Non-escrowed performing loan: do you force escrow after you buy, or watch the tax roll yourself?

48% payment increase on a borrower who has paid for six years would make me nervous enough to leave it alone. You'd be creating the exact event you're trying to insure against.

What does the tax and insurance monitoring cost through a servicer? If it's 8 or 12 dollars a month I don't understand why this is even a debate.

@kestrel it's usually cheap, the cost is that a report tells you about a lapse after it happened. A tax certificate pull might show a delinquency months after the due date depending on how the county reports, and that varies a lot county to county.

I look at raw land mostly and the tax angle is the one that actually bites. A tax lien can move ahead of a mortgage lien in a lot of states, and how the sale process works differs enough that I check the specific state before assuming I have time to cure.

I monitor, and I set the trigger before I buy so I'm not deciding under pressure. Tax delinquency of any amount, I advance and add it to the balance if the mortgage allows advances. Insurance lapse of more than 15 days, force placed, and I tell the borrower what force placed costs them so they have a reason to reinstate their own policy.

The part people skip is reading whether your mortgage actually gives you the right to advance and recover. Older seller-carried paper sometimes doesn't. @trellis, does yours?

Genuinely asking, when a note buyer forces escrow, whose money funds the shortfall in year one? If the tax bill comes due in four months and the escrow has only collected 1,240, does the servicer advance it and bill me?

@sable yes, generally the holder funds the advance and the servicer collects it back over time or adds it to the balance, subject to what the documents and applicable rules allow. Which is why forcing escrow isn't free even when the borrower absorbs the payment increase.

I'd leave a six year clean payer alone and spend the money on monitoring. The 310 escrow line is a real risk to the thing I actually bought, which is the payment stream.

From the outside this looks like the same question landlords have about whether to inspect. You either accept less information and a cooperative borrower, or you get more information and a worse relationship. I don't know which is right, I just recognize the shape.

So on a non-escrowed loan the borrower's insurance policy names the lender as mortgagee, and when the note is sold that has to be updated to me or my servicer, otherwise a claim check gets issued to whoever's still on the policy? I want to be sure I have that right. Is that automatic or does someone have to do it?

@juniper somebody has to do it, and it's the thing that gets forgotten. The servicer usually sends a mortgagee clause change to the carrier at boarding, but I'd confirm in writing that it went out and that the carrier accepted it. Same for the tax authority address so the delinquency notice reaches someone who cares.

@trellis, I'd monitor and leave the payment alone. Six years is a lot of evidence.