I recently received a bill from CHASE that I owe over $4,900.00 for an escrow shortage. According to the bill; its an Annual Escrow statement. The last escrow statement that I have received from Chase was in 2008. I called and they confirmed. Is there anything that i can do about this large bill. If I add it to my mortgage payment, my house note increase $200.00 per month for 60 months to cover the amount owe. iS THIS LEGAL???
Jerking customers around with escrows and precipitating a "default" was a classic mortgage servicing fraud specialty of all of the subprime lenders during the bubble.
Usually, the borrower has a duty to keep the property taxes and hazard insurance paid. Sometimes, the loan agreements expressly call for amounts necessary to pay hazard insurance, taxes, condo fees and primary mortgage insurance to be paid into escrow and then the lender pays the amounts due. Escrows can and should be adjusted when taxes and insurance premiums are paid.
While the use of escrow arrangements gives the lender the interim use of the borrowers money and in many states deprives the borrower of the interest on these funds there is nothing inherently sinister about escrow arrangements. These can be helpful in smoothing payments and assuring that the borrower has properly budgeted for amounts which come due at annual or semiannual intervals.
Subprime lenders used escrows as a pretext for soaking the borrower with additional charges in a variety of ways. First upon any failure of the borrower to timely forward a hazard insurance policy or bill, the lender would often purchase a so-called forced placed insurance policy, often from an insurer that was either an affiliate or which was paying some sort of kickbacks to the lender. These forced placed insurance policies were usually characterized by offering minimal coverage for amounts that were sometimes two to five times higher than the competitively priced policy selected by the borrower.
The lender then billed the borrower for this forced placed policy and juiced up the escrows, precipitating default.
When a borrower failed to pay the amounts demanded, additional late charges were added. The lender would also make unfavorable credit reports about the borrower. After a month or two, the lender would begin putting payments into a "suspense account" and not applying them to the loan at all. Borrowers were then told that they were in default and late charges were added every month. An additional amount of several thousand dollars, characterized as attorneys fees or loan modification fees were also added as a consequence of any workout.
Finally, the sub-prime lender would have someone offer to lend the distressed borrower a new sub-prime loan. This new loan would soak the borrower with new fees at closing, often running into tens of thousands of dollars, would exact and additional penalty through payment of a "prepayment penalty". The net effect of this arrangement was to "rescue" a borrower from one sub-prime loan, by simply putting the borrower into another with an even large loan amount, often at worse interest and other terms.
This was the sub-prime predatory lending model.
Generally JPMorgan Chase was not in this business. However, when Chase purchased Washington Mutual, it folded this firm's sub-prime operation into its own lending model. This included employing many of the dishonest people who worked for WaMu.
As George suggests, the first thing you need to do is carefully work through the math of your various bills, including tax bills, hazard insurance and the like. You also need to look carefully at the escrow accounting.
It may simply be that the local politicians have run your property taxes up and if this is the case, then your complaint is with the tax assessment or rate rather than with the bank. If you have been placed in a forced placed insurance policy, you need to find another cheaper policy and make sure that at the first policy opportunity that the expensive forced placed policy is replaced with a competitive policy. You may need to PAY FOR THE POLICY YOURSELF in advance of the policy anniversary date and make sure to FURNISH A COPY OF THE NEW INSURANCE and CANCEL the forced placed policy. Lenders will make this exceptionally difficult to do, because they want to leave you in the forced placed policy to rip you off.
You can use a Qualified Written Request to obtain copies of the forced placed insurance policy and the escrow accounting. Good luck! This may NOT be easy. You need to be both persistent and thorough. Generally, Chase is less predatory than many of the other lenders.