Tax collector in Hilltown solving payment mystery: It appears lender who bought mortgages did not pay property taxes.

Allentown Morning Call
December 12, 2001
Hilltown Township Tax Collector Alice Kachline is spending untold hours unraveling a mix-up triggered when at least one lender bought billions in mortgages from a bank, then neglected to pay some homeowners' property tax from escrow accounts.

Kachline said she's whittled down a list of unpaid properties from nearly 100 to 20 or 25 by contacting Wells Fargo Home Mortgage officials and other lenders that manage homeowner's escrow accounts.

Yet Kachline said she won't breathe easily until she resolves all tax bills that are still outstanding.

"I'm going to spend all of Christmas week calling people myself unless this is straightened out soon," Kachline said Tuesday, less than 24 hours after she alerted township supervisors of the problem. "I don't want to lien taxpayers who shouldn't be liened Someone dropped the ball on this somewhere down the line."

Although the details of the mix-up are still surfacing, it appears as if at least part of the problem arose when the large residential lender Wells Fargo Home Mortgage purchased billions of mortgages from First Union Corp.

At least one other lender -- Washington Mutual Inc. -- also may be involved, Kachline said, although that could not be confirmed with Washington Mutual officials.

As she sorted through the unpaid property tax bills this week, Kachline urged taxpayers in the township of 12,000 to call her office and check whether their bills are paid.

Tax bills are due by the end of this week, although Kachline said she would probably give a grace period of one to two days and extend the deadline into early next week.

Sifting through Hilltown's property tax accounts, Kachline discovered that some homeowners with escrow accounts who had been religious about paying bills in the past had not paid this year. Soon, she suspected that lenders -- which hold money in escrow to pay property taxes and homeowner's insurance -- hadn't paid the tax bills.

"I've been tax collector for eight years and I've never seen anything like this before," Kachline said.

" I think it's just sloppiness at this point," she added. "It certainly doesn't behoove any lender to do this, because it is the one that has to pay the penalties."

Escrow accounts are usually created when homeowners close their mortgage loans, according to information on Wells Fargo's Web site. The lender holds the account to pay recurring bills such as property taxes and homeowner's insurance. Many lenders and banks, Kachline said, insist on escrow accounts to ensure that insurance and property taxes are paid.

Kachline has spent a good share of her time working with Wells Fargo officials to solve the problem, which was probably an oversight on Wells Fargo's part, said Dan Frahm, a spokesman for Wells Fargo Home Mortgage in Des Moines, Iowa.

In September 2000, Wells Fargo bought $35.7 billion in mortgages - - in a deal that represented 400,000 homeowners -- from First Union Corp., Frahm said.

Frahm said his company has been alerted to a similar problem in a handful of counties in South Dakota, and is now researching the Hilltown incidents. He could not say how many property tax bills have not been paid in either Bucks County or South Dakota.

"It's not uncommon, unfortunately, for customers to learn that their property taxes have not been paid from escrow," Frahm said. "Unfortunately, there are periodic mistakes. We will correct any errors to the complete satisfaction of our customers and we'll absorb any penalties."

Bucks County homeowners can call a toll-free Wells Fargo hotline - - 800-288-3212 -- if they have questions about unpaid property taxes, Frahm said.

The potential for mistakes has increased in the last two decades because more and more lenders are selling mortgages to other financial institutions or contracting with outside companies to service the accounts, the president of a national consumers group said Tuesday.

"Most lenders do pay [property tax bills] but a lot of them use outside service companies to service and monitor the tax bills," said Richard Roll, president of the American Homeowners Association, a consumer group that helps homeowners protect and maintain their homes.

With the trend toward consolidation, there's always a chance that a homeowner's mortgage will be sold to a lender or service company that's less careful than the previous lender or service company, Roll said.

With interest rates low, lenders scrambling to buy and sell mortgages are "operating at capacity," added Bruce Watterson, director in the financial advisory services practices group at PricewaterhouseCoopers of New York, which helps corporations solve business problems. "Service transfers are particularly difficult. Both sides could be acting in good faith" and yet one or both could make an innocent mistake, he added.

Wells Fargo and First Union are "two of the largest players in the marketplace," Watterson said. "Both have been through mergers and acquisitions. Both have to adapt to new equipment and systems."

As a precaution, homeowners should always check with their township or borough at the time when property taxes are due, Roll said.

"It's a good idea to do a spot check," he said.

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