Q: Your column a couple of months ago talked about a mortgage holder being responsible for property taxes. This was mentioned in regard to the foreclosure of their home by the lender.
Why would the homeowner be responsible if there was no property tax escrow account? I do not see how they would be legally responsible.
A: Until a lender actually obtains title to a home through foreclosure, the homeowner is responsible for all costs associated with the home. One of those costs is the payment of the real estate tax bills when they come due.
Once the lender gets title to the home, the lender becomes responsible for the payment of all bills associated with the home.
The tax escrow account is an account that a lender sets up to pay the real estate taxes with money deposited monthly by the homeowner. The lender has the right to apply the amounts held in the real estate tax escrow towards the payment of the real estate taxes, but if the homeowner fails to make payments on the mortgage, the lender can use the money in the tax escrow to pay the loan.
If the lender didn’t have a tax escrow, the obligation to pay the real estate taxes remains with the homeowner. If the homeowner were to sell the home, the homeowner would have to pay all back real estate taxes owed along with all amounts owed to the lender.
Just because the lender has begun foreclosure proceedings does not mean that the amount owed by the homeowner is frozen in time as of that date.
Quite the contrary, once the lender starts foreclosure proceedings, the homeowner starts to incur even more expenses. Those expenses will relate to the lender’s fees in the foreclosure along with the amount owed on the loan, and any expenditure the lender makes relating to the property including the payment of insurance premiums and real estate taxes.
Nov. 11, 2006.