How Do You Wrap A Mortgage Payment With PITI? - Posted by Gary (CA)

Posted by John J. on February 24, 2001 at 09:03:21:

I have done several of those, Gary. When I sell the property I have the title company - who does the closing - call the mortgage company to find out the balance of the escrow account. Then the buyer pays me this amount and therefore will “own” the escrow account from then on. On the closing document we adjust the proration of insurance premiums - which are paid in advance - and property taxes - which are paid at the end of the year. The buyer each month pays me the P&I on my note as well as the exact escrow amount that the mortgage company charges. When the escrow amount gets adjusted I forward the statement to the buyer and adjust his payment accordingly. On notes where the payments are handled by an escrow services firm who collects the payments from the buyer and then pays the mortgage and sends me my portion, I send this firm the paper work and they notify the buyer of the new amount. In one case the mortgage company does not have an escrow account so I had the escrow firm set one up and collect/pay the T&I.

On occasion the escrow will have an overage and the mortgage company will send a check made out to the mortgage holder. Since this account is owned by the last buyer the mortgage holder will either endorse the check and forward it or cash it and write a check to the buyer. At closing I have the title company draw up an agreement covering all this, that everyone signs.

I keep the insurance policy in name of the mortgage holder and add everyone else as additional insureds.

At the end of the year I forward the annual escrow statement or other form from the mortgage company, indicating the exact property taxes and insurance paid, to the current owner for his records and income tax purposes.

How Do You Wrap A Mortgage Payment With PITI? - Posted by Gary (CA)

Posted by Gary (CA) on February 24, 2001 at 02:15:12:

Can’t figure out how to handle this logistically? I bought a house from a seller ‘subject to’ the 1st TD (inside a land trust). The lender collects property taxes and fire insurance in an impound account such that the mortage payment includes PITI. If I sell on a wrap…

  1. How does one handle the tax and insurance? Do you write the wrap to cover PITI and then tell buyer how much the principal, interest, tax and insurance are? Can the new buyer take the property tax deduction? Can you tell the lender that the trustee (me) will now pay tax and insurance separately and that the payment to them will now only be P & I?

  2. Does escrow know how to handle this situation cleanly without raising red flags to the lender?

  3. How do you clearly explain the process to the unsophisticated buyer?

It’d be so much easier if the taxes and insurance weren’t impounded.

Gary (CA)