Mortgage company increased escrow by 5000

UPDATED: Oct 1, 2022

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Mortgage company increased escrow by 5000

Recently, my mortgage loan was sold to another provider but just before it got transferred I have received a letter from an original provider that my escrow account shortage is in an excess of $5000. I have contacted both companies new and old and didn’t get any answers except that old company paid more for my flood insurance about $2600 but new company should be credited and eventually that will apply to my account. Now even with that it doesn’t add up to over $5000. I have contacted my home and flood insurance company and nothing changed for 2 years and my premium for this year went up by 60% in total. Property taxes also went up by about 8%. My new loan company said that I have to wait 90 days before they complete their escrow analysis but at the same time I have to be paying $700 more every month. Can you tell me what options I have at this point so that my increase gets eliminated and I don’t have to pay $700 for next couple months before they resolved that issue and my worried is if they do.

Asked on January 3, 2019 under Real Estate Law, New Jersey


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Even if the loan was sold, the mortgage remains governed by and subjet to the terms of the mortgage agreement--i.e. the original mortgage agreement remains in effect. Review what it says about escrow and increasing it. If they are trying to increase it in a way not permitted by the agreement, you could refuse to pay, but be aware that this would almost certainly lead to litigation, which could be expensive even if you win. There is no good, inexpensive way to deal with their desire to increase the escrow: you have to be willing to potentially end up in court over this, such as if they try to cancel your mortgage for not paying the increase, declare you in default, and force you to pay the whole balance, and you have to take them to court to stop them from doing that. Paying the increase, since in the end, unused money from escrow will come back to you, may be the most cost-effective option.

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