LEXINGTON, Ky. (LEX 18) — Certain homeowners across Fayette County may have noticed a much larger increase in their mortgage payments recently. This likely has nothing to do with a big insurance premium increase, or interest rate adjustment, or higher property tax assessment.
“What happened is; in ‘22 and ‘23 we had two separate property tax bills in the same year,” said Fayette County Property Valuation Administrator, David O’Neill. “It happened because in both years they were tax rate increases that went above the 4% that a district is allowed to take without it being subject to a petition or recall,” he explained.
But that difference was only a few bucks in most cases, so the difference was added to a second bill later in the year, just ahead of the new year. That led to all kinds of confusion for the mortgage servicing companies.
“They get this (second bill), and they've got automated systems in place, I guess, that said (to them) this is what our annual tax liability is going to be, so we'll adjust the escrow payment down to cover these 11-dollar tax bills,” Mr. O’Neill said of what likely happened.
Many homeowners, as a result, either received a refund of escrow money, or a reduced monthly payment for a year or two. But now those companies are having to pay the normal property tax amount for the borrower who might now have insufficient funds in the escrow account.
“So, somebody who ordinally paid $1,000 a month in mortgage, they were adjusted down to $800. Then a year goes by, and the mortgage company gets the real tax bill, and so now they’re scrambling to get the money back into escrow. So, a $1,000 mortgage that went down to $800, is now $1,200,” O’Neill stated.
David said those types of refunds or large swings in either direction is a red flag, and worth a phone call to your lender. He also believes a homeowner who might now be struggling to make up this difference should call to see what, if anything, can be done to help alleviate the burden.
“Talk to your mortgage company, because I think they have a little bit of culpability here in allowing your escrow to do these wild swings,” he stated.
David said he’s hopeful of never having to do a second yearly bill again, no matter how small the amount, because this clearly caused a ton of confusion on the lenders’ side of things.
“I don't think it was reasonable to expect the people who made that decision to foresee all of these consequences that resulted, but now we do know,” he said.
Mr. O’Neill did a nearly 30 minute videocast with Fayette County Clerk, Susan Lamb, most of which covered this topic in greater detail. To view that link, click here: The PVA & County Clerk Explain Tax Bill Issues - YouTube
