Officials dig for answers on mortgage payments

Officials dig for answers on mortgage payments

CUMBERLAND – Town officials say they made no changes to the way tax bills were delivered this year and say their actions had nothing to do with many residents’ monthly mortgage payments ballooning by as much as $200 or $300.

Mayor Jeff Mutter said he was scheduled to take part in another conference call at mid-week on an issue that’s been rankling residents who’ve seen a “dramatic increase” on their mortgage payments. Some have seen higher payments for the first time this month.

The mysterious change appears to center on some banks choosing for the first time this year to pay homeowners’ full property tax bill at the beginning of the year, leaving numerous escrow accounts short and causing the banks to hike monthly bills to make up for it.

“The town did absolutely nothing different,” Mutter told the Town Council last week, rebuffing social media assertions that municipal officials somehow played a role in this.

The motivation for the banks seems to be the town’s unusual offer of a 2 percent discount on full payments made in the first quarter, but many residents are stating that they’d rather have the payments continue to be spread out for budgeting purposes. They’re also saying they were never notified by their banks of the change.

Mutter said the town has been offering the 2 percent discount “forever,” and town officials have “double, triple and quadruple-checked” their processes.

“We had a lot of banks or mortgage companies for some reason take advantage of the 2 percent discount,” he said. “We can’t get a solid answer on why it happened.”

The change is also throwing off an already unsynchronized town budget, he said. Though there were record-high tax collections in the first quarter, the next three quarters will show record lows. It throws the historical collection percentage out of whack, he said, but more importantly damages household budgets.

The town has also grilled its third-party vendor, CoreLogic, but has come up empty in the hunt for any changes made on the municipal side, said the mayor. He said his “gut sense” is that issues are being generated at the bank level.

Finance Director Ray Chauvin said what typically happens is for residents to have the option of a one-time payment or spreading a shortage over several months. Citizens Bank seems to be the bank at the top of the list for “changing the rules” on mortgage holders. Banks are supposed to talk to individual borrowers before they take steps such as this, he said.

Though impacted residents are probably paying less overall, said Chauvin, they’re being impacted significantly in the short-term.

Collections for the first part of the year in Cumberland were up 4 or 5 percentage points, or between $4 million and $5 million. Though the town was the beneficiary of the early payments, Chauvin said, it creates some issues for municipal budgeting with an artificial surplus.

Mutter said the town’s tax levy percentage is thrown off dramatically, and officials are in discussions about how to synchronize everything without having to do significant borrowing. If the town does its budget projecting that this will happen again next year, and it doesn’t, there will be significant problems, he said.

The only other community in Rhode Island to offer the early payment discount is East Providence, according to Mutter.

Officials say they believe more residents are experiencing this issue because lending institutions such as Citizens and Cenlar are buying up mortgages.

In numerous online discussions about this issue, residents seem to be in agreement that mortgage holders with local banks and credit unions are not experiencing the same kind of problem.

Comments

I've noticed there's many more houses for Sale and house prices look to be going down. The banks now are looking for ways to save money. What goes up...

Derrick L, the actual data shows the opposite. The number of active listings in Cumberland is down YoY. 135, 137, 106 active single family listings for Oct ‘17,’18,’19 respectively. The median sales price is $315k, $303k, and $342k for those same months (with August 2019 seeing a relative peak at $352k).

The article mentions that mortgage holders that have their mortgages with local banks or credit unions haven't seen an increase. Curious to know if anyone that has been affected by this have looked into refinancing their mortgage with a local bank or credit union. If so, where and was it beneficial?

While that may be true for Cumberland, Fannie Mae's own numbers disagree with that sentiment. Thankfully, Rhode Island has strong leadership with a strong economy. As Friars123 pointed out, probably best to go with a local bank which may have better resources than a national bank.

As a homeowner, my escrow would be re-evaluated at the same annual date it began, or a fixed date agreed on mutually. THEN, if the escrow was short, I could either pay the shortage, due to tax/insurance increases, or, the mortgage lender would divide it up amongst the 12 months of mortgage payments. So I fail to understand how the bank paying it ahead, would require immediate shortage paid by homeowner. It should tally to the annual escrow renewal date. Usually this is controlled by state law as to operations. Again, I do not understand the sudden payment requirement of any supposed shortage by a homeowner. Makes no sense. An escrow has a renewal date annually.