DEAR BOB: Our home mortgage has one of those escrow impound accounts for payment of the property taxes and fire insurance. We have had this loan for two years and it has been a constant source of trouble.
The lender sends us a statement once a year setting the amount we must pay into the account. The form is so complicated neither my husband nor I can understand it. But the amount seemed reasonable, so we went along.
Then last month we received a letter stating there is a $562.34 deficit in our account that the lender wants us to pay immediately. But there is no way we can pay that amount all at once. Since the lender was doing the calculations, how can they be so wrong and what should we do? -- Paula W.
DEAR PAULA: Escrow impound accounts are rip-offs imposed on mortgage borrowers by lenders whohave no valid excuse for demanding lump-sum payments of account deficits caused by the lender.
Write to the lender explaining you can't pay that and you want to spread the repayment out over the next year. Be sure to emphasize the deficit was caused by the lender's error in miscalculating the escrow impound account monthly payment.
Unless you have a VA, FHA or private mortgage insurance mortgage, which require escrow impound accounts, it may be possible to cancel your escrow impound account. Many lenders will gladly do so even though these very profitable accounts are major headaches for lenders because of problems like yours.
If you have a conventional mortgage that does not require such an account, you may be able to cancel the account and pay your property taxes and fire insurance premiums directly.
DEAR BOB: Along with our monthly checking account statement, our bank sent us a simple application for a home equity loan. The bank will waive all fees for customers who set up a home equity loan account.
The bank will lend up to 80 percent of the home's value, minus the first mortgage balance. In our situation, that would mean a home equity credit line of almost $200,000 that will cost us nothing unless we borrow money by simply writing a check. This sounds too good to be true. What's the catch? -- Oscar W.
DEAR OSCAR: Read the fine print carefully. I presume this is an adjustable-rate home equity credit line. Be sure you understand the terms. The bank knows the chances are that sooner or later you will use all or part of that credit line and the bank will then profit from your borrowing.
I suggest you take the free home equity credit line. The time to borrow money is when you don't need it. If an emergency or an investment opportunity comes along, then you will be prepared.
DEAR BOB: We offered to buy a home and after haggling back and forth we finally reached agreement on the price and terms. One of the conditions we insisted on was getting a new mortgage for 80 percent of the sales price.
However, our agent has been unable to find us a mortgage for more than 75 percent of the price. We have had the house appraised by three lenders, but none will reveal their valuation to us. Do you think we paid too much? -- Richard W.
DEAR RICHARD: Perhaps. You should be thankful you put that contingency clause in your purchase offer. If the loan you want can't be obtained, you can cancel the sale and get your earnest money refunded.
But before you do that, I suggest you talk with the lenders to learn why they don't want to make you a loan for more than about 75 percent of the sales price. Perhaps the lenders think you paid too much. Or maybe your income is not sufficient to qualify for a larger loan. Be grateful for those free mortgage appraisals that might have saved you from making a costly mistake.
DEAR BOB: We made a $1,500 earnest money deposit to buy a house. The real estate agent is holding our deposit. Then my wife lost her job because of cutbacks at her company. Her prospects of finding a similar high-paying job are not very good.
I notified the agent to cancel the sale and refund our $1,500. But she refuses because, she says, the seller won't refund our money. What can we do to get our money back? -- Thomas K.
DEAR THOMAS: It sounds like you breached your contract to buy the house. Just because your wife lost her job doesn't make it impossible for you to buy the home.
Unless your purchase contract limits the seller's damages, called a liquidated damages clause, the seller might even sue you for damages caused by your breach of contract. For details, consult a local real estate attorney.
Readers with questions should write Robert J. Bruss directly at P.O. Box 280038, San Francisco, Calif. 94101.