New definition of an escrow account -- A piggy bank begging to be cracked open.

An article posted on the Baltimore Sun website offers a true example of a nightmare for any homeowner. Baltimore City and Baltimore County tax officials are acknowledging that property tax checks from American Home Mortgage that were meant to pay property taxes for their customers, are bouncing. The situation is so serious that Baltimore County is no longer accepting corporate checks written against the bank accounts of American Home Mortgage. All payments from them will have to come in the form of a certified check. Just as troubling in this report is a comment by a senior financial analyst from Bankrate.com that property tax checks are not even being sent.

Regardless of the financial situation faced by a homeowner in this day and age one thing any homeowner would expect is for the mortgage company to have maintained the funds necessary in the escrow account for each borrower. It appears that this has not happened. Unless American Home Mortgage has failed to deposit the funds given to them by the buyer into the escrow account, I simply can’t see a reason why these checks would bounce. There has been a suggestion that their escrow bank account has been frozen for protection while it undergoes Chapter 11 bankruptcy proceedings.

This also does not ring true with me. Unless the account was frozen out of concern that AHM would dip into this account to keep itself afloat or rob the coffers. So, where does this story stand? Has American Home Mortgage failed to live up to its side of the legal agreement it made with its customers by not depositing funds into their escrow accounts? Have the escrow accounts been frozen because there was withdrawal activity seen which set off red flags? Is it just a simple mistake?

All postulation aside the most troubling story behind this is that if the property taxes are not paid by American Home Mortgage the homeowners will be the fall guys. The taxes will still be due and if they are not paid by AHM the homeowner will be hit with a late payment penalty and if they can’t pay that bill their property can be put up for auction at a tax sale.

Imagine you’ve paid your mortgage payments and you are just holding on and keeping your head above water and this hits you. Or, just as horrible, the mortgage company doesn’t pay your homeowner’s insurance and you suffer a fire or, since the mortgage terms always state that you must maintain insurance, they cancel your insurance for non-payment and order you to pay for insurance on your own?

The scandals involved with the housing conspiracy continue to deepen. Coming up in the mix…insurance companies get shafted and lay off employees, lose their income stream and fail. Also in the pike are stories about the “winners” in this conspiracy, the financial institutions that gain control of large swaths of American property. Just beyond that, homelessness for former homeowners who can not find affordable rental property or cannot find an apartment leasing company that will rent an apartment to them because of their foreclosure. Down the road…vacant homes, American suburbia becomes a ghost town.