Here's the scenario. Loan closes on 6/15. First payment is due 8/1. Property taxes will be billed and due on 7/1, with a penalty after 9/1. The bank's practice is to collect what they estimate the bill to be at closing, disclose it on line 904 on the HUD, place it in the escrow account, and then pay it 7/1 when the bill is issued, after closing but before the first payment. The escrow deposit and disbursement are not reflected on the initial or annual escrow statements since they occur before the escrow computation year. This seems wrong to me, but I guess that's "the way it's always been done and there's no way around it." I asked why we couldn't just pay the bill between 8/1 and 9/1 (after the first payment but before the deadline to avoid a penalty), but I'm told we always pay property taxes as soon as they're due in July. If I'm correct in thinking that this isn't okay, what should I suggest the bank do differently? And is there a reg or law that I can site that shows that this is wrong? Thanks!
Don't make me say, "I told you so!" Sincerely, your friendly Compliance Officer.