Busybis said:
What is the name of your state?What is the name of your state? Indiana
Two years ago my husband and i purchased a newly built home. Property taxes were escrowed. 2004 we received a letter saying out escrow was in excess of $253.00. So they were sending us a check. Just yesterday we receive a letter saying out escrow has in sufficient funds and our escrow was shorted $2000. So pretty much that adds about $200 on our mortgage payment a month now. This doesn't make sense to me. Is this normal? Does this happen alot ...where they miscalculate the escrow funds by such a large number. All of our payments have been prompt and paid in full. Any advice about escrows would be appreciated. This just doesn't add up to me.
Indiana is my home state. What you described is very possible on a newly-built home. In Indiana property taxes are paid in arrears. Since it is a newly-built home it was probably originally assessed as undeveloped property and the property taxes might have been something like $60 a year. That was what you were paying on your home when you got it and when the escrow was first set up. I am careful at closing to warn buyers of new homes that their taxes will go up dramatically after the property is reassessed. There sometimes is also a warning letter in the closing documents regarding that.
So the second year, you're still paying into escrow as if it were undeveloped property. But the problem is the property has been reassessed. The fact that taxes are paid in arrears means that you (and the mortgage company that has the escrow) isn't going to be hit with that tax bill until later. And there isn't enough money going into escrow to pay the bill.
So in short you paid excess into the escrow when it was assessed as undeveloped property. You got a refund in 2004 for that. But you continued to pay the same amount of taxes into escrow after it was reassessed as developed property. Then in 2005, they took their annual look at the escrow and found out it was terribly short.
If you find Indiana's property taxes paid in arrears concept confusing, you're not alone. I've been counsel at a title company for about a year, and I still have trouble with the concept.
What you want to do is find your original closing package. In there one of the documents will be titled something like "Escrow Disclosure Statement." It will show, for the first year, a monthly breakdown of how much money goes into the escrow account each month and how much goes out for property taxes, insurance, PMI (if you have it.). And it will show the money going out for those expenses, a running balance, and the projected amount left over at the end of the year. I think you'll find a very small amount each month going in for property taxes. That apparently wasn't adjusted after the first year because of the excess in the escrow. So the second year you ended up with the same escrow...but your property had been reassessed as developed property. Then the third year that tax bill came and the escrow didn't cover it.
I'm sorry you apparently weren't warned about this at closing. But my guess is, since you said you live in Indiana and it's a new house, what you're being told regarding the escrows is correct.
