Escrow is a special type of bank deposit in which the deposit does not actually become the property of the bank. Rather the bank acts merely as a holder of the money in escrow and must return the money upon the depositor’s request. The technical legal jargon for an escrow account is bailment. Bailment is simply a six-dollar word that means the delivery of personal property over to temporary custody by another person or entity. Ownership of the property is fully retained until a return request is filed with the bank. The best possible option to prevent all this is that you get a loan from a private lender. As you look for the lowest interest rate along with the best possible payment option you can check out Singapore Personal Loan offers you low interest rates.
Most people will deal with an escrow account when they buy a house. For instance, let’s say that Homer Simpson has decided to fly the coop of Springfield and settle his family down in Twin Peaks. Part of the process of signing the contract stipulates that Homer’s down payment goes into escrow. Bailment arrives in the form of transferring Homer’s private property-his down payment-over to another entity. Since this is done in the legal aura of “good faith,” it means that an escrow agent is allowed to hold the deed to Homer’s new house which-but don’t tell him-was the site of a brutal murder committed by L-um, that is, by Killer BOB. What you do need to tell Homer Simpson is that when he writes out his check it should be made to the escrow agent and not the seller. The agent will hold onto those funds until the formal house purchasing contract is drawn and signed.
Once Homer moves into his new home in Twin Peaks and begins paying his monthly mortgage, a portion of that check is deposited into a reserve fund that is also known as an escrow account. The job of the lender is to review escrow accounts yearly to make sure there is enough of the green stuff in there to cover upcoming taxes and homeowners’ insurance premiums. If the lender determines that Homer’s escrow account is not quite as large as Marge Simpson’s hair, an adjustment is made. This is why one year you may find your monthly payment is more than the year before and the next year it has gone down again.
Okay, let us leave Homer and Marge safely in their home in Twin Peaks with Killer BOB climbing over that sofa. Let us talk about you and your escrow account. When you see an inflated monthly payment from what you paid last year, it is most likely because there truly was not enough in the escrow account. Occasionally, however, lenders dip their hands into the interest that your escrow is continually building and use it for their own private purposes. In some cases, state law says that a lender is perfectly entitled to take your escrow interest and, what’s more, is not even required to inform you that the interest ever existed. Check your state’s particular laws regarding this. Keeping in mind that a lender’s estimate often is way off simply because he’s no Kreskin, it also does not hurt to do some research to make sure you are not a victim of escrow dipping.
The first step to take if you believe your escrow account is being badly managed is to contact the lender directly. Ask to speak to the account manager and delineate your concerns to the letter. Then send an actual letter of follow-up. If you receive little satisfaction, you can either call your state’s consumer fraud department and file a complaint or you can contact your state’s banking regulation officer. Doing the latter may just inform you that you are hardly alone and will one day take part in a massive class-action lawsuit against your mortgage lender.
If state agencies appear to be dragging their feet, it’s time to bring in the big guns. Contact the Federal Reserve Board or FDIC. The US Department of Housing and Urban Development (HUD) should also be quite interested in what you have learned about the management of your escrow funds.
If you can get even less satisfaction than the Stones or Devo, head back to your lender again and inquire about arranging an escrow release agreement. This is a contract that essentially transfers for the burden of paying your taxes and insurance over to you. Should your lender balk at this suggestion, it’s time to call around and get a better interest rate so you can simply refinance your way out of your escrow pickle.
David Robson is the founder of Complus Alliance. He has been writing about different topics for almost 10 years. He’s main focus is delivering quality insights to a wide array of audience.