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Questions about Escrow Account Rules

What is an escrow account?

When related to real estate matters, an escrow account is an account that is created to hold funds to cover the homeowners/renter’s liabilities in regard to insurance, property taxes, maintenance, etc. Under the terms of the Real Estate Settlement Procedures Act (RESPA) a lender may require a borrower to establish such an account.

Some of the top escrow account-related questions answered by Experts are listed below.

Can a bank require an escrow account to be opened after the mortgage is given?

The bank may be entitled to do so if such authority is granted to them in the loan documents. If this authority does exist it is usually found in the deed of trust section for escrow or on the note. If no such authorization is given to the lender, the borrower may seek an injunction against the opening of the escrow account with his or her permission.

Once I deposit funds in an escrow account, do I have any right to those funds?

If there has been no breach of the agreement by either party, in the case of a traditional property sale escrow the funds may only be released only after both parties sign a separate agreement for the release of the funds from the account.

How do I get back the monies In an escrow account if the seller breaches the agreement?

If the seller is in breach of the agreement to sell, the seller’s signature or a court order is required for the funds to be returned to the buyer. If the buyer breaches the agreement and the terms of the contract state that the funds may be treated as liquidated damages, the buyer’s signature is required before funds are released to the seller.

My property purchase fell through because of a delay in mortgage approval. No denial letter was issued. Without it the lender won’t respond at all to my request to return the earnest money I deposited in an escrow account. What’s the best way to get at least some of the earnest money deposit back?

In such a case, you have a few options. You could: (1) File a complaint with the Federal Reserve Consumer Help at the following link: http://www.federalreserveconsumerhelp.gov/ (2) Hire a civil litigation attorney to write to the bank threatening legal action and, if necessary, to sue for release of the funds. (3) If these do not produce results, you could contact the local media and tell them about the trouble between you and the bank. Banks do not want bad publicity, and they may want to work with you to resolve the problem to avoid being seen publicly in a negative light.

If members feel an HOA is not representing them can they put their dues into an escrow account?

As long as you are part of the HOA, and unless it approves the payments into an escrow account, you must continue to pay dues to them failing which you will be in arrears of your fees and other payments.

I was not delinquent on my property taxes and my insurance premiums were paid but the mortgage company forced an escrow on my account. Can they do this?

If your mortgage documents provide for an escrow the requirement is valid unless the lender agrees to its removal. If your credit history is good and you have established substantial equity in your house, lenders may be willing to be flexible in this regard, but in the current market scenario lenders tend to be rigid in enforcing mortgage conditions. However, if your documents do not require an escrow, the lender cannot unilaterally impose this requirement on you.

The real estate escrow account is meant to both protect the lender from defaults on the part of the homeowner or renter as well as to assist the borrower by reserving funds to meet his financial obligations and liabilities. Escrow account law is a complex issue and obtaining the advice of experts prior to opening the account or to resolve problems in its operation can often protect the borrower from financial loss and legal problems.
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Recent Escrow Questions

  • Wise Owl 58On April 12, 2014 I sent via certified mail a

    Wise Owl 58
    On April 12, 2014 I sent via certified mail a letter “Qualified Written Request” pursuant to the Real Estate Settlement Procedure Act (“RESPA”) at 12 U.S.C. as amended (“RESPA”) to the alleged lender JP*****. I received a late and vague comply on June 8, 2014 that was deficient. The comply was in the form of pay-off statement it, said in part we had $45,000 in an escrow account.
    We have paid $131,000 of a home at closing sold for $141,500. They now claim the pay-off is $258,000 at the same time they claim in multiple pleadings we don’t owe them nothing and we are current on payments.
    The home after the December 22, 2013 flood and before renovation that sits in a flood plane may sell for $170,000 if a bank was willing to give a loan to the new borrower. Homes that suffered from the flood in this area have been renovated sold , and only for the for sale sign to reappear.
    I filed chapter 7, April 22, 2014 and on May 16, 2014 I requested a hearing because the bankruptcy 7 cannot proceed without requested information in which the lender failed to comply. I filed and was granted a hearing on July 29, 2014 in Chapter*****for possible sanctions for failing to comply. Do I need to file a memorandum in support?
    A local attorney stated he needed time to decide if he was going to make an appearance on this case, he has our file but after we received a continuance he has not responded to us, the hearing is on July 29, 2014. The court denied my attempt for another continuance. No one wants to touch this case because they claim the courts are controlled by the mortgage lenders.
    I did not receive the information from the lender about the real party in interest, original note and mortgage or Certified copy Affidavit of Lost Note, unbroken chain of assignments, securities number, current and former investors, trust pool numbers etc. They have been compelled by the trial court 3 separate times, but has failed to comply.
    We had file Chapter 13 in 1998 and it was discharged September 21, 2001. It’s my understanding that the foreclosure had a “stay of proceedings” and our mortgage was reinstated, but the servicer claimed we were in default as on November 1, 2001 which was the same time the 7 year balloon loan matured , there was no notice of default, the mortgage agreement states we were suppose to be given a 30 notice prior to accelerating our loan and we were current on our payments. We were not in material default.
    There was addendum attached to the original mortgage agreement which they claimed was lost, that allowed us the option to reset the loan at the maturity date for the remaining 23 years at the prevailing interest at the time. We requested the option but was told they had to do research before they could make a decision. They eventually agreed we were entitled to the reset but then sold the servicing after we had defaulted to E** Mortgage/ B*** ST****. The process started all over again.
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    There has been no evidence the additional payments and payments made after the note matured were ever applied towards the interest or principal.
    Without our knowledge we were told October 22, 2013 apparently F****** M** had bought the note one week after we closed November 1, 1994. The current servicer JP***** M** now claims the own and hold the note as of September 16, 2014. F***** M** was not a party at the filing nor were they a party during the bankruptcy, and they did not possess the original note and mortgage although they claimed it was a secured claim.
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  • My wife and I recently purchase a home from our former friends

    My wife and I recently purchase a home from our former friends (a mother and daughter).
    We have a signed purchase contract and a signed and now recorded quit claim deed. The deal was we were to assume their mortgage, give them $35,000 down. $25,000 when escrow opened and 10,000 - $1895 which they agreed to pay toward closing costs and start paying the mortgage and HOA fees on July 15, 2014.
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    We are at our wits end, we went to the police station to file a police report however, they said at the time they could not do anything unless we wanted her arrested. At the time we did not but now her threats are becoming increasingly violent and we may not have a choice.
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