My Mortgage Company Didn’t Pay My Property Taxes

What should you do if your mortgage company didn’t pay your property taxes? First, don’t panic, but do take immediate action. Start by contacting your lender, tax authority, and even your lawyer if necessary.

Getting an unpaid tax notice in the mail can be scary, especially when you know you have an escrow account and your mortgage payments are up to date. The important thing is to remain calm. Then, take the necessary steps to resolve the issue.

This article provides more information about how escrow accounts work and what steps you should take if you receive a tax notice in the mail.

In This Piece

• How Do Escrow Accounts Work?
• What If You Learn Your Mortgage Servicer Didn’t Pay Your Taxes?
• Stay on Top of Your Mortgage Payments

How Do Escrow Accounts Work?

Many lenders today require homebuyers to set up escrow accounts prior to closing. The lender uses this escrow account to store money to cover fees above and beyond your mortgage payments, such as property taxes, homeowners’ insurance, and HOA fees. You pay these extra fees right along with your mortgage payments each month. Your lender takes its share of your payment and then puts the rest into this escrow account.

Bills for your property taxes, insurance, and HOA fees should go directly to your lender, who then pays these fees right from your escrow account. In turn, you should receive a notice on your mortgage statements when each of these bills is paid. If you received a tax notice in the mail, something went wrong with this process. It’s critical to take immediate steps to resolve this issue.

It’s also important to understand this connection between your property taxes and your mortgage payment. In fact, knowing how an escrow account works can help you better compare mortgage rates when searching for a home and determining exactly how much you can afford to pay each month.

What If You Learn Your Mortgage Servicer Didn’t Pay Your Taxes?

There are several reasons your mortgage servicer might not have paid your taxes, such as:

• Clerical error. It’s not unheard of for local and state tax authorities, and even loan servicing companies, to make clerical errors that result in unpaid property taxes. For example, maybe the local tax authority sent the bill to your address instead of to the mortgage servicer.
• Change in loan servicing company. Another common reason for unpaid property taxes is a change in loan servicing companies. It’s possible your lender sold your loan or changed mortgage servicers. In this case, your tax bill may have been sent to the old company rather than the new one.
• Late mortgage payments. If you’re behind on your mortgage payments by more than 30 days, the lender isn’t required to pay your property taxes. However, if there’s still money in your escrow account, most lenders will make these payments.

If you find out your mortgage servicer didn’t pay your taxes, don’t assume anything. Instead, it’s crucial that you act fast. The first step is to contact all related parties.

Contact Your Lender

The first person you want to contact is your lender. Explain the situation and ask it to check on your escrow account immediately. In fact, you can request a copy of your escrow account activity at any time. In most cases, the lender will walk you through what steps you must take to resolve the issue.

However, if you’re not satisfied with the results of this call, you can file a dispute by sending a letter to your lender. In this letter, provide your name, contact information, account details, and a description of the error along with copies of your tax notice. Don’t send this letter with your standard mortgage payment. Instead, send it in a separate letter directly to your mortgage servicer.

Keep in mind that your lender is required by law to pay these fees out of your escrow account prior to the due date. Clerical errors do occur sometimes, so give your lender time to fix the error. Once you send a dispute letter, it only has 30 days to reply. However, it can state in writing that it needs an additional 15 days to investigate the issue.

Contact Your Tax Authority

You also want to contact your tax authority to discuss the issue. Even if you worked things out with the lender, you still want to update the tax authority on the status of your tax payments.

However, if your lender states that it didn’t receive your tax bill, you need to make sure the tax authority has the correct records. Start by explaining to the agency that your taxes are in escrow and your lender makes the payments. Then, have it check its records to make sure it has the right mortgage servicer listed.

If your lender states that it paid your taxes, ask the tax authority to recheck its records. If the agency’s records still show unpaid tax records, provide it with payment information from your lender and ask it to recheck. You may have to call your lender back if the agency is unable to find the payment.  

Contact an Attorney

If after sending a letter to your mortgage servicer or providing the tax authority with the necessary documentation you still haven’t resolved the issue, it may be time to seek legal assistance. Contacting a lawyer can help you learn more about your legal rights pertaining to escrow accounts. It’s likely your attorney can resolve the issue quickly or guide you through the next steps.

Stay on Top of Your Mortgage Payments

Unpaid taxes could result in a lien against your property, which can be difficult to remove. Unpaid taxes don’t directly impact your credit score. However, if you have to use your credit card or take out a personal loan to cover these costs, your credit score could drop.

The most important step is to follow through and make sure your taxes were paid in full. Ask for a full report of your escrow account where it shows payment. You also want to double-check with the tax authority to make sure your tax bill was paid.

If you’re in the market for a new home or considering refinancing your current home, you want to make sure your credit score is in good standing before applying for a new loan. Try Credit.com’s ExtraCredit program to build, guard, track, reward, and restore your credit. Sign up for ExtraCredit today.

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