We have customers who are not escrowing for taxes. We get notified from the Town that the customers have not paid back taxes; can we setup a negatvie escrow account? Also, we are going to set them up for future tax escrow payments, putting them on mandatory escrow. Or,can we advance against the principal balance on the loan? If so, can we go over the principal balance and still be secured by our mortage? What is the best way of handling negative escrow accounts? How are other banks doing this? Do you think it is better paying for the back taxes, for example, and spread the payment out over the next 12 months? Depending on the amount due, it could create a high payment for some customer, which they may not be able to afford.

It is all going to depend on your current contract with the customer. If the contract does not address this issue, you are probably left with (1) have them agree to establish an escrow acount and work with them on the best way to fund the negative balances or (2) declare the loan in default and foreclose.