Financial Literacy - Smart borrowing
Consumers share their lending woes

Escrow error

We took out a home construction loan with ABC Home Loans in August 2007. When we closed on the loan we signed an escrow waiver, which eliminated our need to escrow our taxes and insurance. This was a stipulation we demanded when we chose this company to finance the construction.

Nine months later, when we went to modify the note to a permanent loan, we were told we had to put six months of taxes and insurance into escrow (we already paid our insurance for the year directly to the insurance company, but still had to put money into escrow).

We presented the loan officer the signed escrow waiver from our loan package that states the escrow account was waived. This started a legal challenge, which unfortunately we lost. ABC Home Loans claimed that the escrow waiver was a mistake and that the "compliance agreement" we also signed at closing allowed them to change the terms of the agreement if there were errors or mistakes, which meant the escrow waiver was null and void.

Our lawyers argued that ABC Home Loans misrepresented the compliance agreement and that it did not override the escrow waiver. We won that battle, but ABC Home Loans came back referencing another clause in the deed of trust, which gave them the right to change the escrow terms if they felt it was necessary.

After discussing this with our lawyers we decided it would be cost prohibitive to fight and it would jeopardize our ability to modify the loan within the deadline period. If we did not modify by a certain date, our interest rate would have been raised close to 2 points.

Bottom line is that we now have to escrow our taxes and insurance, which we are thoroughly against. There were a number of other last-minute surprises working with this mortgage company. ABC Home Loans saw us as a transaction and didn't care about us as a customer.

We encourage anyone taking out a loan to have their lawyer review all of the paperwork. Don't trust the lawyers drawing up the paperwork for the bank. The bank inserts language that allows them to change the terms at their convenience. Choose who you do business with wisely.
-- Kristine Tanzillo
Myrtle Springs, Texas

More escrow blues

My son and his wife have a mortgage with XYZ Bank because I recommended it at the time. Now because of taxes and insurance they have had super increases in escrow and because of the economy their income has been drastically reduced.

They told me that they called XYZ Bank and they were told that the bank won't even talk to you about solutions until you are 60 to 90 days late.

I couldn't believe this so I called my local XYZ Bank loan officer and she said that it was totally out of their hands and to just keep trying to call the mitigation department.

My son and his wife are so upset about this because they don't know what is going to happen and expect the worst.

They are both college grads with five degrees between them and own two companies and have jobs. They will succeed but, because XYZ Bank won't return their calls or talk to them, they are now preparing to move out of their home and rent somewhere until the economy gets better. It's sad because they have the ability to pay about $1,500 a month -- just not $2,500.


You would think that if XYZ Bank could give them a $1,000 per month break and add it on their mortgage for two years, that it would only be $24,000, which is less than 8 percent of the value of their home. Banks are just asking for failure when they treat people like this.
-- Buddy Haynes

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