‘Manufactured’ foreclosures an emerging threat to consumers

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

When a home mortgage transaction includes a provision for escrow, as most do, the borrower is required to pay a fixed amount every month in addition to the payment covering interest and principal. This escrow payment is deposited into a fiduciary account from which the company servicing the loan makes payments for taxes and insurance as they come due. In previous articles on escrows, I gave convenience as the major advantage to the borrower, and loss of interest on the escrow account as the major cost. I also mentioned the possibility that the lender might accidentally fail to make the payment, which could result in a tax delinquency or a cancelled homeowner's insurance policy. These are serious matters, to be sure, but I viewed the risk as very small. More recently, however, I became aware of another risk associated with changes in required escrow payments. When taxes or insurance premiums increase, monthly escrow payments must increase as well. What happens if, for some reason (incl...