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Property taxes paid ahead at a refinance?

We have always paid our own property taxes. We have 70% equity in our home which is valued at about $1.5M.We're refinancing with BofA and suddenly one week before the closing we're being told the title company has a rule that property taxes (which are paid ahead here) due within 60 days of closing must be paid in full at closing (which is 30 days ahead of when the city says they are due). I can't even get an amount from the city to pay as they haven't computed the first quarter of what the FY2015 taxes will be; the title company allegedly is going to charge us last year's rate + 20%. I am fuming that this was not brought up by the BofA mortgage guy before this, and forcing us to pay the title company for what we owe the city for taxes paid ahead doesn't seem right to me. We have 20 years history paying the city on time. This is supposed to be a Fast-Track 15yr refinance at 3% aimed at people with high credit ratings, but now it's coming off more like bait-and-switch.  We never had to pay ahead like this at purchase or other refinances. Am I off base here?
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June 15 - Newton
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Answers (6)

First I would like to say I am very sorry for this happening to you and I can understand how mad you are.
That being said I must agree that this is typical that the taxes and insurance are now due at the closing table.

I wish you the best.



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June 15
I'm sorry to see this happen to you and I can only assume what happen in this instance . . .

The Loan Officer quoted you a rate and term based on you escrowing your taxes and insurance not realizing the there is a hit to the rate for not impounding. Now you have reached the finish line and he/she realizes you have been misquoted. Your file is completed and ready to be closed based on impounding the taxes and insurance (not on the terms you discussed), which is why they are telling you this has to be done.

You have the option to not impound the taxes and insurance, but this is usually a .125% to .25% cost (discount point). I have seen this happen with Loan Officers working for me and the lock had to be changed with no impounds to be collected, underwriter had to sign off on the change, documents resent to title, and I waived the (cost for not impounding) fee b/c this was not disclosed properly by the loan officer. This was not the borrower's fault.

Answer: I hope you have in writing (e-mails) stating you do not want taxes and insurance impounded and not included in the payment then go to the manager letting them know this was established on the initial application and demand this to be corrected. Also, demand the cost for not impounding was not presented to you or even discussed a fee assciated and they should waive this fee. Also, it is customary to require you to pay what is owed in taxes for the remainder of the year.  I can tell you changing the terms at the closing table is predatory lending and they should be quick to fix this with no cost associated.

If you need further information please reach out to me here on Zillow or post on this thread so others will learn from your experience.
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June 15
You're a little off base.  I don't know of any lender who wouldn't ask you to pay your property taxes at close if they're due within 60 days of close. 

Try to go a little easy on your loan agent.  We're used to many things like this being a normal part of closing and sometimes we do miss telling our clients absolutely everything that can and will happen. 

It happened that you're finding this out now one week before close since the Title company was probably asked to prepare your final closing statement for the doc drawing person.  This will happen when the lender is clear to close and is ready to start preparing your loan docs. 

Your loan agent could have told you upfront that paying your taxes at close would be a possibility.  I don't know when you initiated the refinance.  It could be the case that you initiated it and were projected to close outside of the window where paying your taxes would be necessary.  I don't know, but there is definitely no bait and switch going on here. 
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June 15
If you don't like the rules, don't borrow the money, then. You don't really need it, do you? Certainly the monetary benefits can't outweigh the horrific victimization you're suffering, could they?

Sounds like you're not only off base, but you're caught in a run down. Slide, jump, bob and weave....

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June 15

Because most closings for a home sale do not take place on the day the taxes are due, the seller of the home may accumulate property taxes that don't become due until after the buyer has already assumed ownership. In such cases, the title company will prorate the taxes, which involves calculating the proportions of the taxes that the seller and buyer each owe. These taxes are often due at closing, and since many homeowners pay their taxes to a lender instead of directly to the taxing authority, you typically pay the amount in equal monthly installments along with your mortgage payments, and the money is held in an escrow account on your behalf, then paid to the taxing authority.

In your situation I see three points that have ruffled your feathers.  

1) Look back and see what was the closing/refinancing date of your other purchases/refinance. The taxes will always have to be paid when the property changes hands, so the time of year you bought/sold/refinanced dictates the amount (with all tax due for the preceding year on December 31 (county), to 1/365th due on January 1.) 

2) If you previously escrowed the amount, the taxes would have been either be paid from the escrow amount or that amount would have been refunded to you after the closing.

3) Finally, I am not sure why BOA is insisting on the additional 20%.  I cannot imagine that the taxes would go up 20% in one year.  Also, since you are refinancing - you will be paying the arrears tax and the tax for the upcoming year regardless.  If the 20% is for a possible rate increase (and not a fee) you should be okay.  The lender may want to have the assurance that there is money in the bank for your taxes, perhaps as a stipulation of providing the loan.

 
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June 15
Typically even though you are handling the taxes/insurance on your own, anything that is due before your first payment will be collected at the closing.  The extra 20% that the title company is collecting is normal when the exact figure is not known.  Understand the frustration and yes it would have been good to know ahead of time.  However if this was done with a loan officer from some type of call center, they would have no idea when your taxes are due at the beginning and they probably have since moved on to the next borrower by the time it was known.  You will get any overage back from the title company when they know what the tax is and pay.
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June 15
 
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