Jessica Longman: Education is Key–Reduce Homeowner Frustration Regarding Property Taxes
Jessica Longman is vice president and tax payment operations manager with LERETA, Covina, Calif.
With more than 22,000 different taxing agencies throughout the country, it can be complicated to understand all the nuances of collecting escrow and payment facilitation of property taxes. For those of us in the mortgage servicing or tax industry, these intricate processes are familiar, but for a homeowner this can feel like unchartered waters.
Some of the most common questions that servicers receive from customers revolve around property taxes. An important aspect to providing an excellent experience for your customers includes educating them on the critical pieces they need to know about their loan; in turn this will reduce call volume relating to property tax questions and reduce overall homeowner frustration about taxes and payments.
Tax agencies require servicers to remit property tax payments via ACH, checks or wires. Payment files are typically sent in bulk and may cover one to hundreds of thousands of properties in an agency. When an agency processes the payment file, any payment that is considered duplicate is returned to the servicer directly. Our research has shown that more than 20% of payments returned to servicers are for escrowed loans – which begs the question, “why are borrowers paying their own property taxes directly when the servicer is collecting the funds and responsible for payment?”
Education is the answer. In order to prevent disorganization and confusion created by duplicate payments, it is important to educate borrowers on the servicer’s process and obligation to escrow and pay property taxes. Education empowers homeowners to understand another part of the financial requirements connected to their greatest financial asset. The positive aftereffects may include an improved servicing experience, reduced call center volume related to escrow questions, and a minimized volume of duplicate/returned payments from an agency.
Educate Your Homeowners on Different Escrow Accounts
It is important to make sure homeowners understand what to do with any property tax related mail they receive.
All homeowners will get a bill, regardless of being escrowed or non-escrowed. Some tax bills will say, “do not pay” or “this is not a bill”, but in many cases the taxing authorities do not provide this verbiage. This is confusing to both new and existing homeowners. Taking into consideration that homeowners are inundated with loan documents at closing, they are either unsure or cannot recall if they have an escrowed account. Consider a one-page hand out in the welcome package that provides information such as details of an escrowed loan, how the amount is calculated and included in the monthly statement as well as when payments are made and by whom. If the loan is non-escrowed, educate the borrower on the process of when and how to pay, and consequences for nonpayment.
Regular and Supplemental Tax Bills
Additional education on supplemental tax bills is also important. A supplemental tax bill is a one-time tax bill(s) which occurs when there is a change of ownership on a property. When this change of ownership occurs, the property is reassessed. The supplemental bill covers the difference between the previously assessed value taxes and the newly assessed value when the home is purchased (change of ownership). Think of it as a “catch-up bill.” The homeowner will receive a tax supplemental bill within six to nine months from closing date, and this is the responsibility of the homeowner to pay, regardless of the account being escrowed or non-escrowed. Due to the current pandemic, the time frames for receiving a supplemental bill may be longer than usual. It is important to discuss this with borrowers so they do not discard this bill with the assumption that the servicer will pay it out of the escrow account.
There are several options to consider when determining the appropriate manner to educate borrowers on their escrow account. Including a clear and concise one-page memo in the welcome packet, as mentioned previously, can supplement any discussions at the closing table about taxes, timing and payment responsibility. Additionally, tax service vendors can help develop a letter (campaign?) cycle before payments are due to prevent confusion and proactively remind the homeowner that the servicer will make the upcoming payment. These letters will automatically trigger a mailing before taxes are due and will remind homeowners there is no need for them to send a payment. Letters could also reiterate to non-escrowed borrowers the importance of timely payments to avoid delinquency. If letters do not align with your company’s strategy, other options could include an alert on your website or mobile ap. It may also be helpful to include expectations of when payments will be posted and reflected on the agency website which is not always immediate and could require processing time.
Educating a homeowner can save servicers time and money and save homeowners time and frustration. A simple campaign to overcommunicate to homeowners can also build a level of trust that can breed loyalty. When a homeowner makes a duplicate payment, there is a waiting period until the duplicate payment is identified and a refund is issued by the tax collector. It may take 30+ days to receive refunds from an agency and with the effects of COVID-19 on staffing and resources, this timeline may be increased.
Everyone benefits from education. Visibility, clarity and understanding around escrow payments allows homeowners to better informed about their finances and their investment; empowered homeowners lead to fewer questions and an improved experience during the life of their loan.
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