DEAR BENNY: I own a house worth approximately $400,000. The current mortgage is $25,000. A company in Florida took over the mortgage about six months ago. The mortgage company handles the tax and insurance payments through an escrow account. Given the current schedule of payments, the account will have a positive balance all next year. The mortgage company now wants to double the escrow payments.
What, short of paying off the mortgage, are my options? Can the mortgage company legally demand such payments? I have owned a number of homes, vacation homes and rental homes over the years and never experienced anything this outrageous. –John
DEAR JOHN: Lenders throughout this country usually demand that their borrowers pay money monthly into escrow so that the lender will pay the annual (or semi-annual) real estate tax and the home insurance. Most lenders are conscientious about making timely payments out of the escrow funds. But over the years, many of my clients have encountered such problems as nonpayment or late payment.
I have never liked the concept of escrow for taxes and insurance. As far as I am concerned, it is basically a means of giving the lender some extra dollars.
Many years ago, when Congress learned of the many abuses involved with real estate, it enacted the Real Estate Settlement Procedures Act — commonly known as RESPA.
One aspect of RESPA deals with these escrow accounts. Under the law, unless local law requires otherwise, a lender has the right to require a borrower to deposit into an escrow account for property taxes and insurance a sum not to exceed the amount of these actual charges, plus one-sixth of the estimated total amount of these taxes or insurance premiums.
In other words, the lender cannot require more than approximately two months of escrow payments.
Do your calculations. If the required escrow exceeds the limits described above, contact the lender to complain. If that does not work, you should file a formal complaint with your state’s attorney general or banking commission. You should also file a complaint with the Federal Trade Commission, the Department of Housing and Urban Development (HUD), and if the financial institution is a national bank, with the Office of the Comptroller of the Currency.
DEAR BENNY: My six-unit condominium (with three owners renting their units) is attempting to change our bylaws to prevent any other owners from renting. It has something to do with FHA not approving loans for condo buildings with more than 50 percent rental units. This gives these owners (one of whom plans to sell) a virtual monopoly!
My question: Can bylaws be changed to affect owners who have purchased units under the current bylaws — ergo, we would never be able to rent our units?
I am 81 and would like to rent out my home if I should need to go to a nursing home or assisted living. With no income from my home, this would be impossible. Or, on my death, I wish my daughter to have the option of renting out the unit if she cannot move here. …CONTINUED