Done To Zen

I spent about an hour with my mortgage lender, trying to convince them to let me do my own escrow. I had already dealt with the whole shebang once before. About a couple of months ago, I found out that I could do my own escrow, and I immediately contacted my bank regarding the procedure to cancel my escrow account.

My bank made it sound like they were actually going to let me do it without forcing me to negotiate a war course, but surely I knew better. My call to the customer service ended with a bad feeling, and I was right. Instead of what I was assured would almost certainly be a confirmation letter, I get a rejection letter instead. It was clearly a template, because not all of the reasons listed in the letter applied to me.

Try Number One

I woke up today morning and felt like trying again, so I called the customer service hotline and waited in line for a couple of minutes. The representative who picked up the call was a American-sounding woman with a nasal voice that was barely decipherable. In my sweetest voice, I explained to her that I know all about the requirements but is it possible to make an exception in my case, please? After about half an hour, the only thing I could get out of her was that she was going to request for cancellation, which could result in approval or denial. I thanked her and went back to my lunch.

Try Number Two

I decided to try again after coming home after work. This time a guy named Robert picked up. He repeated his name and tagline three times (I guess he thought the connection got dropped/was unstable or something). I talked to him for an hour and once again explained everything. He offered to put in a request. I declined, informing him that I had already tried that route. I asked him if I could be transferred to someone who had the authority to approve or deny escrow cancellation (he didn’t, of course). No, there were absolutely no numbers that he could transfer me to. Could I talk to his supervisor? No, it wouldn’t matter, because his supervisor wouldn’t be able to do anything, either. I thanked him for his time and he said something about how the bank appreciates my business. I hung up in disgust.

Try Number Three

I had to pay my mortgage today (because the 1st was Labor Day and I was out of town over the weekend), so I headed over to my bank with their slip and my checkbook in hand (yes, I still pay manually; my checking account is in a state of flux presently, and I don’t want to accidentally overdraw). As I waited in the short line, I decided to once again try to get rid of my escrow account. Maybe a face-to-face conversation would have better results?

I paid my mortgage and explained to the teller that I’m looking to get rid of my escrow account. He had no idea what I was talking about, so I ended up waiting about five minutes for a personal banker to turn up. I told him that I wanted to do my escrow. He had no idea what I was talking about and so he went in search of another personal banker who was more knowledgeable than him. I talked to the lady, but she had no idea what I was talking about either. She kept trying to get me to set up an automatic payment, saying I’ll have full control over exactly where my money is going. I had to explain to her ten times before she understood that I wanted to pay the city directly, not through a middle man (i.e., the bank). She said she didn’t think it was possible; I assured her that it was. She went in search of a mortgage specialist and so we ended up chatting about her kids for ten minutes (specialist was on phone with customer). Finally, the guy turns up and informs me that there is nothing he or anybody else at the bank can do about escrow. Yes, he does his own escrow, too Yes, he understands that I’ll be better off doing my own escrow. Yes, he understands that my property was valued much higher than my purchase price. No, he can’t do anything. I’ll have to call customer service and negotiate with them.

I thank them and leave for home, disappointed.

For now, it looks like my bank won.

Why escrow myself?

There are several reasons for why I want to escrow myself. The main reason is that I my monthly payment goes down by a lot. To be sure, I’ll still have to save the tax amount each month, but this will go under “savings” until I have to pay the taxes twice a year. The payment to my bank goes down by about 12.5%, so it’s pretty significant, not to mention that I hate the idea of giving anyone an interest-free loan. On top of this, I’ll be earning interest by saving the money in a high-interest savings account. The interest isn’t going to break any records, but it’s passive income all the same, and when you’re just starting out building your passive income, every little thing helps.

When can I escrow myself?

I’ll have to wait at least a couple of years, unless I pre-pay my mortgage by the required amount, that is. I only recently bought the house and I did not put 20% down; I only put 5% down, but because it was my first house, I got a nice deal where I didn’t have to pay PMI for a slightly higher interest rate.

One of the requirements to cancel my escrow account is to have at least an 80-to-20 loan-to-value ratio. I’m currently pretty far from this ratio, so it will take me at least three years to get the loan down to 80%, assuming that my house’s value stays the same. If it goes up, all the better. If it goes down, as is likely, it will be worse.

Pre-pay mortgage until I can escrow?

I was considering this somewhat seriously over the past couple of months, & especially over the past week or so. It will be awesome to not have any debt, but the truth is that it doesn’t really make any sense to put everything into my house. Liquidity is much more important for me, and, besides, I want to have a diversified portfolio to reduce risk, take advantage of higher-interest investments such as stocks, etc.

So I guess I’ll just have to grin and bear it for the next three or four years it will take me to get to 20% equity.

Not all is lost, though.

I purchased the property for over ten thousand dollars below what the city thinks it’s worth, so I contested the valuation with my city. They were very nice about it. I just had to contest through an application, and they replied back within a week informing me that the city will accept my new purchase price as the market value starting next year, so property taxes will go down next year! Of course, the change isn’t much per each month, but it’s there, all the same. :-)

I’ll try again when I have a 85 - 87% loan ratio.

I should have a longer on-time payment history by then and my loan ratio will also be closer to the required amount, so they may be willing to make an exception in my case. But that will take more than a year, too, so nothing in the works for 2009. Unless I prepay mortgage by a small but noticeable amount. We’ll see…