Loan Modification

Chapter 13 Debtors Beware: Recurring Problems with Mortgage Companies ? Part 4 Forced Escrow

By Peter Orville, New York Consumer Attorney

In parts 1, 2 and 3 we discussed how mortgage companies often engage in “double dipping”, how they often fail to send you monthly statements, and they ways in which they misapply monthly mortgage payments during your Chapter 13 case.  Part 4 discusses how a mortgage company can force a homeowner to add escrow to their monthly payments.

Many individuals file a Chapter 13 bankruptcy because they fell behind on their mortgage and property taxes. A Chapter 13 bankruptcy will allow you to pay the back due mortgage payments and property taxes over a period of three to five years, rather than coming up with a lump sum to get both current. As long as you continue to make your monthly Chapter 13 plan payments and your ongoing mortgage payment, the mortgage company cannot take any adverse action against you or your property. However, if you fail to pay your property taxes the mortgage company could step in and pay them without giving you notice.

Assuming your monthly payments to the mortgage company were not originally escrowed, since you now owe the mortgage company for the taxes they paid, they may force you into adding an escrow your mortgage. The escrow account forces you to add to your regular monthly mortgage payment an amount to include both the taxes they already paid, AND enough each month to cover the property taxes due in the future. To cover those payments through the escrow account, your monthly mortgage payment will increase significantly. If you fail to pay the new escrow amount you will be deemed behind on your mortgage and the mortgage company could pursue remedies against you, one of which is foreclosure.

If you have fallen behind on your post-petition property taxes be sure to contact your bankruptcy attorney to discuss your options.

Related posts:

1. Chapter 13 Debtors Beware: Recurring Problems with Mortgage Companies ? Part 3 Misapplied Monthly Payments
2. Chapter 13 Debtors Beware: Recurring Problems with Mortgage Companies ? Part 2 Failure to Send a Monthly Statement
3. Chapter 13 Debtor’s Beware: Recurring Problems With Mortgage Companies – Part 1 “Double Dipping”

Full post as published by Mortgage Law Network on January 29, 2010 (boomark / email).