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Household Finances

Re-Fi - question re: taxes

16 years ago

We are refinancing our home and the closing was supposed to be Monday ( tomorrow ). Friday afternoon I get a call that my existing mtg co has not paid our property taxes yet so we can't close.

Why can't the existing mtg company send the money we've paid in for our property taxes to the new mtg company and then *they* can pay them when they are due?

I just dont understand this. Can someone explain it to me?

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Comments (4)

dave_donhoff
16 years ago
Hi Shaun,

Why can't the existing mtg company send the money we've paid in for our property taxes to the new mtg company and then *they* can pay them when they are due? I just dont understand this. Can someone explain it to me?

I can explain... but unfortunately, the answer's not going to be very satisfying.

The reason is beacuse the servicing company (the place you send your loan payments to, who manages the distribution of the cash, and subsequent bookkeeping of where it all goes, and when) is not your mortgage company. It may be a subsidiary of them, or a 3rd party contractor... but its not the actual mortgage company (even if it has a very similar name.)

The servicing companies business model is to have as many loans managed per month, by the least number of clerical administrative staff, at the lowest possible hourly rate. In order to accomplish this, their processes are *EXTREMELY* dumbed-down and stretched out. *NOTHING* happens quickly on any out-of-the-ordinary request, and all standard changes (like the turnover of escrowed funds for taxes & insurance when a refinance occurs) is handled in a batched-out manner once a month during a special shift.

In short; It COULD be done the way you logically just described... but the rate/fee driven public doesn't want to pay the higher servicing costs for that kind of service.

Hope that clarifies (if not exactly creating the warm & fuzzies.)

Cheers,
Dave Donhoff
Leverage Planner
shaun
Original Author
16 years ago
Well you explained that perfectly! Thanks very much.
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brickeyee
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Setting up new escrow accounts is on e of the less obvious costs of a refi.

The balance at the old servicer will be refunded when the mortgage is paid off, but in the mean time you have to establish a new escrow account.

Borrow the $$ short term to make things happen NOW.
scryn
16 years ago
Do you need to set up escrow? When we refinanced we didn't set up an escrow. About a week later the old mortgage company sent us a check for entire escrow account we had paid into. We put that check into a savings account of our own and now pay our taxes and insurance out of that savings account (kind of our own escrow of sorts). I really prefer to be able to see our money and take care of things ourselves.

I know that not everyone prefers it that way.

-rj

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