Mortgage Crisis Has Lenders Forcing Escrow For Tax Delinquencies

Published November 17, 2008 | Collector / Treasurer | Automatically Archived on 12/31/2008

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The National Mortgage Crisis has lenders on the alert for delinquent real estate taxes.  Mortgage lenders are stepping in much quicker than ever before to pay off borrowers’ delinquent real estate taxes.  While your lender may not have required you to escrow your property tax payments in the past, more than likely if you fall behind by as little as two quarters, your lender may a) pay off over due tax balances, b) force you into tax escrow and, c) require you to reimburse them immediately for all amounts paid on your behalf.


Do they have the right to do this?  Generally speaking, yes.  They have the right to step in to protect their underlying investment in your property. 


When can I expect my lender to get involved? Lenders used to wait 12-24 months before intervening in tax delinquency situations.  Now many lenders are requesting quarterly updates on all past due real estate tax balances.


Will my lender inform me of their intent to pay my past due taxes?   Generally speaking your lender will send you a demand payment notice giving you a short period of time to rectify the situation; after which, they will send the Town payment for all overdue taxes.


What can I do to avoid having my lender take such action?  If you are unable to pay your real estate taxes, we urge you to contact your lender immediately to make escrow arrangements or discuss other finance options.  The Town will not refuse payments made by lenders on your behalf nor can we get in the middle of any payment/arrangement disputes that exist.