Escrow Trouble Do I Have Recourse?

[Anonymous]

All,

I recently purchased a home (3 months ago), this home was a complete gut and remodel (a company bought it and flipped it). it got a new roof, new windows, new septic, new HVAC (heat and central AC), new kitchen/bathrooms, flooring, basically everything.

The tax assessment for 2014 was $3,938 and the tax assessment for 2015 is $3,963 so not much of a change.

Now my Home owners insurance is $1,025 for the year which I paid a year in full but I understand they want to also take that in escrow so when its due next year they can pay it.

So in my escrow account will pay out $4,988 over the course of the year.

however here is where the trouble comes in my loan servicer is right now taking a whopping $745.95 per month which over a 12 month span equals out to $8951.40 so if I do my math that is a $3,963.40 overpayment which is $330.28 per month (if I add my current years tax plus homeowners insurance and subtract that from the $8,951.40).

Now I know I will get that back next year when they reassess the property however its seem very shady that they can take that much and hold it hostage from me for a whole year.

Could they be holding this much because they were afraid of the tax bill taking a huge hike because of all the work done to the property so they want to have excess in there for when the 2016 tax assessments are done?

it just seems to me that they are taking way to much of a cushion for themselves and in turn it hurts me because I have to have this far excessive escrow payment to make.

Now all that being said I can comfortable afford to pay it, that's not the issue here it just seems like they should not be able to hold this much extra money hostage from me every month, I could see them maybe taking an extra $1,000 to cover themselves but double just seems wrong.

Also it should be noted that the taxes on the GFE were not listed this high, I was at the closing table and saw the hiked up numbers and was for sure taken by surprise.

I should also not my town takes tax payment semi-annually not quarterly like most town could it be some kind of mistake because of that? 

Do you think I would have any recourse if I called them or are they just going to give me the line that I have to wait until next year?

[StartingOver10]

They are limited to 2 months worth of escrow cushion so it sounds like they have much more than that according to your post.

Do you also have other items in your escrow - such as mortgage insurance, that can increase the figures too. Flood insurance is another one. if you don't have those other figures, then contact the lender servicing department to get it straightened out.

It is a RESPA violation if they exceed the allowable maximum cushion.  http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ramh/res/respafaq

[Anonymous]

No PMI on the loan and also no flood insurance it is purly Insurance and Taxes.

I had no idea they were only allowed a 2 month cusion thats good information that I can use!

[Anonymous]

They are allowed a two month cushion, anything over that is to be refunded during yearly review.

Most lenders will use the purchase price (not property tax assessment value) to calculate escrow for at least the first year. It sounds like that may have been what happened if a lot of upgrades were done before you bought it.

[ezdriver]

I believe that they are estimating what the new property taxes will be vs what it was before the OP purchased it. The new property taxes will be based on the purchase price. What is that mil rate so we can calculate what the annual property taxes will be?

Monthly escrow contributions must be sufficient to pay the tax bill when it is due. If we know the taxes that will need to be paid and when, we can tell you if the escrow contribution is excessive.