Q: Mortgage escrow refund led to shortage; who's responsible?
I received a refund check for an escrow overage from my mortgage company in August of last year. This was issued before they paid our taxes, leading to a negative balance in the escrow account. Now, they are increasing our monthly payments by over $1500 to cover a $10,000 shortage. We didn't know the refund would cause a shortage and didn't sign any new agreements related to this situation. Shouldn't the mortgage company be responsible for the shortage?
A:
Who is 'responsible'?
That depends. Is the accounting accurate and did you receive the money refunded?
Then YOU as the property owner are ultimately 'responsible' to pay the taxes. U
A:
Who is 'responsible'?
That depends. Is the accounting accurate and did you receive the money refunded?
Then YOU as the property owner are ultimately 'responsible' to pay the taxes.
Unless the company misapplied the funds or didn't actually refund the money, that is! I think I understand that they were collecting the correct amount, but then refunded a large sum to you so that the escrow no longer contained enough money to pay the taxes. If YOU didn't pay the tax, then I would wager they advanced the money to your account, and are now adjusting things to make that 'advance' whole and also collect enough to pay future taxes. That would be completely appropriate.
Did they do the math wrong? THEN you can challenge things. (Eg they SHOULD collect $1000 per month, or $12,000 a year, and you 'owe' them 12,000 for last year's advance plus 12,000 for next year's taxes so they deduct $2000 per month instead of 1000. Then they've done it right. If they try to collect $4000 per month, then you can complain and get that adjusted,
Bottom line:
If you're asking 'can they change my monthly amount'? The answer is likely 'yes' -- read your escrow agreement.
If you're asking 'can they make adjustments if they mess up'? the answer is also yes so long as they don't try to charge you interest or penalties!
If you're asking 'do they have to pay my taxes if they make a math error'? the answer is no, why would you think that? They have an obligation to make corrections to their math and do the best they can to not make errors. It sounds like you got the money and now you want them to ALSO pay your taxes because they shouldn't have refunded your money to you. That isn't how it works.
Unless there is something missing or I'm misinterpreting things, then the math is what the math is. You need to pay your taxes. Be that through a 'one time' payment (you returning the mistakenly refunded money) or by an increase to your escrow payment, you still owe it.
Justia Ask A Lawyer is a forum for consumers to get free answers to basic legal questions. Any information sent through Justia Ask A Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between Justia and you, or between any attorney who receives your information or responds to your questions and you, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask A Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises, or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.
