Should Borrower Stop Paying Precarious Mortgage Lender?

SHOULD BORROWER STOP PAYING PRECARIOUS MORTGAGE LENDER?

By Bob Bruss

October 09, 2007

Editor's note: Robert Bruss passed away on Sept. 26, 2007. This was one of the last real estate columns he wrote. Inman News is publishing Bob's last work as a final salute to the nation's most well-known real estate writer.

DEAR BOB: My home loan is with American Home Mortgage (AHM), which is in a precarious financial condition. AHM is holding significant dollars in my escrow account for property tax and homeowners insurance payments. Should I stop paying AHM and pay such items myself? Should I refinance with another lender to avoid potential loss of my escrow funds? --Robert D.

DEAR ROBERT: Escrow impound funds for the payment of property taxes and hazard insurance are supposed to be held by mortgage loan servicers in a separate trust account. I hope AHM is following the law and properly segregating borrower funds.

Do not stop paying into your escrow account because that would be a default on your mortgage.

You can ask AHM to cancel your escrow account so you can pay your property tax and insurance bills directly when they come due. Many mortgage lenders will cancel escrow accounts if their borrowers have an on-time payment record.

But you have to ask. However, if you have a VA, FHA or PMI (private mortgage insurance) home loan, an escrow account is required.

The new Robert Bruss special report, "17 No-Down-Payment Formulas for Use in a Buyer's Market," is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his Real Estate Center).