Most homeowners secure a mortgage to finance their home purchases. When they do this, almost all mortgage companies will include your property tax bill and homeowner’s insurance in the monthly mortgage payment, through what is known as escrow. Although some lenders may allow you to pay both of these bills separately after the first year of your mortgage, many people prefer to continue paying them through escrow because it is more convenient.
Even if you pay through escrow, your municipality may send you a property tax bill. Why does this happen, and what should you do if you get one?
Why You Might Get A Property Tax Bill
If your property taxes are escrowed, the tax bill is sent directly to your mortgage servicer. The lender then pays the bill. You will find it on your next monthly mortgage statement. Sometimes things may go wrong. You can receive a tax bill from your local jurisdiction. Some of the possible reasons for this are:
If you fail to pay your mortgage on time, your lender is not obligated to pay the full amount of your taxes. While they have the legal right to do so, it is not something that occurs frequently. If you are late on your mortgage payment, your lender will usually contact you to notify you of the amount owed.
To protect their investment, mortgage lenders will most likely continue to pay your property taxes on your behalf. If your local town places a lien on the property for unpaid taxes, the mortgage company may face problems during the process of a possible foreclosure.
Simple Clerical Error
Mistakes happen, and if this happens with your tax bills, you may receive a payment notice. So, if you receive a tax bill it could be due to several reasons, including simple typos or misplaced information in emails. But, it may take many days to figure out what happened and why. However, many clerical errors are simple to correct.
Your Loan Servicing Company Has Changed
One of the most common reasons for tax bills sent to homeowners is that their loan servicing company has changed. If the company changes during the billing cycles, the jurisdiction may have sent your tax bill to the previous company. The old company obviously will not pay the bill and maybe the jurisdiction was not notified of the change. In this case, you may be issued a tax bill.
The Mortgage Repaid
Escrow accounts are valid for the duration of your mortgage, regardless of the term of the loan. Once the mortgage is paid off, your escrow account will be closed. If this is the case, the municipality will send tax bills directly to you as you will have to pay them even after your mortgage is paid off.
Steps to Take If You Get A Tax Bill When Your Taxes Are Escrowed
When you receive a tax bill even though you have an escrow account, there are a few practical steps you can take to resolve any issues. Do not ignore the bill as it could lead to further complications. Here are some actions you can take:
Call The Tax Office
The first step is to ensure that there is no error at the tax office. Contact them and tell them that your taxes are being paid through your escrow account and what they have on file. Many simple errors can be corrected with just a phone call. If they inform you that your mortgage lender did not pay the taxes, then you must follow up immediately.
Contact Your Mortgage Company.
If the taxing agency claims the taxes were not paid, you must immediately contact the mortgage company. Find out the reason for this and if there is an issue what steps they are taking to resolve it.
If your call does not resolve the problem, send your servicer a letter, formally known as a “notice of error”. Federal law requires mortgage lenders to acknowledge receipt of an “error report” within 5 business days. The company must correct any errors within 30 business days (within 45 days if it notified you of the reason for the delay before the end of the 30-day time limit). The company will also have to pay any penalties imposed due to late payment. (12 CFR §1024.35).
Contact the Tax Office Again
After calling your mortgage company, you should get back to the tax authority to let them know the situation. For example, if your mortgage lender has paid the taxes then get a receipt for the payment and send it to the tax authority.
If there is any other reason, keep track of the progress that all parties involved are making toward resolving the situation. You should not assume that everything will be taken care of for you.
Take proactive steps to ensure that your taxes are paid in full and on time. Otherwise, you may have to face a lien on your property or be forced to defend yourself against a tax seizure of your home.
Contact our experienced staff to learn more about our mortgage services and competitive rates, or to get pre-qualified for a home loan.