All Forum Posts by: Turgut Oz

while I agree impounds are good for lenders to reduce defaults, they are horrible for responsible borrowers. If I have 6 figures of taxes and insurance escrowed at 0% interest I am losing $20k+ of interest income.... and even worse opportunity cost is even more. 

Most people would be in doomsday scenario if escrow were removed, because a significant portion of buyers would not be disciplined enough to set aside the funds themselves for payment and would then be in tax or insurance default. Your partner (the bank) knows this, which is why they're not crazy about the idea.

That said, I agree with you about removing escrow if you're the type that knows what you are doing and always keeps sufficient reserves (I don't really get the redeploying the capital other than keeping it somewhere safe and liquid, since you'll need it every year like clockwork). I hate escrow for 3 personal reasons:

1. I have had two different instances in the past where my lender failed to pay property tax and insurance. In both cases I had to pay out of pocket until it was resolved. Both were eventually resolved but at great time & aggravation to me.

2. I do not trust the record keeping of lenders. I had a loan once sold 3 times in 2 years, and the last buyer suddenly insisted I had a $25 late fee on my account for some mystery late payment from years earlier from one of the previous note holders. When I inquired which lender & which payment (I keep records on everything), they couldn't identify it, only told me that I'd keep getting the notice it was on my account until I paid it. Coda: I told them they could kick rocks unless they identified what payment & lender it was, and that they could send me letters until I was dead and I'd sooner set $25 on fire in the middle of the lawn first. After 2 years of sending the monthly letter (they probably spent more on letters than $25), I suddenly got a letter one day that because of my excellent payment record they were granting me a courtesy convenience waiver of the fee.

3. I like paying my insurance and taxes depending on when I need deductions. Sometimes I pay just before the end of the year, other times I will pay just the minimum on insurance and/or taxes before our 2/28 deadline depending on where I am with write-offs. I don't get that luxury with escrow. 

Personally I think it’s one of the largest injustices done to the American homeowner. Imagine the amount of purchasing power taken out of the economy at any given time so insurance companies and banks can lower risk for themselves.  Granted it all gets paid (or should get paid) in the end but I’d rather have control of my cash vs paying it in escrow.  I’ve always thought this is an overlooked issue that banks and insurance companies have gotten away with.

Totally understand your frustration, and it’s great to hear you’ve been so consistent with your payments and maintaining a strong equity position.

From a lender's standpoint, even when a borrower meets general eligibility criteria (like a strong payment history and low LTV), the ability to remove an escrow account isn't always at the lender's discretion alone. In many cases, it depends on who owns the loan—such as Fannie Mae, Freddie Mac, or a private investor. Each has its own servicing guidelines that the lender or servicer must follow, and sometimes those guidelines restrict escrow waivers regardless of borrower performance.

Since you're in Texas, it's also worth noting that certain state-specific regulations or risk factors related to property taxes and insurance premiums can come into play, and some investors see escrow as a way to protect the asset and ensure those payments are made on time.

That's unfortunate to hear that they will not work with you even as you are up to date and not late on payments. I have a loan with Chase and they removed the escrow after about 2 years at my request with no fuss. I too would rather keep that money and pay it later

PMI and Escrow are two totally different things. Most loan documents require the property to be escrowed for taxes and insurance as that protects the lender to make sure they are being paid. The default rates on taxes and insurance I would bet are 10 fold compared to loans who have escrow because people live paycheck to paycheck and then when a big bill comes due they cannot pay it.

I would guess your loan documents require it

BTW why are you putting up a big fuss on having the servicer hold taxes and insurance escrow?