Shakedown from the Bank

[BlackbeardsWyfe]

My Citibank mortgage was sold to Greentree  Servicing earlier this year. I recently received a notice that my escrow was short. I contacted them to find out if it was short because we had switched insurance providers and was told that Greentree requires a 2 month escrow "cushion". My choices were to pay the two months or my mortgage payment would go up until the 2 month "cushion" was reached. I will not receive any interest earnings from the "cushion" fund either.

Is this legal? I had no control over the sale of my loan and did not enter into any loan agreement with Greentree. Citimortgage did not require a "cushion" and I have never had any problems with that loan.

Any insight, suggestions or comments would be greatly appreciated!!

Blackbeards Wyfe

[geekette]

Back when we had a mortgage, seems like we always had a 2 month cushion for escrow. 

[GizmoTX]

Mortgage companies love to have your escrow to play with. See if you can eliminate your escrow & pay your annual property taxes & insurance directly. This is good practice for when you pay off your mortgage completely -- your property taxes & insurance are still due every year. (We haven't had a mortgage since 1990.)

[chasesfish]

I think the 2 month escrow is contractual and in your documents.  Usually the bank just increases your payment to build the buffer back up.  Your prior provider may not have enforced it -I actually had a negative escrow balance once before I got the nice letter telling me the amount is going up.

If you're below 80% LTV, you may be able to call them up and just drop the escrow.

Also, remember the purpose of that buffer.  If you don't pay, the property taxes and insurance is still due and it would take them 60-90 days to foreclose.  You get the buffer back once you payoff the house.

[frugaliknowit]

My suggestion is do not spend a lot of time or effort fighting it.  It's only an impound; it's not like they are charging you a fee.  The opportunity cost of two months of taxes is pretty minimal.

[Cheddar Stacker]

Mortgage companies love to have your escrow to play with. See if you can eliminate your escrow & pay your annual property taxes & insurance directly. This is good practice for when you pay off your mortgage completely -- your property taxes & insurance are still due every year. (We haven't had a mortgage since 1990.)

+1.

I cancelled my escrow a few months ago because of a similar issue. Now I have a few hundred extra dollars/month to play around with until the big payments come due.

[Thegoblinchief]

Drop the escrow (if you can) if this bothers you that much. Otherwise deal with it.