When buyers purchase a home, they sign a mountain of paperwork. By the time the real estate closing ends, most buyers remember little of what they signed. This includes their escrow agreement. Many homeowners today agree to have a company, often their own mortgage lender, boost their monthly mortgage payments by a set amount. Lenders or outside companies then take these extra dollars and put them into an escrow account.
They then use this account to pay homeowners' property tax and homeowners insurance bills for them. It's a convenience factor: Having others make their insurance and property tax payments gives homeowners one less thing to worry about.
Who's Handling Your Escrow Account?
But this hands-off approach can also lead to problems. A recent story in the Chicago Tribune, for instance, highlighted the rather frightening story of Chicago-based American Escrow, an escrow company that went out of business. When it did, the company left behind many homeowners who are now wondering where their escrow money is.
The situation with Chicago’s American Escrow is a serious one. According to the Chicago Tribune story, some customers of the firm are now delinquent on their property tax and insurance bills because of the company's failure. This happened even though these homeowners automatically had been making their escrow payments on schedule.
How Big is the Fallout?
No one knows yet how many homeowners across the country are delinquent on their property tax or homeowners insurance bills because of American Escrow’s shutdown. But the Chicago Tribune in its story does cite some numbers: In Pennsylvania, as many as 200 consumers may be delinquent on their property taxes because of the company going out of business. The Ohio attorney generals office says that it had received 30 complaints. The Chicago Tribune also found victims in Indiana, Maryland, New York, Nebraska, Florida, New Hampshire, Colorado and Minnesota.
Now, several state attorneys general have opened investigations into American Escrow and its failure.
It's important to remember that cases such as this are rare in the escrow field. That's because most home lenders do not outsource escrow functions to a third-party company such as American Escrow. Instead, home lenders usually collect escrow money themselves, and then use those funds to pay off their policyholders' taxes and insurance.
Homeowners might want to take this opportunity to call their own mortgage lenders for a quick update on their escrow situation. The vast majority of homeowners who have an escrow account maintained by their lender or a third party will never experience any problems. But it never does hurt to investigate.
SOURCE: For more information on American Escrow, read Ameet Sachdev's story in the April 16 Chicago Tribune.
 |
