Warning: those with mortgages and escrows: the company American Escrow is bankrupt.

underthecity · Mar 19, 2009

I'll try to be as succinct as possible.

When we refinanced a few years ago, our broker got us a mortgage with a separate escrow account with a company called American Escrow. We paid them every month the escrow money, they paid our bill every year. No problem for years.

Until a few months ago when the bill was late for 2008. Every time I called, they said the check was going to be sent.

Fast forward to two weeks ago. I got a letter saying American Escrow was going out of business. We had already paid Jan, Feb, and March. They said they were going to reconcile and refund our money.

We got a letter with two checks made out to our county's sheriff's office for the tax bill advising us to pay it since at this point they were so late paying. Now there was a $300 penalty for them being so late.

We called back today to find out the status of our refund and learned that American Escrow is bankrupt. Someone had embezzled all the company's money. The lady advised us to contact a lawyer to try to get our money back. Also, she told us she sent us the checks payable to the sheriff in case the company didn't get around to sending them out at all. (She was actually trying to do us a favor. Unfortunately, this was minus the $300 penalty which we now have to pay.)

We went to the bank to talk to the manager to see if they could do anything to help us. The manager called American Escrow and learned the same thing we learned. The bank could do nothing, but the manager did refer us to a lawyer who could help us and not be too expensive.

So, first thing Friday morning we have to race to the sheriff's office to pay the tax bill (hoping that the checks AE sent do not bounce) and talk to the lawyer to try to get us our money back.

So, if anyone here has American Escrow as their escrow company, act immediately and finalize whatever you have to do before the company and whatever remaining funds disappear!

This sucks! We don't need this crap right now. I'm never going through a mortgage broker ever again to refinance. And with Obama's new mortgage restructuring plans, mortgages now have to have their own escrows by law, which was why American Escrow was going out of business in the first place.

joyce · Mar 19, 2009

Wow, this sucks! I'm so sorry to hear you're going through all this crap. I hope you can somehow get away from having to pay the late fee. It's not your fault the crappy company didn't send in the money. :Hug2:

Greenwolf103 · Mar 19, 2009

Sorry to hear that, Allen. I hope everything works out.

Joe270 · Mar 19, 2009

And with Obama's new mortgage restructuring plans, mortgages now have to have their own escrows by law, which was why American Escrow was going out of business in the first place.

Yeah, Obama's 'plans' are gonna bankrupt all of us. Nice change.

Wayne K · Mar 20, 2009

Joe270 said:
Yeah, Obama's 'plans' are gonna bankrupt all of us. Nice change.

At least he's not telling us that the economy is fine and that the recession is in our foolish little minds.

Unique · Mar 20, 2009

Wayne K said:
At least he's not telling us that the economy is fine and that the recession is in our foolish little minds.

POINT!

This sucks! We don't need this crap right now. I'm never going through a mortgage broker ever again to refinance. And with Obama's new mortgage restructuring plans, mortgages now have to have their own escrows by law, which was why American Escrow was going out of business in the first place.

Can you explain this part for me, please? (I understand the sux part - I agree!)

This part: mortages have to have their own escrows by law.
And: mortage brokers.

My escrow is part of my mortgage. The same company deducts the escrow, pays the insurance and taxes, yada, yada.
IIRC - it was that way for me every time I bought a house.

How is your situation different - and why was it that way in the first place?

I'm sorry you're going through this, Alan. You really shouldn't haveto pay that penalty IMO. You exercised good faith on your end; someone else failed on their end. Who embezzled the money and is there a chance of recovery? I hope so.

Good luck, my friend.

underthecity · Mar 20, 2009

Unique said:
Can you explain this part for me, please? (I understand the sux part - I agree!)

This part: mortages have to have their own escrows by law.
And: mortage brokers.

My escrow is part of my mortgage. The same company deducts the escrow, pays the insurance and taxes, yada, yada.
IIRC - it was that way for me every time I bought a house.

How is your situation different - and why was it that way in the first place? . . . Who embezzled the money and is there a chance of recovery?

A mortgage broker is an independent agent who sets up mortgages. The one who refinanced for us was an asshole who set us up with a mortgage with an outside escrow.

I was told recently that by law, all mortgages must by 2010 contain their own escrows, rather than be handled by outside companies.

That's why our situation is slightly different.

Regarding the embezzlement, only time will tell if the person is caught and prosecuted.

Unique · Mar 20, 2009

Wells Fargo picked up my mortgage shortly after I got it. I can't recall the originator. I've had excellent service with them, Alan. You might want to give them a call and explain your situation - see what they say. Ya never know.

They've always been understanding when I've called and they have actually given me good advice re: certain situations.

~Blessings~

petec · Mar 20, 2009

As a non-American

Can someone explain what is an escrow mortgage

I found THIS but it is gobblydygook to me

alleycat · Mar 20, 2009

petec said:
As a non-American

Can someone explain what is an escrow mortgage

Here's a very simplified explanation.

An escrow account is a "holding account".

A typical borrower will make a mortage payment every month, this will include the interest on the amount borrowed, plus part of the principal (original amount of money borrowed). In addition, part of the payment will include money to pay the property taxes and the property insurance on the property. The mortgage holder (lender) wants to make sure these are paid.

The part of the monthly payment for taxes and insurance will be held in an escrow account. Once a year the taxes and insurance will be paid from this account and the amount in the escrow account should drop close to zero. Then the mortgage holder will recalculate the estimated amount for next years taxes and insurance and adjust the mortgage payment accordingly.

So, if someone has been paying their mortgage all along, part of their payment should have been going into the escrow account to pay taxes and insurance. If the company managing the escrow account goes out of business, it could be possible for the borrower to lose the money he's put into his escrow account. He would then be stuck paying for taxes and insurance twice. Not so much fun. Escrow account holders/managers are suppose to be "rock solid", but as we've seen lately, no business is rock solid anymore.

It actually gets more complicated than this, but that's a rough idea of how it works.

Ol' Fashioned Girl · Mar 20, 2009

And 'escrow' account is one which is set up to receive your money monthly to pay some bill at the proper time - usually property taxes at the end of the year or annual insurance premiums at renewal. Most mortgages require escrows for these two items. An 'escrow' account is also used by a realtor to set aside a good faith offer on a home when you buy. By law, the account is to be used only for the designated use and for nothing else... that's supposed to guarantee the money will be there when it's time to pay the bill or close the deal.

ETA: Alleycat beat me to the punch!

petec · Mar 20, 2009

alleycat said:
Here's a very simplified explanation.

An escrow account is a "holding account".

A typical borrower will make a mortage payment every month, this will include the interest on the amount borrowed, plus part of the principal (original amount of money borrowed). In addition, part of the payment will include money to pay the property taxes and the property insurance on the property. The mortgage holder (lender) wants to make sure these are paid.

The part of the monthly payment for taxes and insurance will be held in an escrow account. Once a year the taxes and insurance will be paid from this account and the amount in the escrow account should drop close to zero. Then the mortgage holder will recalculate the estimated amount for next years taxes and insurance and adjust the mortgage payment accordingly.

So, if someone has been paying their mortgage all along, part of their payment should have been going into the escrow account to pay taxes and insurance. If the company managing the escrow account goes out of business, it could be possible for the borrower to lose the money he's put into his escrow account. He would then be stuck paying for taxes and insurance twice. Not so much fun. Escrow account holders/managers are suppose to be "rock solid", but as we've seen lately, no business is rock solid anymore.

It actually gets more complicated than this, but that's a rough idea of how it works.

Why not borrow the money from a bank to buy the house at a fixed interest rate

alleycat · Mar 20, 2009

petec said:
Why not borrow the money from a bank to buy the house at a fixed interest rate

The escrow account is just for the taxes and insurance (a place to keep the money until it needs to be paid out); it doesn't have much to do with the kind of loan someone has.

petec · Mar 20, 2009

So why not pay a fixed monthly amount into a bank account that you gain interest on?

Sorry, I'm probably missing something here, but am trying to understand the advantage of paying into an ESCROW account where they gain the interest on your money

Ol' Fashioned Girl · Mar 20, 2009

Some mortgage companies require that the money is paid into escrow - meaning you can't access it for anything else during the year, leaving the account empty when it comes time to pay the taxes and insurance.

petec · Mar 20, 2009

Thanks to all for answering my dumb European questions

Pete

alleycat · Mar 20, 2009

petec said:
So why not pay a fixed monthly amount into a bank account that you gain interest on?

That would be lovely . . . but the lender doesn't want the borrower to have access to the money they've been paying in monthly for taxes, etc. . . . because people have a nasty habit of spending any money they have (and then some). The lender doesn't trust the borrower to always do the right thing.

And yes, someone else gets to keep whatever interest the money earns during the year. That's why the escrow account holder is willing to do it. It used to be even worse than it is now; it used to be that the mortgage company would require a lot more in escrow than was actually needed and keep the interest on that. A few years the law was changed in the US so that mortgage escrow accounts had to basically pay out all the money in the account (in other words, a zero balance once a year).

alleycat · Mar 20, 2009

petec said:
Thanks to all for answering my dumb European questions

Pete

No problem.

We are kind of giving you the short version. There are all sorts of nuances and additional factors to this.

petec · Mar 20, 2009

Being a dumb European.

I pay my tax and insurances directly to those authorities monthly. no other money making companies involved

alleycat · Mar 20, 2009

petec said:
Being a dumb European.

I pay my tax and insurances directly to those authorities monthly. no other money making companies involved

You can have a mortgage like that here. I don't have a mortgage anymore (yeah!), but on the last one I had I paid my own taxes and insurance. The loan to value on that mortgage was so low that the bank couldn't lose no matter what I did (except maybe if the next Noah's flood hit Tennessee).

Clair Dickson · Mar 20, 2009

underthecity, I also agree with the above suggestions to see if you can get the late penalty removed. They may go for it. Bring any and all documentation you have that backs up the non-payment from your escrow company being the problem. I had a snafu two months ago where my gas bill got gooffed during payment (it's confusing, and I'm still not sure what went wrong, but in the end my March bill was paid, but Feb was not??) When I called and explained what I could of the problem and they saw that I tried to pay, when I asked for the late fees to be removed, they agreed to it. You have nothing to lose by asking.

***
How does a "plan" make a company go out of business? I mean, unless it's actually put into place, a plan is nothing more than an idea. There was a plan to put a Kroger's in near the small town where I grew up. The local (overpriced ;-) grocery store stayed in operation until construction on the new place began. The plan was talked about and tossed around for several years... including purchase of the land about 18 months before construction began. Now, the store could have just folded, knowing that the Kroger was, most certainly, going to put them under. But it's just a plan. Until it goes into affect, any company would be foolish to shut down before hand.

Is it possible American Escrow got nailed by the mortgage fall-out, with people not paying their mortgages or getting new ones? Maybe I just don't understand.

astonwest · Mar 20, 2009

Clair Dickson said:
How does a "plan" make a company go out of business?

It sounds (from what I've read here) like the new "plan" is forcing mortgage holders to have an escrow account with the bank itself and not a third party. Since the company in question only handled escrow accounts and was not a mortgage company, there is no way for them to stay in business.

At least from what I read here.

I'm still trying to figure out why a person can't pay their own taxes and insurance without an escrow account specifically set up. I pay mine out of my own accounts, but used to have an escrow account...those people would force me to put in far more than I needed, just so they could keep their grubby hands on my money.

And now the federal government is going to mandate it so they can do so.

Clair Dickson · Mar 20, 2009

astonwest said:
It sounds (from what I've read here) like the new "plan" is forcing mortgage holders to have an escrow account with the bank itself and not a third party. Since the company in question only handled escrow accounts and was not a mortgage company, there is no way for them to stay in business.

But how does a "plan" force anything? Doesn't it have to be law?

And wouldn't a severe decrease in the number of mortgages combined with an increase in defaulted mortgages hurt an escrow company who's only income is tied to that?

***
Given the fact that most Americans have, on average, less than $2k in savings, I can see that the bank would be worried about the tax money sticking around. I mean, there's a lot of foolish money management that goes on. I understand why banks do it.

underthecity · Mar 20, 2009

Clair, it's not a "plan," it's a law. And it's due to go in effect in 2010.

We went to the sheriff's office first thing this morning and explained to the extremely nice lady about what's happened. They were understanding (several ladies worked there) and waived the penalty and paid the taxes with the American Escrow checks.

During the transaction, I hoped to sway them by holding up our new baby and all the women there just about went nuts when they saw her. I don't know if it made a difference, but it couldn't have hurt.

So, as of right now, our county and city taxes for 2008 are paid, assuming the American Escrow checks are good.

And we are refinancing, and the new mortgage will include the escrow built in.

Clair Dickson · Mar 20, 2009

(I did try googling, but I can't find anything. Probably my search terms suck.)

I'm still having trouble understanding how a bill that is, what, less than three months old (it's Obama's bill isn't it?) can make a company go bankrupt. I'm just not seeing that. Sorry. If I'm just being a pain, please just say so and I'll go away. But I keep thinking that the bankruptcy of American Escrow is a different problem from the new escrow law.

But at least you got the late penalty waived. =)

Warning: those with mortgages and escrows: the company American Escrow is bankrupt.

Finestkind

I'm really shy...

I'm a grrrl dog, yo

Agent of Doom

Finestkind

Agent of Doom

Lurking

Still around

Hand? What hand?

Lurking

Still around

Lurking

Hand? What hand?

Lurking

Still around

Still around

Lurking

Still around

A dark core to every cloud

2 WIP? A glutton for punishment

A dark core to every cloud

Finestkind

A dark core to every cloud