Its not Countrywide's fault then. Its actually the fault of your realtor and/or the title company. The title company does a "tax certification" before you close. That is, they look at the tax bill for the property to calculate your pre-pay and escrow. The problem with that is, on new construction, usually only the land has been appraised and taxed for that year, since the home probably didn't exist when the county appraisal was done. So if the land only appraised for $15K, but your house was worth $200, then the tax certification will only show the $15K and all the figures are based on that accordingly. When a realtor reviews the HUD-1, they should catch it and notify their client that a) The end of the year tax bill may be more than whats in escrow and b) The escrow amount will be increased once the new tax assesment is done (including the land AND house). Also, the title company, at closing, should point this out too. Sometimes the problem is, if you go new construction, and don't use a realtor independent of the builder, AND use the builder's title company, they aren't going to say a word, because they want to sell you that house and if you were to find out the truth about how much your monthly note + escrow will end up being, then you might not by the house.
and this is where the problem comes in. from what i've heard, both builders and the title companies have been held responsible for this in some cases. it's deceptive.
its more the title company than the builder ....the title company is there to do all the research, including the tax certification IMo, alot of the blame falls with the owner/borrower also .....when you buy a house, you HAVE to know how taxes work ...tax rates are VERY easy to find out, and if one knows simple math, its easy to find out about what your taxes will be and to compare that to escrow accordingly when i bought my house, the tax rate in my area is 3.4% before homestead exemptions .....bout my house for $210,000, so I knew the taxes would be no more than $7,140 + about $2,400 a year for PMI and property insurance ..well, when i did the math, I knew my escrow should be around $800 a month ...however, on our HUD 1, it was based on the land only so I made sure and put that extra amount back and was prepared for my escrow to increase
These bozos unilaterally made the change nine months after closing. They knew it was a new house w/o a property tax track record at closing and setup the escrow account accordingly, but they forgot about it later. We got the notice in the mail saying that they were reducing the escrow ammount but not the reason why. We reasonably assumed that they overwithheld (which is another story for another day). CW f*ck*d up, plain and simple.
The lender (Countrywide) has nothing to do with the closing, nor are they responsible for making sure all the figures are right. Thats up to you, the title company and your realtor. The title company does the tax certification, not the lender. Your title company and realtor are the ones who screwed you by not telling you that the escrow will not cover your taxes and that it will increase.
i hear ya. the problem is, the home builders are drawing up worksheets used to make the sale and saying, "here's what your monthly payment will be" knowing full well that isn't a correct figure because the land hasn't been appraised with the home on it. literally using that deception to close the deal.
true ....but the escrow officer (and realtor) should catch the low tax figure and inform the borrower so they are prepared
agreed. we're saying the same thing! both are at fault. both seem sinister. for some reason, the salesman doing it seems MORE sinister TO ME.
Wouldn't it just be the builder's responsibility to work through the monthly payment estimate for the price of the house itself? Since when does not knowing your own tax burden become the fault of the builder? You can do some pretty quick math on your own...take the sales price of your house and multiply by 3%. That will roughly give you a guesstimate of what your tax is the next year. If it is not in line with what you think your escrow will be, then start saving some extra tax money. Besides, your escrow is set up on what your previous tax year was or what you will pay THAT year. Its not the mortgage company's fault that the value of your home rose from one year to the next so you owe more escrow. I can NOT believe someone would make a major purchase like a home and NOT know their total fiscal burden. Heck...the only reason you get in the mess is you are actually getting a HUGE TAX BREAK the first year you live in a new home before appraisal on the improvement is inluded. Even if someone was "misleading" in the escrow estimate...the smallest amount of due dillegence by the home buyer would prepare them for the larger burden later.
Here's what's happenening: people are going to new areas to buy brand new homes. they're being told that they can get in for really cheap. a salesman sits with them in a temporary building and does up a worksheet showing them what their tax burden is, what the likely cost of insurance is, and what the loan payment will be, given the rate and how much put down. remember that most of these builders are also doing the financing. he bunches all those numbers together and gives you the bottom line...here's what it will cost you each month to own this home. and people go, "aha...i can afford that! that's great! i'm going to be a homeowner!!" what he fails to tell them is that it's nowhere near the complete picture. and he knows it's not. and he has them rely on it. that's the very definition of fraud. because he fails to tell them that the appraised value of their "home" doesn't actually include the building they will call their "home." so they're induced into the deal with less than complete facts.
The lender (Countrywide) has nothing to do with the closing, nor are they responsible for making sure all the figures are right. The lender has a lot to do with the closing. The lender setup the escrow account correctly, at closing. They were actually a little too aggressive in their escrow calculations. We figured at the time after we made it through the first full year cycle, the lender would readjust their escrow calculation. We were half through the first full year when the lender unilaterally readjusted the escrow downward. Since we had overwitheld at that point, we did not question it. To repeat, CW set the escrow payment schedule correctly at closing, i.e. they had us withholding enough to pay taxes and hoi. They later f*ck*d it up.
I thought nowadays, most builders who do in-house financing, take the selling price of the house, and determine an escrow amount from that.
i would assume they do something close to that, too. the cases have cropped up where they did NOT do that.
I recently made the leap into home ownership myself. The escrow was handled completely by my broker. She inflated my payment based on the appraised value of both the house and property, which I was notified of about a week before closing (it went up 4K!!!). She warned me that at some point in the next year that the escrow folks would do their assessment and determine that I am overpaying (of course based on the property's value alone). She told me to put the refund in savings and to start paying it back into escrow each month (as an extra payment).
You guys should stop using escrow, assuming you have willpower, and can save money. Escrow companies just take your money and build interest on it. Seriously, escrow is over-rated. I calculate my own payments, and I'm saving thousands of dollars.
I will have to agree ... escrow is a crock. It seems nice and easy up front, but it will catch you later. I switched insurance companies in the middle of the year. I was lead to believe that CW would take care of everything with it being in the middle of the year. Im told I failed to contact the insurance company to cancel my old policy. I accept responsibity as I should have stayed on top of it, regardless. CW decides to pay out to both insurance companies. I would think this would raise SOME type of flag and them at least would notify me. instead, 6 months later, they raise my escrow stating too much has been paid out. When I first called in, the rep told me, "uhh your taxes or insurance must have gone up" instead of actually researching the problem.
You guys should stop using escrow, ... IIRC CountryWide forced us into using an escrow account. They also forced us into paying PMI. No, they don't. The escrow officer does. The escrow officer works for the title/closing company. I suspect that this was not the case for us. The escrow account was completely managed by CountryWide, making them lender and escrow agent. The only mail we got wrt escrow was from CW directly. When we fixed our escrow withholding, we talked directly to CW's home office.
depending on how much you're able to put down on the home, you may or may not even have a choice regarding escrow.
