Current Year Ad Valorem Taxes on Foreclosed Property

[Unregistered]

Does the mortgage/service company ever pay taxes that might already be in an escrow account for the year in which a property is foreclosed, if the property is purchased by a 3rd party?

[George Roddy, Jr.]

Dear Guest,

It would be very unrealistic for a mortgage co to pay for the taxes prior to the auction and even more improbable after the auction. Typically, after 4 months of missed payments and prior to the auction, the mortgage co/servicer will "DEPLEAT" any monies that our in an escrow account. If the bank takes back the property at the auction, then they will entertain the idea of paying any delinquent taxes. Typically, the will pay the outstanding taxes when the sell the property in a few month to convey insurable title.

Hope that helps,

George Roddy

[Will Crozier]

George,

To dig deeper into this property tax escrow account question---

When you say that the bank would "DEPLETE" the escrow account do you mean to say that they would send these escrowed funds to the county to cover as much of the due taxes as possible, or would they use these funds for some other use? (pocket it? send it back to the owners? other?)

Thanks!

[George Roddy, Jr.]

Will,

What I meant to say is that most loans requires the borrower to pay for PITI (principal, interest, taxes and insurance) every month. This is called "escrowed". When the borrower falls behind on their payments the taxes and insurance are not being paid, right? When the loan goes into foreclosure, usually the lender will grab any money that is in the escrow account (where the borrower has paid taxes and insurance) and use this money to pay themselves(lender).

In the event the bank forecloses and is the highest bidder, then they will settle up with the tax assessor and purchase another insurance binder.

George