Escrow Accounts

As financial regulators and Congress probe more deeply into the delinquencies and foreclosures roiling the subprime home loan market, one key contributing factor is receiving increased attention: the lack of mandatory escrow accounts. According to some industry estimates, a majority of subprime mortgages closed during the housing boom years carried no escrows for property taxes and hazard insurance. That is in stark contrast to the prime mortgage market for consumers with good credit, where mandatory escrow accounts are routine.

A Charles County woman pleaded guilty in federal court Wednesday to mail fraud that was part of a plan to defraud lenders and a title insurance company of $1.7 million. Brenda Lukenich, 60, of Hughesville was an escrow accountant for title companies that operated in Baltimore, Annapolis and Washington, D.C., according to a statement by the U.S. Attorney's Office for the District of Maryland. Roughly five years ago, Lukenich altered escrow account statements prior to audits - required by the title insurer - to show that accounts were balanced even though they actually were short about $3 million, the statement said.

Maryland's Department of Licensing and Regulation has conducted unannounced "blitz audits" of 200 to 300 licensed real estate brokers in Maryland over the past two weeks to make sure no one is dipping into escrow accounts set up for homebuyers.Harry Loleas, deputy commissioner of the Division of Occupational and Professional Licensing, and George Rayburn, assistant commissioner of consumer credit, said the spot audits were ordered by Licensing and Regulation Secretary William A. Fogle Jr. to make sure brokers aren't taking funds intended for home purchases and using them to cover operating expenses for their office or pay off personal debts.

A Baltimore grand jury has indicted a 67-year-old Reisterstown man on 24 charges alleging he stole more than $7 million from various escrow accounts, the city State's Attorney's Office announced Monday. George Sybert Sr. of the first block of Briarwood Farm Court owned Maryland Title Co., based in Baltimore. The indictment claims he took money from individual accounts his company held. Sybert is scheduled to be arraigned in December. A message left at Sybert's home was not returned Monday.

ALEXANDRIA, Va. - Two defendants accused of visa fraud were torpedoed by their own witness yesterday when he testified that he was shocked to learn that they had tapped client funds that were supposed to be kept in special accounts. "I blew my top," said Dale M. Schwartz, an Atlanta immigration lawyer, when asked what he did when he learned that clients' escrow accounts had been raided. He said he told a staff lawyer at the Interbank Group, a Herndon, Va., company run by defendants James F. O'Connor and James A. Geisler, that "she ought to quit and get out of there."

A former office manager of two Howard County real estate firms was charged yesterday with 32 counts of theft and four counts of forgery in the alleged embezzlement of $161,301 from escrow accounts, police said.Josephine F. Davis, 45, of the 17,000 block of Frederick Road, Mount Airy, was released on her own recognizance. She had been employed with Howard Realty and Marsho Realty, trading as Re/Max Realty, according to District Court records. According to court records, Ms. Davis left a letter for her employer admitting to stealing the money from the office's escrow accounts between September 1987 and June 1990.

General Motors Acceptance Corp., one of the country's largest mortgage lenders, settled a federal lawsuit yesterday by agreeing to refund tens of millions of dollars to hundreds of thousands of homeowners who officials said had been forced to pay excessive amounts into escrow accounts.The attorneys general of 12 states, including New York and California, called the settlement with GM's mortgage unit a significant victory against abuse in mortgage lending and expressed hope that it would result in reforms.

DALLAS -- Bill Harrison of Fort Worth learned the hard way the hazards of tangling with his mortgage company.Convinced the company was charging him too much in escrow payments, Mr. Harrison withheld from his monthly mortgage payment the amount he believed he was being overcharged.That led to a long-running dispute, which was finally resolved in Mr. Harrison's favor. A happy ending? Not quite."After all that, I got a letter from a credit-rating firm saying they were putting on my credit report that my mortgage payments had been late," Mr. Harrison recalled ruefully.

A Baltimore grand jury has indicted a 67-year-old Reisterstown man on 24 charges alleging he stole more than $7 million from various escrow accounts, the city State's Attorney's Office announced Monday. George Sybert Sr. of the first block of Briarwood Farm Court owned Maryland Title Co., based in Baltimore. The indictment claims he took money from individual accounts his company held. Sybert is scheduled to be arraigned in December. A message left at Sybert's home was not returned Monday.

Republic Air Travel, a Dallas-based travel agency that recently began advertising low-cost charter flights from Baltimore-Washington International Airport to Florida, has diverted hundreds of thousands of dollars from customer refund accounts to cover its operating expenses, federal regulators say.The U.S. Transportation Department on Monday filed a civil complaint against Republic Air and Airlift Group Inc., a charter operator, saying they also failed to...

Homeowners are accustomed to mortgage payments that include taxes and insurance. Every month you pay 1/12 of the annual tab (give or take), and the lender socks it away into an escrow account for when the bills come due. But a lot of the subprime loans made during the pre-credit-crunch frenzy didn't come with escrow accounts. There's nothing like being hit with an unexpected tax bill to ruin your day - or wreck your budget. Many of the people streaming into St. Ambrose Housing Aid Center in Baltimore for help avoiding foreclosure don't have escrow accounts and didn't realize it when they got the loan.

A real estate title company in Severna Park and Ocean City was shut down after as much as $2 million from its escrow account for property settlements allegedly turned up missing, according to court documents and state regulators. Maryland Insurance Commissioner Ralph S. Tyler ordered yesterday that business licenses for Day Title Inc. and owner Deborah A. Williams be suspended and revoked. The Maryland Insurance Administration issues licenses and regulates title companies, which conduct real estate closings.

As financial regulators and Congress probe more deeply into the delinquencies and foreclosures roiling the subprime home loan market, one key contributing factor is receiving increased attention: the lack of mandatory escrow accounts. According to some industry estimates, a majority of subprime mortgages closed during the housing boom years carried no escrows for property taxes and hazard insurance. That is in stark contrast to the prime mortgage market for consumers with good credit, where mandatory escrow accounts are routine.

ACROSS THE country this month, millions of homeowners are receiving a document from their mortgage company that they might find confusing or nettlesome: the annual escrow account disclosure statement. The very idea of an escrow account gets under the skin of some homeowners. After all, escrows mean that you pay more - often hundreds of dollars per month more - than the principal and interest you owe the lender. You're required to pay prorated amounts for hazard insurance premiums, property taxes, private mortgage or FHA insurance, condo fees and other expense items due at times during the year.

When shopping for a mortgage to purchase or refinance your home, here are some tips: If you know you're going to sell the house within the next seven years, consider alternatives to the usual 30-year fixed rate mortgage. Adjustable rate mortgages (ARMs) are available at lower rates than fixed-rate loans. Lowest rates apply to mortgages that adjust every year. Progressively higher rates are charged for ARMs with rates that are locked in for three years, five years or seven years. After the lock-in period, the ARM interest rate adjusts at that time to the then-current index rate, plus a predetermined margin (i.e.

Home sellers and those refinancing homes who pay off their mortgages frequently wait for weeks or months before receiving the funds sitting in their own escrow accounts. The balances in those escrows can amount to thousands of dollars -- all intended for property taxes, insurance and other annual or semiannual expense items. But mortgage servicers are free to retain and profit from that money long after the underlying loan has been paid off. Why? Because of a glaring loophole in federal law. While Congress has prescribed detailed rules on how much a mortgage company can require a borrower to contribute to an escrow account, there are no provisions in the law about returns of escrowed funds.

Home sellers and those refinancing homes who pay off their mortgages frequently wait for weeks or months before receiving the funds sitting in their own escrow accounts. The balances in those escrows can amount to thousands of dollars -- all intended for property taxes, insurance and other annual or semiannual expense items. But mortgage servicers are free to retain and profit from that money long after the underlying loan has been paid off. Why? Because of a glaring loophole in federal law. While Congress has prescribed detailed rules on how much a mortgage company can require a borrower to contribute to an escrow account, there are no provisions in the law about returns of escrowed funds.

ANNAPOLIS -- Title companies again narrowly avoided yesterday being forced to give up the interest they earn on their clients' escrow accounts.By a 12-10 vote, the House Ways and Means Committee agreed not to use title company interest as the source of funding for the proposed Maryland Affordable Housing Trust, a fund that would help pay for affordable housing in Maryland.For years, title companies have fought a turf battle with law firms over the interest earned on client escrow accounts.

ALEXANDRIA, Va. - One of the defendants on trial in a visa fraud case openly admitted yesterday that dozens of foreign investors were lied to and millions of dollars were never placed in escrow accounts as promised. Calling his actions a "misrepresentation," James F. O'Connor testified that instead of being placed in separate bank accounts, the clients' money was used to fund ongoing expenses of the Interbank Group, the Herndon company he headed. The admission came during a daylong court session marked by the unusual.

ALEXANDRIA, Va. - Two defendants accused of visa fraud were torpedoed by their own witness yesterday when he testified that he was shocked to learn that they had tapped client funds that were supposed to be kept in special accounts. "I blew my top," said Dale M. Schwartz, an Atlanta immigration lawyer, when asked what he did when he learned that clients' escrow accounts had been raided. He said he told a staff lawyer at the Interbank Group, a Herndon, Va., company run by defendants James F. O'Connor and James A. Geisler, that "she ought to quit and get out of there."