Forum Rules (Everyone Must Read!!!) (updated: 04/28/2015)

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Mortage Increase Due to Shortage in Escrow?

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  • Mortage Increase Due to Shortage in Escrow?

    I've received notice from my mortage company that my escrow is/was short and they have covered some fees. As near as I can tell, this is due to the 5 months of past-due mortage payments that were rolled into my Ch. 13 plan as a priority/seured debt. To be honest, it's not all that clear to me but our annual property taxes have only gone up about $300 a year for the past 2 years while we've been in the plan, so that's how I'm reading the document.

    The letter states I can either pay this money back in a one lump sum of over $4000 (lol, right) OR my mortage will increase by $400 a month, beginning next month, for a year.

    So, I'm supposed to come up with an extra $400 a month (don't know how that's supposed to work) to repay money they're guaranteed to get back in the plan, and some of which they've already received because we're 2.5 years in and theirs is a secured debt? This makes no sense to me.

    Has anyone else experienced this? Or does anyone have any insight? I'd be appreciative for any info.

  • #2
    Hopefully you have an attorney. Any and all pre petition payments, late fees, interest accruals and advances should be included in the Proof of Claim. Your mortgage payment should not increase to cover any pre petition shortage. Your attorney needs to 1) review the claim that was filed and 2) contact the lender to determine what, if any, increase in your mortgage payment is justified based upon post petition taxes and insurance impounds.



    • Tinker
      Tinker commented
      Editing a comment
      Thank you for the info. I will contact my atty and ask him to look into it.

  • #3
    Exactly what Des wrote is what I would have written. This needs more direct review to see where they are getting their numbers.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.


    • #4
      I had several months of pre-petition missed mortgage payments paid from my Ch 13 plan. That included any escrow shortfall that occurred as a result of this arrearage. My pre-petition arrearage was paid in full through the Ch 13 plan before the unsecured creditors were paid, which took several months. I had no increase in my mortgage payment other than for post-petition (and customary) tax and insurance increases. I currently have an escrow shortfall because school taxes (several thousand dollars where live) were paid. My payment hasn't changed yet and I don't expect it to.
      Filed Ch 13 Fall 2013, 60 month plan


      • #5
        UPDATE: Okay, I spent hours this morning pouring over documents and I was _wrong_ about the shortage coming from pre-petition shortages. Here is the correct situation (as I understand it).

        At the end of 2016-beginning of 2017, we missed multiple mortage payments. We had the funds but were planning to walk away from the house. In June, the mortgage company filed a relief from the automatic stay to collect the past due payments (nearly $12,000) in total. Due to some unforseen circumstances, we decided it would be best to stay in the house, so after going over the options with my atty I paid the past due balance in full and brought the account current as of July.

        The shortage in the escrow account, according to some close reading of docs from my online mortgage acct info, is due to them _not_ applying _any_ of that lump payment to the escrow account. Normally, approx 1/3 of my monthly payment goes into escrow. So the shortage is from them applying all the past due payments to the principal balance.

        I'm going to contact my atty tomorrow but I suspect he's going to tell me either (1) there's nothing that can be done, or (2) for an additional fee, because this is not technically part of the ch. 13, he can try and negotiate it.

        I am so frustrated. It never occured to me that they wouldn't distribute the past due funds the way regular payments are distributed. And I don't think we can handle the extra montly amount.


        • #6
          They are not allowed to apply post-petition payments to pre-petition debt (including escrow). In a Chapter 13, they get the normal payment which they apply to the normal installments. The arrears should be applied as such. This is an area, misapplication of payments, which is always troublesome in Chapter 13s with arrears. Your attorney should understand how this is supposed to work!
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog

          I am not an attorney. Any advice provided is not legal advice.


          • Tinker
            Tinker commented
            Editing a comment
            Thanks. Yes, that makes sense. Unfortunately, in this case, it was post-petition. We deliberately didn't pay for a few months a couple of years into the plan as we were going to surrender the house (it's underwater). Decided to stay and paid off past-due payments in a lump sum (my BK atty handled the payment). The mortgage co took that entire past-due payment (about $12,000) and applied it all to the principal instead of distributing the portion of it they would normally have put into our escrow. My fear is that, although shady and shitty, it's legal. I likely won't hear back from my atty for a couple days and in the meantime I'm literally sick to my stomach.

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