Posted by Linda Juenger on 8/9/08 10:52am
Msg #259466

How and why does this keep happening?

Obviously I live in the same county that I close a lot of loans in and thank god I know when our taxes are due. We pay 2 installments, 1 in July and the other in Sept. And, these taxes are for the previous year. (What we just paid in July is for 2007, not 2008). I have kept very close eye on borrowers loans (especially in July) that an installment is not missed. We make sure that one of the loans (old one or new one) is paying the taxes if they are escrowed. It has been confusing this year for some reason and a couple of them haven't been right and the installment is missed in the payoffs.
Just last night again, the Sept installment was not included in payoffs and escrow is not set up to pay this in Sept. If I hadn't brought this to the borrowers attention and had them call, they would not have had their taxes paid next month. What's the deal? They had 2 options at that point, 1 to pay them in Sept themselves or completely rework the loan. They were upset, which I can't blame them. They chose to pay them themselves in Sept.
It could very well be our county that is the problem, but several lenders and title co's are not paying close enough attention to this. I have saved the day a couple of times in July and again last night. This is NOT my job to make sure their taxes are paid on time, but I also couldn't sleep at night knowing the borrowers taxes aren't being paid and will be very late when caught and high penalties go along with that. I don't mind doing someone else's job, but I want part of their pay. Simple as that. Someone is dropping the ball and I am picking up the pieces. To these borrowers last night, I was worth my weight in gold. They were so appreciative that I caught this and told their LO on the phone they didn't appreciate this being overlooked. Sad thing is the LO probably hates me for making him look bad instead of owning up to it and thanking me for the borrowers sake.
This is another reason why we are invaluable to borrowers. All loans should be closed by an independent 3rd party that has no interest in the loan. We are another set of eyes for the borrowers to make sure things are what they are. These borrowers had it in their heads that the taxes were included in the loan. But, when they called, they were not.
Just venting.

Reply by Maureen_nh on 8/9/08 11:56am
Msg #259485

I have constantly run into tax/escrow problems also. Not always that one but others also.
I honestly believe from what I have seen and heard that often the LO has no clue about this and that it is the title co that is dropping the ball.
Often the LO doesn't see the final HUD until after we get it.
I may be wrong , but that seems to have been my experiance.

Reply by Linda_H/FL on 8/9/08 1:19pm
Msg #259503

When I was doing closings in CT (at a law firm) tax info came in on the search....any tax installment due within 45-60 days of signing (lender specific) either had to be paid at time of disbursement or the attorney had to escrow sufficient funds to pay the taxes when they came due - many times it was lender instruction that the next installment be paid or held.

Just IME

Reply by PAW on 8/9/08 12:24pm
Msg #259493

1st payment not due in time to pay tax burden

This is a frequent problem when a new loan is closed just prior to a tax payment. Loans that close in August have a first payment due date of October, thus missing the tax payment due date.

Unfortunately, loan officers and brokers don't usually catch it and don't have it put in the closing instructions to collect the September tax payment at closing. This should be done even if the current mortgage has an impound account for taxes, as the payoff may be made before the tax payment due date.

Title companies, especially out-of-state companies, often don't catch it either.

Lines 210 and 211 on the HUD are for city and county taxes that have not yet been paid, but the payment is due within 60 days of the funding date.

A prudent signing agent would catch it, as you did. It doesn't make any difference if the "LO looks bad", you're not there to make him look good, you're there as a service to the borrower/homeowner.

Reply by Pat/IL on 8/9/08 5:43pm
Msg #259523

Re: It's the lender's call prior to due date

Whether or not the future tax installments are to be paid through escrow, the lenders generally want any installment within 60 days (sometimes longer) paid at closing - as mentioned above. It is the title company's job to adhere to the lender's instructions. As long as the taxes are not delinquent at the date of funding, it's the lender's call. I have never known a case where the lender has not required HUD approval before signing. Our company also sends the HUD to the broker, if applicable.

It is possible that the title company blew the tax search on the preliminary title report and marked them paid. Or, if the lender being paid off is escrowing the taxes, maybe the installment was already paid.

I think a bigger problem this close to the tax due date occurs when the payoff lender's service pays the taxes after the payoff statement is issued, resulting in a shortage in the escrow account, and thus an increase in the payoff amount - and further resulting in a short payoff and duplicate tax payment. This can really be a pain in the neck. Title officers need to be careful at tax time.

Linda, it's good to see that you look out for the borrowers. I doubt very many signing agents are as vigilant.

Reply by Cari on 8/11/08 12:02am
Msg #259613

...we're very limited to what we can and can not

explain to the borrowers on their documents, regardless on what's going on with the taxes, hud or anything else, an IL notary can get in BIG trouble for potential UPL violations....

It's absolutely great that you caught the mistake and saved the day for the BO, so few notaries are willing to go the extra mile, and I'm not sure of your state's Notary laws, but IL has one of the lamest if not weakest notary law around, but it does limit us on what we can explain to the BO.

I can almost guarantee that if you were in IL and pissed off a LO, because you pointed out a real problem with the loan docs, you would certainly never work for that TC or SS that hired you, ever again. Speaking from experience (Citigroup/PrimeAmerica)

Kudos to you though!