Many people only think about escrow when they’re buying a new home. Once they’re all moved in and settled, they tend to sometimes forget about it. However, for those who have received notice that a bank or other lender is about to foreclose on their home, it’s possible that escrow could represent a chance at keeping the home.
How is this possible? Before understanding that, homeowners must first understand what escrow is and the laws that surround it.
What Is Escrow for Property Taxes and Insurance Premiums?
When a mortgage company or other lender provides a mortgage to a new homeowner, they have many things to consider. One, of course, is the ability of the homeowner to pay the mortgage on time throughout the life of the mortgage. However, lenders are also very concerned with property taxes and homeowners’ insurance policies. While these are also concerns of the homeowner, the lender will concern themselves with these factors for two reasons.
The first is that if the home is not properly insured, it is particularly vulnerable to certain events, such as a home fire. With no insurance, the home has no financial protection from these hazards. Not only is the homeowner at risk of losing the home, but the lender also faces the risk of losing the home that secures the mortgage.
Lenders will also concern themselves with property taxes. This is because if a homeowner defaults on their property tax payments, the county taxing authority can place a lien against the home. This lien is superior to the lien created by a mortgage, meaning that a third party could take ownership of the home, nullifying the terms of the mortgage. If that happens, the lender will have no way to collect the money they loaned for the home’s purchase.
For these reasons, many lenders will place the property taxes and insurance premiums for a home into an escrow account. When property taxes or insurance premiums are due, they are then withdrawn from the escrow account, ensuring that these expenses are paid on time, every time. It’s a way for the lender to protect themselves. However, that escrow account may also create a valid defense for any homeowner facing foreclosure.
Real Estate Settlement Procedures Act and Escrow
It is perfectly legal for a lender to take money from a homeowner that will cover their property taxes and insurance and place that money into escrow. However, the Real Estate Settlement Procedures Act (RESPA) is a federal law that, among other things, places a limit on how much money the lender can require the borrower to hold in an escrow account.
In the event that a lender requires a homeowner to place too much money into escrow, this is often a valid foreclosure defense. This is because the homeowner did not have access to money that they should have, which the homeowner could have potentially used to pay down their mortgage, thereby nullifying the need for foreclosure.
When that is the case and a homeowner believes too much of their money is being placed into escrow, they cannot simply stop paying their mortgage. Instead, they can submit a qualified written request to the lender concerning the way the loan is being serviced.
While RESPA is a federal law, Florida also has its own laws pertaining to escrow. A violation of these can also help build a foreclosure defense.
Florida Laws on Escrow
Florida Statute 501.137 outlines specific duties the mortgage lender has when holding funds in escrow for a homeowner’s property taxes and insurance premiums. These include:
- Every year the lender must provide the property owner with a statement of their escrow account. This statement must detail all funds deposited into the account, and all funds deducted from it.
- When taxes or insurance premiums are due, the lender must pay these costs using the escrow account in a timely fashion. This is so insurance on the home does not lapse, and so that homeowners can receive the maximum tax discount available with regard to taxable property.
- If the lender fails to pay insurance premiums or property taxes, using the escrow account, within 90 days of their due date, the lender is responsible for paying the difference of the cost of the previous insurance policy and the cost of a new, comparable policy.
- If the lender refuses to pay that difference, the lender is then liable to the homeowner for the homeowner’s attorneys’ fees and the costs the homeowner incurred as a result of the lender violating their duty.
- If there are not enough funds in the escrow account to cover the cost of property taxes or insurance premiums, the lender must notify the property owner within 15 days of receiving official notice from the county tax collector or receiving notification from the insurance company that premiums are due.
- If the lender fails to make payments from the escrow account for property taxes and insurance premiums and there are enough funds to make the payments, the lender is responsible for any losses the property owner sustains. Overdue fees are one example of these types of losses.
- In the event that the lender does not pay insurance premiums, but they are less than 90 days overdue, the insurance company must legally reinstate the insurance policy, retroactive to the time the policy was canceled.
Violation of any of these Florida laws could act as a defense to foreclosure. For example, when property taxes and insurance premiums are not paid, a lender may foreclose on a property, even if the mortgage payments are up to date. However, if the lender did not inform the property owner within the allotted timeframe that there were not enough funds in the escrow account to cover the costs, this could serve as valid foreclosure defense.
Contact a Florida Foreclosure Defense Lawyer So You Don’t Lose Your Home
Escrow is often a confusing thing for homeowners, but it’s important they understand what it is, particularly when it pertains to their insurance premiums and property taxes. It may be just the thing that helps them keep their home. An experienced Fort Lauderdale foreclosure lawyer understands these laws and will apply them to a case to determine if escrow violations can provide a viable foreclosure defense.
If you’re a homeowner facing foreclosure, don’t wait another minute to contact Loan Lawyers at (954) 523-HELP (4357). We know the law surrounding mortgages, taxes, insurance, and escrow and we’ll use that knowledge to help protect you, and your home. Call us today or fill out our online form so we can begin reviewing your case.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.