrote me: “Knowing  there would be a shortage if I paid the lower payment, every month since March , I have over paid my mortgage by at least $100 and specifically requested it be deposited to escrow. However, despite my requests, it was always misapplied to principal. In addition, they somehow overpaid my Homeowners policy and I received a $500 refund from my insurance carrier.. I sent that  back to my lender, and that was also misapplied to principal.

Now because of all these payment misapplications, it’s nearly impossible for me to try to track what the running balance of my escrow account. I do not trust that their estimate of what my escrow account balance will be when they forecast a shortage is accurate. The fact that one of the largest banks in the world can not get this right is insane. I am on the verge of refinancing with a different lender even though rates are higher than my current rate and I will be out several thousand dollars in closing costs, just so I can be done with this.

I just want to see a 1 year escrow account statement showing every payment made in to it, and every withdrawal taken out for taxes/insurance so I can track the balance and verify the amount in it is correct with all the over payment deposits I have made. Are they required by law to provide this if requested? Peter.

A: Peter. When I don’t know the answer to mortgage-related questions, I ask my friend Jack Guttentag, also known as “The Mortgage Professor”. Here is his response:    They can file a “qualified written request,” which they send to

Customer Service, as follows:

Your loan number; Names on loan documents

Property and/or mailing address

This is a “qualified written request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I am writing because: [Describe the problem and the action you believe the lender should take.]

[Describe any previous attempts to resolve the issue, including conversations with customer service.]

[If it is relevant to the dispute, request a copy of your payment history.]

[List a day time telephone number.]

I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business days and must try to resolve the issue within 60 business days.

And then the Professor added: “if that doesn’t work, you sue”. (www.mtgprofessor.com).

NOTE FROM A READER: Read your article. Be careful receiving a letter from any company that promises to send you a deed. No need to pay them $ 85 to send you what you can get on-line or from the local recorder of deeds office. Actually , you don’t need a copy. As long as it’s recorded that affirms legal ownership. Any real estate agent can check to see if your deed is recorded. If you pay off the mortgage, make sure you get a notarized copy of the satisfied mortgage. Banks, mortgage companies are lax in sending this. Charlie.

A:Thanks, Charlie for the helpful comments. I deleted the name of the company you mentioned because I don’t like to single any one company out; and besides, your comment applies to any company that wants to charge you to get legal documents that are recorded in the county offices.

You do make a very good suggestion about making sure that your mortgage is released from land records once it is paid off. Typically, if you are refinancing or selling, the title company (escrow company) will send the payoff amount to the lender. Then, the lender will do one of four things: (1) send a document to the company that indicates the loan has been paid in full (this can be called a “release of deed of trust”, “a certificate of satisfaction” or some other name that is consistent with local practice; the title (escrow) company will then record the release on the land records; (2) some lenders will actually arrange to record the release directly; (3) some lenders will send the release document to their former borrower, with instructions that it must be released, or (4) do nothing.

I have been involved in countless closings (settlements) where an old deed of trust (also referred in some states as a mortgage) was not released from land records, even though my client swears it was paid off. This can be a difficult, time-consuming project, especially if the lender (such as a Savings and Loan or even a Bank) is no longer in existence.

The moral of this is clear: if you pay off your loan, make sure it is released from land records. As Charlie pointed out, your real estate agent (or your attorney, or the recorder of deeds) can assist you.

Q: My parents gave their house to me and my three sisters in 1997. They purchased the home in 1965. They set up a life estate. Unfortunately my father passed and my mother is in assisted living. She will never return to the house so we sold it. My question is since she is still living is the cost basis from1965 or 1997 for capital gains?  Rhonda.

A:  Dear Rhonda. For the convenience of my readers, you are referring to what is known as the “stepped-up” basis. Oversimplified, when a person dies, the tax basis for his/her heirs is the fair market value (FMV) of the property on the date of death. So if dad bought a house many years ago for $100,000, and on his death its FMV is $1 million, the basis for his heirs is that latter number. If they sell it for that amount, they have no capital gains tax to pay. (Its not exactly true that the only thing you can’t avoid is death and taxes.)    To answer Rhonda’s question, property subject to a life estate gets stepped up just as if the life tenant owned the property in fee. Your dad’s life estateterminated on his death and mom became the sole life tenant. I cannot provide specific legal or even tax advice, but from what you have written, it would appear

that the current basis is: half the date of death value on dad’s death and half the purchase price for the mother’s half of basis. Dad’s half received a step up basis when he died, and mom’s half is unchanged. 

If you want to sell the house, talk to your attorney about arranging to legally terminate the life estate. There may be language in the life estate document stating that it terminates on death or upon vacation/abandonment of the property. If there is no such language, and your mother is not competent to sign legal documents, you may have to get a court to appoint you as conservator and guardian.

Q:At our recent closing, we were charged $225 for a survey. We were told this was required by the lender. What exactly is a survey?  Anthony.

A:      Anthony: Oversimplified, a survey will show the boundaries of your property, and whether there are any encroachments – such as a fence that is on the other side of your property (or inside for that matter). It should also indicate whether there are any easements of which you should be aware. Typically, utilities and cable companies may have an easement so that they can repair pipes, wires, etc on your property. But does the next door neighbor have the right to walk through your back yard in order to take out his trash?

Why does the lender require a survey? Up until the mid 1980s, mortgage lenders did not ask for a survey. But since title insurance companies will issue an exception to clean title unless there is a survey, I haven’t seen any lender in recent years not asking for one.

If you are buying a condominium unit, you do not need a survey; but you should obtain the Plats and Plans of the association which – in effect – is the equivalent of a survey.

I firmly believe that even if your lender does not require a survey, every homeowner should make sure to get one and review it before you take title. From my experience, the great majority of surveys are clean; however, in one case, my client’s survey showed that half of what she thought was her back yard in fact belonged to the next door neighbor.

If you are refinancing and have made any changes to the outdoors, usually you do not need a new survey but can sign an affidavit that no improvements have been made since the last survey was prepared.

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