Escrow Fraud: The Next Mortgage Loan Scandal?

After multiple go rounds with her lender's service department, Veronica Ynclan of Texas knew she needed professional assistance, "I kept calling customer service and no one could help me."
The story of Ynclan's quest for an escrow account refund begins like so many others after the burst of the housing bubble in 2008: her loan was sold.

Dovenmuehle Mortgage, the company that purchased Ynclan's loan, was seemingly unaware that between the time she entered into the purchase agreement for the new construction house, and the moment her family moved in, the home had already lost 15 percent of its value. It is for this reason alone that according to Ynclan, "mortgage insurance was required as well as the escrow for our property taxes."

Ynclan continued to her pay her mortgage on time and in full each month but at the beginning of this year, she noticed something very strange.

"Every month I kept noticing that the funds in our escrow account were growing. At the beginning of the year we had something like $8,000 in the account, and would have had around $13,000 by year's end," she said. It was at this point that Ynclan began to suspect that her lender was not paying the mortgage insurance policy premiums after all.

Ynclan opted for the usual course of action in these types of situations. "I wrote them a letter that they owed me an escrow refund, and they said not only did they not owe me a refund, but my mortgage payment was going to go up. The letter they sent me showed $5,000 less in the account on their end, but that just wasn't right," she recalled.

Ynclan considered securing the services of a qualified real estate attorney. However during the course of arming herself with information via the Internet, she came across a company called Loantech. She picked up the phone and was surprised when David I. Ginsburg, the organization's President, answered. He decided to take responsibility for getting her account in order.

"David was personally responsible for my account. He's the one who answered the phone and spent a good half hour talking to me and understanding my case. He made me feel comfortable like I was in the right and not crazy. It's not OK to keep paying a lender and not know if I have mortgage insurance," she said.

Loantech asked for all of Ynclan's mortgage paperwork, some of which proved that Dovenmuehle never paid the mortgage insurance premiums. An audit report was drafted and delivered, and in less than a month, not only did Ms. Ynclan receive a check for $4,036 for the unpaid insurance but, "with my solid payment history, I proved I didn't need mortgage insurance anyway." The lender waved future premiums, saving her an additional $180 each month.

Ynclan's story has a happy ending, but it doesn't always work out that way. Anecdotal evidence and official reports suggest that escrow errors are on the rise. The situation in Illinois is bad enough that the General Assembly passed a statute designed to protect homeowners from overzealous escrow accrual. The odds of mistakes occurring increase exponentially when the purchase of mortgage securities passes through several hands.
In today's battered housing market, folks have enough trouble meeting their basic loan obligations without the added burdens placed on them by lender mistakes and poorly-trained customer service departments.

Do you think mortgage escrow account fraud is under-reported? Have you done battle with your lender's service department?
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.

Ilyce Glink

Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns ThinkGlink.com, where readers can find real estate and personal finance resources.

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