3723edm (10/23/82)
I have just received my new mortage payment booklet, and was advised of a substantial increase in the monthly payments. Upon analyzing the calculations, I realized that the mortgage company (United First Mortgage Company) had come up with a new scam resulting in a larger escrow balance requirement. When I contacted the company, they advised me that: a. this is the correct way to calculate the escrow balance b. other companies are doing it c. New Jersey is the only state where they do this, because it's the only state where the quarterly mortgage payments vary from quarter to quarter d. it's equitable I have already discussed with the company about NOT having them keep the escrow, and they won't hear of that. In any case, I'll describe the OLD and NEW ways of computing the escrow deposit required, based upon a $1200 annual tax. Under the old way, the $1200 annual tax was divided into 4 quarterly payments of (approximately) $300 each. Escrow would accumulate over a 3 month period, at $100 per month, for each quarterly payment. Assuming taxes were due in March, June, September, and December, no escrow deposit would initially be required. Under the new method, the $1200 tax is still divided into 4 $300 payments. But the mortgage company "claims" that each quarterly tax payment is an annual bill! As a result, $25 is credited each month towards EACH of the 4 quarterly payments. So when the March payment comes due, it only has $75 credit; the June bill only has $150 credit; the September bill has $225 credit; the December bill has $300 credit. These add up to only $750, creating a $450 shortage out of thin air. Anytime there's a shortage, it is averaged out over a one year period, so that $37.50 is added to each monthly payment. I realize that next year, my payment will go down, because this big shortage will no longer be there. But this means they're holding that extra money for the rest of the term of the mortgage. What I would like to know is: has anybody else heard of this scheme being used by United First Mortgage or any other mortgage company, in or out of New Jersey? If it affects you, are you interested in obtaining legal counsel to challenge this practice? Send your replies to: Eli Mantel, houxm!3723edm