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This Is Important

One of the most important financial decisions that we make in a lifetime is the purchase or refinance of a home or other real property. While most all of us understand the benefits of car, life or health Insurance, title insurance is something that is rarely given much thought prior to sitting down at the closing table with an escrow officer or attorney. A title insurance policy insures that there will not be any unpaid claims or interests tied to the newly purchased property. The American Land Title Association reports that more than 30 percent of all real estate transactions have a defect in title, and while there are many ways that the title to our property can be compromised, delinquent property taxes remain one of the most problematic and costly.

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Imagine purchasing the home of your dreams, only to find out that the previous owner had failed to pay the taxes on that property for the last several years. Those taxes have inadvertently become your responsibility, as they are tied to the property. Your recourse as the new owner would be to contact the title company that issued the title policy and file a claim. In the vast majority of these cases, the insuring title company defers to the tax certificate which can provide full or partial indemnity in the case of unknown or unpaid property taxes, penalties and interest, or tax liens.

During the last 30 years, tax certificates have become an integral part of the escrow closing process as title companies have looked to third-party vendors that manage this potential liability. Through well-defined risk assessment, turning this task over to property tax experts makes all the sense in the world.

So, what is a tax certificate?

A tax certificate is a fully or partially indemnified document that reflects the current status of property taxes, penalties, interest, and any other affiliated costs due on a designated property legal description. It also provides up-to-date ownership and address information, assessed values, tax rates, exemption status, and, most importantly, any delinquencies. Additionally, a tax certificate identifies all collecting entities and their contact information allowing for quick and easy disbursement. A tax certificate does not constitute a report on the status of title, mineral interest’s taxes or leases, personal property taxes or other forms of non-ad valorem taxes.

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Tax certificates provide another level of protection to the borrower, the title company/agent and ultimately the underwriter who is insuring the transaction. In the case of tax delinquencies or liens, a sound tax certificate provides a safety net for the buyer. Generally provided by companies that specialize in property tax research, the information is vetted by professionals who have a clear understanding of taxing authority requirements and property characteristics. Hidden delinquencies, rogue property splits, special districts and agricultural rollback liabilities all play a big part in the everyday world of tax service. For a title insurer with so much at stake, the smart and obvious play is to reduce liability by employing a tax service to assume the risk.

Gathering reliable information

What was originally a completely manual process has evolved greatly over the years. While there are still some aspects of tax research that require a hands-on approach, the vast majority of tax research is now automated. The most common method of data aggregation requires the periodic purchase of assessor/appraisal tax rolls. Depending on the tax service’s requirements and the designated tax cycle, these rolls might be purchased weekly, bi-weekly, monthly or quarterly. This method has shown to be for the most part, efficient and reliable. The most common complaint regarding the roll-purchasing method is that even when obtaining rolls on a weekly, basis there can be a time gap in the information which could result in delayed or inaccurate results.

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Another method is “real-time” fulfillment. Through technological advancements, real-time research is emerging as the go-to solution in tax service fulfillment. This method provides up-to-date results with no time lag. The information is retrieved through automation at the time of order and reflects all current and delinquent taxes along with the most current appraisal account information. This provides the title company a true snapshot of the property status, effectively reducing the number of “updates” needed prior to closing by the escrow team. Real-time is especially effective during the current tax cycle, when tax bills are sent out by the assessor. It is during this frenetic time when tax payments are being received by the collector on an almost minute by minute basis. While a week old purchased roll cannot reflect the payment status, real time results can report this information up-to-the minute, once posted. The most common complaint regarding real-time fulfillment is the current limited availability in smaller, rural counties.

Tax certificates are in most cases ordered by the title company/agent at the beginning of the title examination process. Whether through escrow software automation or a stand-alone platform, the order is submitted directly to the contracted tax service. Depending upon the complexity of the research required on the subject property, the tax certificate can be returned within minutes or in some cases it could take several days to complete the examination. These cases are rare; tax certificate requests are almost always fulfilled prior to the completion of the title work.

In most states, tax certificates can be considered a pass-through cost on the closing disclosure. This passes on the fee to the seller if a purchase, and the borrower if refinance, and is inclusive in the total closing costs. Comparative to other closing preparatory items, a tax certificate is moderately priced considering the risk associated with property taxes

What happens if there’s an error on the tax certificate?

Chasing down property tax information can appear very simplistic, and in the vast majority of cases it is. However, it’s that other small percentage of orders that can morph into a serious issue before, during, or after the closing process. No matter how thorough or complete the research is errors still may occur. Depending upon the warranties represented in the agreement between the tax service and the title provider, the tax service can be liable for the missed taxes, penalties and interest, and any tax suit costs that may apply.

Title servicers understand these risks and rely on the tax service professionals to research, identify and report any threats to the transaction. Like many challenges that emerge during a title search, a property tax issue can effectively bring a transaction to its knees. Ultimately, the tax certificate provides a simple, common-sense solution for all parties involved in the transaction, and more importantly, peace of mind.

About The Author

Chris Flynn
Chris Flynn is the president of APG, a division of LERETA. Flynn joined APG in 2014 with more than 30 years of real estate tax/title industry leadership, computer software expertise and management experience to his role with the company. Flynn focuses on strategy, leadership, innovation and excels in customer relationships and retention. A former President’s Award winner, Flynn has been a long-time member of Texas Land Title Association.

Preserving The American Dream Through Proper Property Tax Collection Procedures

Tax servicing companies are tasked with achieving customer satisfaction by processing property tax payments in a timely and accurate manner on behalf of their respective lenders. As a tax service company, we must also consider that customer satisfaction extends far beyond merely achieving (or exceeding) our lenders’ expectations. We also have another client’s interest and satisfaction concurrently at stake; namely, the borrower.

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The American Dream was founded on the notion that any hard working American family could one day own their very own slice of the land of the free and the home of the brave. Many Americans, nationwide, learned just how desperate holding onto that dream had become after as many as 10 million homes were lost due to the housing crisis in 2008.

While tax service companies do not maintain control of the timely remittance of mortgage payments, they do oversee and control property tax payments, which, when left unpaid, can ultimately result in property loss. Paying all property taxes in a timely manner is therefore of the upmost concern. The implementation of key tax procurement check points along with establishing processing prioritization methods are two approaches in maintaining the security of the American home. Servicers should either choose to implement these methods or make sure they partner with a company that does.

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Procurement Check Points

In order to succeed in obtaining an accurate property tax status, procurement processors must be trained to ask the appropriate questions when working with tax collecting authorities. We find that patience and professionalism are two necessary tools to apply in order to help expedite the tax procurement process. We must understand that tax collectors are busy, especially during peak cycles, and so gathering the appropriate information in a succinct single attempt is both the goal of the procurement specialist as well as the tax collector. Of the many necessary questions asked, we must be sure to determine the appropriate check remit type, whether or not an original bill is required with payment, if a duplicate bill fee is required, whom the check is to be made payable to, whether or not the funds have been turned over to a third party, and who (or what entity) paid the last delinquency of record. While many agencies establish web sites that contain delinquent property tax data, should a processor identify a critically delinquent parcel, it behooves us, as a tax service company, to reach out to the tax office in order to verify that their web site contains all relevant payment details.

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Prioritization Methodology

Each state and tax jurisdiction establishes guidelines in determining how long a property tax can remain unpaid before tax sale, foreclosure and property loss. These guidelines must be gathered and recorded for each of the more than 25,000 tax jurisdictions nationwide. The severity of the delinquencies identified, in terms of when said taxes must be redeemed before loss, are to be prioritized as they are over-laid against the tax agency’s established delinquency guidelines. For example, since a property can be lost within a 12-month period, once property taxes are sold at tax sale, in states such as Connecticut, District of Columbia, Maryland, Rhode Island, South Carolina and Vermont; it is vital to cure all delinquencies before foreclosure proceedings occur.

Without the appropriate understanding of the tax jurisdiction terminology, specific to the classification and severity of delinquencies identified, it is literally impossible to proceed. For example, a procurement processor must know and understand how to process a delinquency that has been sold in a tax lien sale. Since tax lien sales consist of the delinquent base tax amounts, accrued interest and additional costs associated with the sale, the procurement processor must be sure to obtain the complete pay off figures. A processor must also know that there is more than one type of foreclosure sale. For instance, foreclosures by judicial sale, more commonly known as judicial foreclosure, are available in every state. A judicial foreclosure involves the sale of the mortgaged property under the supervision of a court, with the proceeds going first to satisfy the mortgage; then other lien holders; and, finally, the mortgagor/borrower if any proceeds are left. It is important to note the type of foreclosure and status of said foreclosure before proceeding with payment. Therefore, procurement processors must be certain that they are picking up only property tax related charges and fees specific to the secured parcel of record.

These are just two examples whereby an appropriate level of expertise is required in order to understand, classify and prioritize the delinquent item. It is also important to establish a team of specialists that exclusively handles and processes property tax payments for properties that are at risk of loss. At risk property tax specialists must not only pay taxes in a timely manner, but they must also reach out to the tax jurisdiction to ensure that all necessary funds have been received and applied without any residual balances due. Noting the lender’s system at all points of the critical payment process, including the receipt of the delinquent tax payment itself, naturally provides a sense of satisfaction and security to lenders as well as our borrowers.

According to ATTOM Data Solutions, which has a large multi-sourced property database, during the last year, there has been a 23 percent reduction in property auctions, foreclosure filings, default notices and bank repossessions, which just so happens to be the lowest level since 2005. While there are undoubtedly multiple contributing factors involved in the aforementioned reduction, we believe that developing and maintaining proper prioritization and procurement strategies is a great way to do our part in helping to protect the American Dream.

About The Author

Marcus Balocca
Marcus Balocca, vice president, outsource current disbursement manager, has been at LERETA for the last five years of his 18 years in the mortgage servicing industry. In his tenure, he has managed a procurement department, call center, delinquency department and a mailroom. Balocca has worked on multiple servicing systems and currently manages a collective portfolio of more than 750,000 loans for LERETA.

Tax Certificates: They Are Still Important

One of the most important financial decisions that we make in a lifetime is the purchase or refinance of a home or other real property. While most all of us understand the benefits of car, life or health Insurance, title insurance is something that is rarely given much thought prior to sitting down at the closing table with an escrow officer or attorney. A title insurance policy insures that there will not be any unpaid claims or interests tied to the newly purchased property. The American Land Title Association reports that more than 30 percent of all real estate transactions have a defect in title, and while there are many ways that the title to our property can be compromised, delinquent property taxes remain one of the most problematic and costly.

Featured Sponsors:

 

 
Imagine purchasing the home of your dreams, only to find out that the previous owner had failed to pay the taxes on that property for the last several years. Those taxes have inadvertently become your responsibility, as they are tied to the property. Your recourse as the new owner would be to contact the title company that issued the title policy and file a claim. In the vast majority of these cases, the insuring title company defers to the tax certificate which can provide full or partial indemnity in the case of unknown or unpaid property taxes, penalties and interest, or tax liens.

During the last 30 years, tax certificates have become an integral part of the escrow closing process as title companies have looked to third-party vendors that manage this potential liability. Through well-defined risk assessment, turning this task over to property tax experts makes all the sense in the world.

So, what is a tax certificate?

A tax certificate is a fully or partially indemnified document that reflects the current status of property taxes, penalties, interest, and any other affiliated costs due on a designated property legal description. It also provides up-to-date ownership and address information, assessed values, tax rates, exemption status, and, most importantly, any delinquencies. Additionally, a tax certificate identifies all collecting entities and their contact information allowing for quick and easy disbursement. A tax certificate does not constitute a report on the status of title, mineral interest’s taxes or leases, personal property taxes or other forms of non-ad valorem taxes.

Featured Sponsors:

 
Tax certificates provide another level of protection to the borrower, the title company/agent and ultimately the underwriter who is insuring the transaction. In the case of tax delinquencies or liens, a sound tax certificate provides a safety net for the buyer. Generally provided by companies that specialize in property tax research, the information is vetted by professionals who have a clear understanding of taxing authority requirements and property characteristics. Hidden delinquencies, rogue property splits, special districts and agricultural rollback liabilities all play a big part in the everyday world of tax service. For a title insurer with so much at stake, the smart and obvious play is to reduce liability by employing a tax service to assume the risk.

Gathering reliable information

What was originally a completely manual process has evolved greatly over the years. While there are still some aspects of tax research that require a hands-on approach, the vast majority of tax research is now automated. The most common method of data aggregation requires the periodic purchase of assessor/appraisal tax rolls. Depending on the tax service’s requirements and the designated tax cycle, these rolls might be purchased weekly, bi-weekly, monthly or quarterly. This method has shown to be for the most part, efficient and reliable. The most common complaint regarding the roll-purchasing method is that even when obtaining rolls on a weekly, basis there can be a time gap in the information which could result in delayed or inaccurate results.

Featured Sponsors:

 
Another method is “real-time” fulfillment. Through technological advancements, real-time research is emerging as the go-to solution in tax service fulfillment. This method provides up-to-date results with no time lag. The information is retrieved through automation at the time of order and reflects all current and delinquent taxes along with the most current appraisal account information. This provides the title company a true snapshot of the property status, effectively reducing the number of “updates” needed prior to closing by the escrow team. Real-time is especially effective during the current tax cycle, when tax bills are sent out by the assessor. It is during this frenetic time when tax payments are being received by the collector on an almost minute by minute basis. While a week old purchased roll cannot reflect the payment status, real time results can report this information up-to-the minute, once posted. The most common complaint regarding real-time fulfillment is the current limited availability in smaller, rural counties.

Tax certificates are in most cases ordered by the title company/agent at the beginning of the title examination process. Whether through escrow software automation or a stand-alone platform, the order is submitted directly to the contracted tax service. Depending upon the complexity of the research required on the subject property, the tax certificate can be returned within minutes or in some cases it could take several days to complete the examination. These cases are rare; tax certificate requests are almost always fulfilled prior to the completion of the title work.

In most states, tax certificates can be considered a pass-through cost on the closing disclosure. This passes on the fee to the seller if a purchase, and the borrower if refinance, and is inclusive in the total closing costs. Comparative to other closing preparatory items, a tax certificate is moderately priced considering the risk associated with property taxes

What happens if there’s an error on the tax certificate?

Chasing down property tax information can appear very simplistic, and in the vast majority of cases it is. However, it’s that other small percentage of orders that can morph into a serious issue before, during, or after the closing process. No matter how thorough or complete the research is errors still may occur. Depending upon the warranties represented in the agreement between the tax service and the title provider, the tax service can be liable for the missed taxes, penalties and interest, and any tax suit costs that may apply.

Title servicers understand these risks and rely on the tax service professionals to research, identify and report any threats to the transaction. Like many challenges that emerge during a title search, a property tax issue can effectively bring a transaction to its knees. Ultimately, the tax certificate provides a simple, common-sense solution for all parties involved in the transaction, and more importantly, peace of mind.

About The Author

Chris Flynn
Chris Flynn is the president of APG, a division of LERETA. Flynn joined APG in 2014 with more than 30 years of real estate tax/title industry leadership, computer software expertise and management experience to his role with the company. Flynn focuses on strategy, leadership, innovation and excels in customer relationships and retention. A former President’s Award winner, Flynn has been a long-time member of Texas Land Title Association.

Get The Information You Need From Tax Agencies, When You Need It

Obtaining accurate information from the various taxing agencies can be, in itself, taxing. Each agency operates differently, with some handling real estate taxes from end-to-end, while others manage only a portion. When taxes become delinquent or go to tax sale for example, many agencies will send the bill to a third party to be collected. To further cloud the waters, the different agencies may also use their own specific terminology for what happened to the taxes or where to locate the appropriate information. However, servicers can help expedite and streamline the information gathering process.

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When trying to obtain accurate and current tax information, servicers should prepare and organize what information is needed before calling the agency. This will prevent wasted time for everyone involved. Also, keep in mind that most tax agencies are extremely busy around collection time and are less willing to work with companies if they call without adequate preparation or a clear understanding of what is needed. Some agencies can go so far as to block a company from calling again. When this happens, companies lose the ability to gather the required material and must go through other, less efficient routes such as mailing the request in or even making an in person visit to the agency.

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Streamline, Don’t Complicate

By being proactive and working closely with the taxing agencies, companies can prevent an information bottleneck and ensure that communication is being fostered. Most importantly, it ensures that the information obtained is correct and up-to-date. Here is what you do before contacting an agency:

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1.) Gather all tax information available, such as the parcel number, homeowner’s name and address.

2.) If possible, familiarize yourself with some of the specific agency’s terminology. For instance, some other common terms for “tax sales” are lien, tax title, tax taking, in rem, tax foreclosure, forfeiture, tax deed, certified sale, tax suit, upset sale, judicial sale. Its important to stay abreast of what an agency uses to prevent miscommunication.

3.) Perform any website searches first to see if it can help you in the information gathering process. Be prepared to have information ready to validate with the tax office. When using a website, do not assume that all information is listed and up to date. It may be necessary to contact the tax office and ask:

>>Does the website provide delinquent tax and tax sale information? If the answer is no, you need to always call to verify delinquency/tax sale details.

>>If taxes are listed as paid, does the website provide the payers name? If the answer is no, you need to call to verify who paid the taxes.

>>How often is the website updated?

>>Are there other websites you should reference to obtain delinquent or tax sales information?

4.) Prepare a script to direct the conversation in order to get all the data needed in the most efficient manner. When calling an agency for the first time, open the conversation by being professional, positive and polite. If you can build a relationship with the person you speak to at the agency, it could result in help with future inquiries and a more streamlined process.

5.) Have questions prepared such as why are you calling and what you need from the agency? Try to stay away from stand-alone “yes” or “no” questions, and instead, ask leading questions for more detailed answers, such as:

>>Do you collect your delinquencies? If not, then you must get the name and phone number of the appropriate party to contact. If the agency does collect delinquencies, then the next question should be, “Are the taxes delinquent?” If you are told all taxes are paid, make certain to ask if taxes were paid at tax sale or by a third party.

>>Were taxes paid at tax sale?

If they were, then when were taxes sold?

Can we still redeem taxes?

When does the redemption period end?

What is the redemption amount?

6.) If time allows, and if the agency will comply, request that the agency send you a document that breaks out any amounts owed so that there is no room for error with the amounts being obtained.

There are a number of unique challenges when working with the different taxing agencies around the country, but understanding the organizational nuances and procedures can help to overcome these hurdles to ensure cooperation and success.

About The Authors

Louise Byrnes (left) and Shelley Lucas
(Left) Louise Byrnes, vendor manager, is responsible for the research of claims and lost properties at LERETA, a leading national real estate tax and flood service provider. (Right) Shelley Lucas, vice president, Tax Operations, has more than 25 years of industry experience. She currently oversees the management of agency and other proprietary information for LERETA, a leading national real estate tax and flood service provider.

LERETA University Offers Virtual Tax Service Training

LERETA, a national real estate tax and flood service provider, has created LERETA University, a web-based training platform to support and assist servicers in navigating in-depth tax servicing information.

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LERETA University is virtually led by instructors who assist servicers and their staff in real estate-specific tax servicing. Accessed through LERETAnet, the company’s existing hub and customer information portal, the LERETA University platform serves as an extension of on-site training and is focused on helping companies avoid risks that are caused by common mistakes and oversights. Inaccuracies in real estate tax servicing have the potential of costing servicers in penalties, interest and property loss not to mention having a negative effect on borrowers.

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“Training is particularly critical for staff in these roles due to the function’s inherent risk,” said Jonnine Eras, vice president of client relations at LERETA. “Tax servicing is an intricate and specialized function that requires employees to have thorough and specific knowledge. LERETA is in a position to share our resources to better equip our customers and their staff with knowledge, understanding and skill that can protect them against possible risk.”

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Since 1986, LERETA has provided a full suite of national real estate tax services for residential and commercial loans, including automated online research and certification, tax bill processing, a suite of delinquent tax services and customized tax outsourcing service programs. In addition, LERETA provides real-time flood zone determination services that include flexible levels of service based on customers’ needs.

“Sharing our resources in this area is just another way that LERETA is redefining what tax service means and what servicers should expect from their partners,” John Walsh, CEO of LERETA, added. “Our innovative technologies and dedicated team of real estate tax and flood service professionals provide our customers with the service and ongoing support they need to succeed.”

Progress In Lending
The Place For Thought Leaders And Visionaries

Vendor Launches Comprehensive Additional Parcel Search Solution

LERETA, a national real estate tax and flood service provider, has launched its Additional Parcel Search Solution, a proprietary new solution that materially improves identification of additional parcels at the initiation of tax service. This solution reduces portfolio risk associated with penalties and interest and potential loss at tax sale.

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One of the biggest challenges in tax service has been identifying additional parcels associated with an address without going through the expense of using a legal description on every loan. Missing parcels when a property is set-up for tax service exposes the servicer to both potential losses from penalties, interest and lost properties as well as borrower dissatisfaction. Despite the importance of identifying additional parcels, the industry has relied on the same tools and methodologies for decades.

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“Over the past 30 years, mortgage servicers have had to rely on virtually the same tax service solutions without significant enhancement or product innovation,” said John Walsh, CEO of LERETA. “LERETA has been aggressively working on methods to reinvent tax service technology and processes. Additional Parcel Search Solution is just one initiative in that agenda, and it’s an important solution that can reduce servicers’ financial risk and increase borrower satisfaction.”

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LERETA recently ran a test for a top five servicer that included a subset of approximately 16,000 loans that had been parceled by another tax service vendor. LERETA’s Additional Parcel Search Solution found 11 properties that had previously been unidentified. Although 11 loans is only 0.1 percent of 16,000, it does represent $2.4 million of potential losses or 10 basis points of MSR value.

“We understand the importance of identifying these parcels and the difficulties created from the inability to discover them,” Walsh explained. “This is an area in the tax service landscape that needed an injection of innovation, and we are proud to provide a solution that can bolster tax service and provide servicers materially better solutions.”

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Tax Line Audits: The Benefits To Servicing Operations

Industry professionals still cringe a bit when they hear the word audit. However, that should not be the case with a tax line audit. This is an audit that can not only save in fees but time as well as improve customer service.

A tax line audit reviews of all tax line data elements that could affect the timely payment of real estate taxes or a correct escrow analysis. This audit should be completed 60 days before the real estate tax cycle begins. Since servicers are required to complete an annual escrow analysis on all loans in their portfolio, it is crucial to ensure that the data used to complete the analysis is accurate. The aforementioned is just one of the many benefits of auditing tax line data.

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The annual escrow analysis is a calculation required under Real Estate Settlement Procedures Act (RESPA) and determines whether the escrow account is in balance and if the borrower needs to pay more money to make up a shortage or if the lender has collected too much money and the borrower is entitled to a refund. If the tax data reviewed within this analysis process is incorrect, the monthly payment information provided to the homeowner will be incorrect causing overage or shortage conditions in future escrow analysis.

Servicers over time have experienced an increase in calls related to the escrow analysis and the subsequent increase or decrease in the homeowner’s monthly payment. Most often the tax payment made from the homeowner’s escrow account is the cause of concern. Completing a tax line audit annually will provide the answers to those difficult questions related to real estate taxes paid from the homeowner’s escrow account. The questions from the homeowner could now be resolved with only one call.

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The three key tax line identifiers that require the most attention and have the most impact on the tax paying process are the payee information (including where the homeowner’s tax payments are sent), the due date and frequency of the real estate tax payments and the tax amounts. All of these factors affect a true and accurate escrow analysis.

Payee – The U.S. has more than 25,000 tax agencies collecting real estate taxes for homeowners’ properties. These agencies, at times, will relocate changing where tax payments should be sent. The address information has to be audited annually to keep the lender’s records accurate to ensure future timely real estate tax payments.

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Payment due date and frequency – Tax collecting entities can change the due date and/or frequency of real estate tax payments that they expect to receive during a calendar year. The homeowner’s data also has to be updated to properly calculate the monthly collection of taxes during the annual escrow analysis.
Tax Amount – The annual real estate tax amount is the last vital field that will also require review to determine if there has been an increase or reduction in the amount of taxes the homeowner is responsible for paying. This amount could be affected by a homeowner’s exemption status or a reassessment by the real estate tax agency.

Although servicers will not see an immediate change from completing a tax line audit, the savings will show up during year two of implementing the audit process. Servicers will experience a reduction in customer service inquiries related to real estate taxes, as well as a reduction in staffing for the processing of real estate tax payments due to fewer exceptions during a tax payment cycle and the penalty loss liability will also lessen because of timely and accurate real estate tax payments. The additional work related to completing a new escrow analysis or repaying a tax payment that was incorrectly processed will also significantly diminish.

While this is one of the last operational changes that most servicers implement, there are substantial financial benefits and an overall improvement in customer satisfaction. It proves to be a win for the servicers as well as the customers.

About The Author

Dionne McBride
Dionne McBride has more than 20 years of service with LERETA working in various departments from training, tax operations and customer service. In her current position, which she has had for four years, is responsible for performing audits using the lender’s tax line data and completing a comparison to our tax tables to identify exceptions. The conversion/acquisition function takes on the responsibility of bringing on large acquisitions for lenders and integrating the new loans into their existing portfolio to begin tax servicing. She can be reached at dmcbride@lereta.com.

New LERETA Tax Information Identifies Habitually Delinquent Properties Nationwide

LERETA, a national real estate tax and flood service provider, has identified 167,112 parcels as habitually delinquent across 39 states nationwide. These findings are from the company’s most recent tax data analysis of its proprietary property tax database.

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The analysis includes 575 jurisdictions with an outstanding delinquency amount of $725,488,886. The average delinquency amount per parcel is $4,341.

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“Unpaid taxes as reflected by these parcel records can have serious ramifications and are subject to tax liens that may ultimately result in property loss,” said Terry Cason, data modeling analyst at LERETA. “The bottom line is, the mortgage lien is subordinate to a tax lien and places substantial risk on the mortgage holder. This is an area lenders should follow more closely.”

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In order to be considered habitual, a delinquent property must have 10 or more years of unpaid taxes recorded. Additionally, a delinquent review must be representative of an entire jurisdiction being analyzed in order to be included in the company’s analysis. Data made available between October 2015 and October 2016 were reviewed.

Since 1986, LERETA has provided the mortgage and insurance industries fast, accurate and complete access to property tax data and flood hazard status information across the U.S. LERETA’s services are designed to increase efficiency, reduce penalties and liabilities and improve processes for mortgage originators and servicers.

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Using Data To Confirm Facts

website-pdf-download

A recent LERETA study analyzed property tax bills across 33 states from January 2015 through April 2016 to determine which states and regions of the country had the highest property taxes. In total, LERETA reviewed 89 million parcel. In order to ensure a sufficient statistical review of the data, the existence of a minimum of 500,000 parcel records by state were required for that state to be included in the study. For analysis purposes, tax collection data were aggregated to the county level so that areas where tax collection is made at multiple levels could be accurately compared.

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LERETA studied 8.5 million parcels in the Northeast, 12 million in the Midwest, 42 million in the South and 26 million in the West. As depicted by the graphs, the data revealed that the Northeast region of the country has the highest property tax bill average at $4,991. The Western region had the second highest property tax average at $3,673 followed by the Midwest at $2,864 and the South at $2,267. The average tax bill across these regions was $3,026, and the total tax digest was close to $269 billion.

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The second graph shows a more detailed breakdown of the data by region, including the total number of parcels reviewed and the total number of exempt parcels. Also provided is a quartile grouping where tax data is segmented into four buckets to reflect the overall distribution of taxes. This is useful when analyzing the average bill amount to a specific distribution range. It also reflects how clustering in a specific quartile will affect that quartile’s position in the region. The table suggests that the average tax amount falls into a higher quartile based on the number of commercial and affluent residential properties “pulling” the average, and that the average is found in a lower quartile where the opposite is true.

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New York, largely due to commercial properties in the Manhattan area, and Connecticut had the highest billing averages at $11,482 and $6,794 respectively. California ranked third with an average of $5,156 and Minnesota was fourth highest at $4,022. According to the data, Alabama had the lowest average at $619 followed by Arkansas at $791 and Mississippi at $936.

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LERETA’s dataset will become more comprehensive as information is posted to its proprietary property tax database through the fourth quarter of 2016. This data is available at the state and jurisdiction levels as well.

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This information helps lenders accurately confirm average tax billing facts and be aware of how these averages compare and correlate with their individual portfolios. Summarized billing information is useful for measuring against a lender’s established footprint, and if needed as a means to collect data in its most efficient form as a service. The more data lenders are armed with, the more proficient they can be in serving borrowers.

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Progress In Lending
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Which Six States Have A Higher Than Average Delinquency Rate?

LERETA, a national real estate tax and flood service provider, found that six states had higher than average delinquency rates. New York was the highest at 11.5 percent delinquencies followed by Texas at 10.9 percent, Tennessee at 9.9 percent, North Carolina at 9.3 percent, Massachusetts at 9 percent and South Carolina at 8.2 percent.

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To be included in this review, a state must have at least one million parcel records available for analysis through LERETA’s proprietary property tax database. Also a delinquent review must be representative of an entire jurisdiction being analyzed. The company reviewed 59 million parcel records in 45 states with source dates ranging from October 2015 to October 2016.

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“It is important to understand that unpaid taxes as depicted by these delinquency rates are subject to tax liens against a property and may result in property loss,” said Terry Cason, data modeling analyst at LERETA. “The mortgage lien is subordinate to a tax lien and places risk on the mortgage holder, typically a lender.”

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The regional breakdown of this review consists of 6.5 million parcel records in the Northeast, 8 million in the Midwest, 36.5 million in the South and 8 million in the West. There were 13 states reviewed that have delinquency rates below the national average and they included: Florida, Georgia, New Jersey, Washington, Arizona, Michigan, Ohio, Minnesota, Oklahoma, Arkansas, Iowa, Maryland and Virginia.

“It is noteworthy to disclose that delinquent data is made more readily available from jurisdictions after the final installment of bill collection in that area,” Cason explained. “As such, a second analysis that will be performed at the end of the fourth quarter this year will offer additional data to compare against the baseline in this review.”

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.