What to Do if Impound Account Servicing Is Unacceptable

Q When I purchased my home, the lender offered to drop 0.25 of a point off the mortgage rate if I agreed to set up an impound, or escrow, account for my taxes and insurance. I took the offer, and the company managing the account has made mistakes with both my property tax and insurance bills. Is there any way I can get out of this impound account?

--M.Q.

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A Your first step should be to contact the company servicing your mortgage to learn how you should present your case. Before proceeding, you should know that lenders on properties in California have the right to require the establishment of an impound account when the loan-to-value ratio on a property is 90% or more. Federal Housing Administration loans require impound accounts regardless of the loan-to-value ratio.

Don’t let your mortgage servicing firm try to tell you that you cannot get out of the impound account simply because you accepted the lower interest rate. Although it is true that you technically entered into a contract, the firm’s end of the bargain is to provide competent loan servicing. If you can demonstrate that it hasn’t, you can argue that it hasn’t lived up to the terms of the agreement.

If you can demonstrate that the company’s mishandling of your escrowed funds has resulted in late or skipped property tax or insurance payments, you have the evidence you need.

In your correspondence with the company, be sure to offer details to support your contention that you are better off handling your own taxes and insurance than relying on the company’s faulty service.

If this approach doesn’t work, complain to the state agency that oversees the company’s operations.

Ultimately, if you feel strongly enough, you may, of course, take your case to court.