Q: Is it a RESP violation if my mortgage company misestimated property taxes?

A: No this is not a RESPA violation. Property taxes are the legal responsibility of the owner (YOU). Lenders almost always require a borrower-owner to timely pay their property taxes. Sometimes, lenders require the borrower-lender to escrow money by paying an additional sum each month with the loan payment for the purpose of paying their property taxes using the escrowed money. They estimate the amount based upon the information provided to them at the time of the loan. If the estimate is too high, there is an escrow overage. If the amount is too low, there is an escrow shortage. The lender will pay the property tax owed by the owner (YOU) and notify you if there is either an overage or a shortage. In the event of a shortage, the lender must give you the option of paying the shortage in full OR the option of paying the shortage over time by increasing the amount of each monthly payment over the next year.

A: It’s frustrating when you discover that your mortgage company misestimated your property taxes, especially with the increased costs it causes. Under the Real Estate Settlement Procedures Act (RESPA), mortgage companies are required to provide accurate estimates for costs such as property taxes when setting up escrow accounts. If the company used the land value instead of the full value of the completed home, this could be seen as a mistake, but it may not automatically qualify as a RESPA violation unless it was part of a broader pattern of mismanagement or failure to correct errors.

Since the mortgage company acknowledged the error, they are responsible for addressing the discrepancy. You should formally request that they correct the error, adjust your escrow balance, and, if applicable, refund any overcharges. If they fail to take action, you may want to file a complaint with the Consumer Financial Protection Bureau (CFPB), which oversees RESPA compliance.

In the meantime, make sure you stay on top of your mortgage payments and continue communicating with the mortgage company. If you’re concerned about your escrow shortage affecting your financial stability, you could also request an alternate payment plan or ask about possible refunds for the overpayment of taxes. It’s important to keep all your records and correspondences to ensure you have documentation in case further action is needed.