I was recently told that there is a clause that should be in all of our notes indicating that the bank is allowed to increase the loan amount (without doing a new note) in order to make past due tax payments for a borrower.
I couldn't find anything in our notes to that effect. We do have a future advance clause in all of our mortgages, that could potentially help with paying taxes. But I would think if we increase the loan amount, we would still have to do a new note....
Has anyone heard of this, or know what I would be looking for in the note to allow for this?

Check your mortgage or deed of trust that is typically where the covenants are found regarding payment of taxes and keeping the property free of other encumbrances. Also, you should have a paragraph regarding expenditures by the beneficiary if the borrower fails to comply with the mtg or d/t provisions. Ours includes the option to add delinquent taxes to the note and charge interest at the note rate. This is all separate and apart from any rights of the bank upon any default of the borrower.