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Foreclosure is a horrible experience for most people; you and your family can lose your home.  Your credit score will be severely impacted; also your family will have to find a new place to live.  The loss of money in an escrow account might also happen.  Escrow accounts are special accounts that lenders use to pay with property taxes themselves.  In an escrow account, lenders gather a part of property taxes from homeowners as part of the mortgage payment, and they set this amount aside until the taxes come due.  The lender then pays the local government the property tax itself.  This is supposed to make the homeowner’s life easier because you won’t have to worry about saving for these bills as they are paid automaticall or texty with the mortgage.

The escrow agreement is created with the lender and the borrower agreeing that the homeowner will send more money with every monthly mortgage payment.  These funds are deposited into an escrow account by the lender; the reason this is done is to pay property taxes.  Property taxes are paid based a property’s value, a figure that can change from year to year based on assessment.  If a homeowner has bought a home with a mortgage, property taxes are owed on the home.  Homeowners facing foreclosure probably are wondering if they have to pay property taxes once foreclosure is finished.

If a foreclosure occurs but a homeowner manages to keep the house, either through a bankruptcy or other means, this escrow account may be closed, especially if the lender has been paid off or no longer has a claim on the property.  Lenders will usually utilize whatever dollars are left over to cover some of the losses that they incurred while foreclosing on your home.  In this case, paying property taxes is now the direct responsibility of the homeowner.

Foreclosure takes time, HUD (Housing and Urban Development) states that mortgage lenders generally start foreclosure three to six months after a homeowner stops making mortgage payments.  Generally in a foreclosure homeowners will miss many payments before the process beings; when homeowners miss mortgage payments, they also are not paying escrow as well.  It is rare to have an escrow account with a large balance.  Often the escrow account has a negative balance, which means there isn’t enough to cover the property taxes.

A foreclosure auction happens when a court sells the property to the highest bidder and pays the lender the debt due from the mortgage.  Essentially, possession of the property is given to the bidder.  Some auctions even use the actual title to the property and give it the buyer at once. When the bidder takes possession of the foreclosure, the duty to pay property taxes goes with it. The previous homeowner then doesn’t have an obligation to pay.

Lenders cannot sell a property repossessed through foreclosure if they have not also fully paid the property taxes.  As a result of this, lenders will try to take whatever money is in the former owner’s escrow account to cover the taxes.  If the funds from the escrow account are insufficient, lenders will pay out of pocket if they are interested in selling the home.  The exception to this is the rare case when there are leftover funds in the escrow account; don’t expect to get this money.  Lenders will simply use it to repay part of the portion of the former homeowner’s mortgage debt.

If you are facing the prospect of foreclosure and have questions concerning the process, please contact a Connecticut foreclosure defense attorney like me to find out your legal rights and options.