Mortgage Escrow Impound Rules

Number of Months Property tax impound advance collection

Mortgage Lenders require tax and insurance impounds on high loan to value loans, called mortgage escrow accounts

California impounds are not required IF the loan is less than eighty percent loan to value.

• Closing month January – First Payment March, 6 months impounds required
• Closing month February – First Payment April, 1 months impounds required
• Closing month March – First Payment May, 2 months impounds required
• Closing month April – First Payment June, 3 months impounds required
• Closing month May – First Payment July, 4 months impounds required
• Closing month June – First Payment August, 5 months impounds required
• Closing month July – First Payment September, 6 months impounds required
• Closing month August – First Payment October, 7 months impounds required
• Closing month September – First Payment November, 8 months impounds required
• Closing month October – First Payment December, 9 months impounds required
• Closing month November – First Payment January, 4 months impounds required
• Closing month December – First Payment February, 5 months impounds required

The months are collected up front and held in trust to make sure that property taxes are paid upon when they are due. You are required to pay one-twelfth of the estimated cost of the escrow items each month. 

Be mindful, these amounts can change, you usually have to put some additional money into the account as well. Property tax bills increase, especially if you bought a home where the seller was taxed at a lower rate than the current purchase price. You will receive a whopping supplemental tax bill in about six months after your close, or as soon as the county catches the increase. Expect any supplemental tax or insurance increase that can affect how much is needed to be collected on your impound account. If you experience a supplemental tax bill the amount you have in escrow may not cover the entire amount due and therefore a shortage would be applied to your new impound account balance.

Lenders  require impound accounts for a single-family, owner-occupied dwelling if:

1. state or federal regulatory  requires the account
2. a state or federal governmental lending or insuring agency (like FHA or VA  Fannie FReddie Ginnie) made or guaranteed the mortgage
3.  borrower fails to pay two consecutive cycles of property taxes 
4. the original loan to value is 90% or more of the sale price or appraised value
5. there are two or more loans secured by the property, and the combined principal amount exceeds 80% of the appraised value of the property
6. the loan is a higher-priced mortgage loans established in Regulation Z, whether or not the loan is a higher-priced mortgage loan (a HOEPA or High Cost)
7. the loan is refinanced  in connection with a lender’s home-ownership preservation program
8. if the borrower does a modification 

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That is what I have to say.

CNBC contributor Alicia Adamczyk identified these five questions many Americans have not asked, or did not know they could ask, that save money.

1. Ask for a raise – Career website Payscale found that only 37% of 160,000 workers surveyed asked for a raise in 2018. Of those who asked, 70% received a raise!  When asking for a raise at work it’s important to demonstrate your value by presenting a particular achievement you’ve had at work, listing any new tasks you’ve taken on since you last got a raise, and all of the value you’ve added to your company.  Many people focus on why they “need” a raise and fail to focus on why they deserve it. 
2. Ask your bank to waive fees – CompareCards, a credit card comparison site, found nearly 90% of people who asked for a late fee to be waived were successful. Accidents happen, you may miss a payment or experience an unexpected overdraft.  However, these accidents can add up.  A couple $25 charges could soon compound.  Please note, negotiating with your bank or credit card company works best if you are a long-time responsible customer or if this is a first-time occurrence, and try to avoid these instances in the future!
3. Ask the seller to pay closing costs – Most first-time home buyers know they have to save for a down payment, but few may understand how expensive closing costs will be. In a competitive market, with lots of people selling similar homes in the same area, sellers may be willing to offer “seller concessions” if you buy their home.  One such concession could be your closing costs.  Director of economic research at Zillow, Skylar Olsen, explained, “what buyers don’t realize is that there are a lot of things you can put in your offer letter that are non-standard.  Everything is on the table.”  Consult with your Realtor and real estate agent and find out if it’s a good idea for you to ask the seller to pay closing costs.
4. Ask for a lower credit card APR – Chances are your credit has improved since you first got your credit card. CompareCards found that 8 out of 10 people who called their issuer and asked for a lower interest rate on their credit card were successful, but only 20% of survey respondents asked!  Asking for a lower credit card APR works best when you have been a long-time customer with an established responsible repayment history. 
5. Ask if you really owe that medical bill – Healthcare costs are some of the most rapidly rising costs in our country today. It’s important to protect yourself by double-checking any and all medical bills to make sure there hasn’t been an error.  DirectPath, a service that helps employees manage their benefits, found that at least half of all medical claims it reviewed for clients had an error.  If you think your medical bill is incorrect, call your insurance company and your doctor.  If that doesn’t help, you can always contact a third-party service to look into the potential error.

Whatever your financial goals are in 2019, a few simple savings techniques could help you achieve them.  Be diligent about your credit report and medical bills, consider negotiating with your bank or credit card company, and ask for a raise when it’s warranted.