Thread Options
|
#1863678 - 10/22/13 04:31 PM
Purchase Transaction & Taxes
|
Platinum Poster
Joined: Jul 2002
Posts: 689
Home of the 8 time NCAA Champ ...
|
Background - I'm in a "new seat" and running into something that I haven't previously encountered. That doesn't mean it's wrong, just that I'm not familiar with it (nor are my companions who I now work with who all worked at the same place previously).
During one time of year we have lenders and attorneys who are insistent on disbursing a payment for the real estate taxes that "they expect" to be due "when the bills come out" at closing (even though the bills haven't been issued) with the closing attorney holding the checks. In some cases the closing attorney states that it is possible to go ahead and take the check to the taxing authority and make the tax payment (even though the bill hasn't been issued). In other cases the attorney is going to hold the check until the bill is issued.
"We" can't understand why this is going on and want to 1) assess the bank's risk in doing this and 2) disclose this properly on the HUD if we do this.
"We" can't understand why this is an issue only at a time near when the tax bills are released. It seems to us that if pro-ration of taxes is sufficient in April, it should be sufficient in October - and if it's not sufficient, the third party (if kosher) should hold the amount to pay the taxes in April just as in October.
The pushback is - "all the other banks are doing it", "secondary market does it this way", "you're the only ones mentioning it". I only care what other institutions do if I know the context and have had a chance to discuss with their compliance people, and "we're" responsible for "our" compliance program, so I don't mind being different.
So - prepare for irony of some degree - are the other reasoned compliance folks around here familiar with this practice? Is it normal/acceptable? Is the risk acceptable? We feel that if we do it, we prorate in the 100's and 400's then show the tax disbursement on line 506.
Thanks in advance for any and all input.
_________________________
Kentucky basketball isn't a matter of life and death, it's much more important than that.
|
Return to Top
|
|
|
|
#1867764 - 11/01/13 08:00 PM
Re: Purchase Transaction & Taxes
RGS
|
Diamond Poster
Joined: Jul 2006
Posts: 1,115
Where the Green Grass Grows
|
"SOP in the industry is for all bills due within sixty days of closing to be paid as a part of the closing."
Maybe SOP for you - but we don't do it. I don't know how you make a borrower pay something before it's due. As a consumer, I'd throw a fit.
We explained to our title companies and lawyers, that our escrow calculations are based on when something is payable. Ex: taxes and a October closing. If taxes are due December 31 - then escrow shows that it will be paid in December. How do you NOT pay it in December and it not throw your escrow off? If you show it due and payable now, does your escrow analysis show it due now? But, next year, you aren't going to pay it in October, you'll pay it in December - which again, messes up the escrow year.
BTW - before we did escrow, we didn't care whether the closing agent did this. It didn't matter to us at all.
|
Return to Top
|
|
|
|
#1867795 - 11/01/13 08:42 PM
Re: Purchase Transaction & Taxes
RGS
|
Platinum Poster
Joined: Mar 2012
Posts: 574
|
If loan closed in October, we would collect 12 months of taxes as Taxes are billed in October. Our first payment if closed after 7th day would be due December 1. In order to insure we had 12 months taxes we would collect 2 months at closing. Hopefully, this is not too muddled
|
Return to Top
|
|
|
|
#1867862 - 11/02/13 10:17 PM
Re: Purchase Transaction & Taxes
RGS
|
10K Club
Joined: Jul 2001
Posts: 83,220
Galveston, TX
|
Because paying bills due within sixty days is SOP in the industry if you are involved in the secondary market. Fixed
TR - You have to realize that many, many of the banks that post on BOL are not involved in the secondary market. Making a statement about the SOP of the "industry" as a whole without qualification is going to generate a lot of disagreement.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
|
Return to Top
|
|
|
|
#1870020 - 11/08/13 10:08 PM
Re: Purchase Transaction & Taxes
Truffle Royale
|
Diamond Poster
Joined: Jul 2006
Posts: 1,115
Where the Green Grass Grows
|
AlwaysinTraining, are you talking about in-house loans? Because paying bills due within sixty days is SOP in the industry, even if you chose not to do it inhouse.. _snip_
Ex: a full year's insurance policy is required on all new loans. If the next year's premium is due within sixty days of the closing, the borrower is going to have to pay it at time of closing. They'll get the money back from their current escrow within thirty days so our borrowers always understand and don't throw fits. Yes. All our loans are in-house. For your example Truff, are you keeping the additional months in your escrow account at closing, or are you paying the insurance company for the full year's policy? (I hope that makes sense.) My borrowers understand that their insurance would need to be paid to the insurance company, but why the closing agent would get to "hold" estimated taxes collected at closing (unless its a matter required by state law.)
|
Return to Top
|
|
|
|
#1870055 - 11/08/13 10:52 PM
Re: Purchase Transaction & Taxes
RGS
|
10K Club
Joined: Jul 2001
Posts: 83,220
Galveston, TX
|
For taxes, if the bill hasn't been published yet, the money will be held in the customer's escrow account and paid out at the proper time.
So you are going to require the full amount sixty days in advance plus two months of reserves - doesn't that really screw up your initial escrow statement???
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
|
Return to Top
|
|
|
|
|
|