Does that make it right? No. And is taking home a single pen from the office any less of an indiscretion, than spiriting home an entire box, or a few sheets of office paper vs. the whole carton? Of course not. But sadly, people do it—a few paper clips from the office, a fudged charge on their taxes, even taking a longer lunch or leaving early from the office.
Thus, you assume when you initiate a real estate transaction that all the charges, and amounts on the various documents presented to you at closing, are accurate.Not necessarily, according to Bob Perkins, a lawyer with Rose & Rose PC in Washington DC, who has been tracking this matter. The more likely scenario, he says, is that escrow agents acting on behalf of Title Insurance companies routinely 'guesstimate' the various recording charges on the HUD-1, claiming that it is almost impossible to determine the exact amounts.
To you, the buyer or seller, that seems like a reasonable assertion, does it not? Besides, you brain is overwhelmed by the entire process. You've been busy arranging financing, buying the furniture, picking the paint colors, planning for curtains. If it's a re-finance, you're figuring how all this is going to work against the budget, and how you're going to make that trip to The Grand Canyon happen. Fees? Hey, these guys are the experts; they know what they're doing. They say these are the charges, that's fine, where do I sign?
Here's the problem. If these are, indeed 'guesstimates' (which they most assuredly are), then you can bank on the fact that they have guessed higher, not lower. And once the actual charges are determined, and the actuals come in lower than the estimates, what happens to the surplus?
You guessed it. The overage stays with the Title Insurance company, and its agent(s).
Okay, so what if it's only five, or ten bucks? Well, you multiply that by the hundreds of thousands of real estate and refinance transaction every year, and those few dollars escalate to a very nice and un-earned payday.
And it might not just be five or ten bucks. Depending upon the size of the transaction, it could be $100 or more. That could be a hundred bucks in your pocket, not somebody else's.
It may not be as glamorous as, say, hucksters who falsify title at land registry offices, then register legal mortgages against a legal title, both of which were obtained under false pretenses, after which the perpetrator steals your house right out from under you. Real estate overage doesn't make for a good movie script. The fact remains, however, that it's dishonest.
And not without precedent. In 1991 the NatWest Home Mortgage Corporation of Manahawkin, NJ was accused of overcharging tax escrow accounts after James Cunningham of White Plains, New York was notified that the amount of his monthly mortgage payment set aside to pay taxes and insurance was being increased, in his case from $292 to $354 per month—an increase of 20 per cent. Cunningham, a train certified public accountant, could not figure out why the bank required the increase, given that neither his insurance, nor his taxes, had risen or were forecast to. The only thing that made sense, he said in a 1991 New York Times report, was to build up a cushion, invest the money and earn a profit from the float.
If anyone should have made any money off that float, it should have been Cunningham, not the bank.
In December of 1990 the attorneys general of six states sued General Motors Corporation's lending and servicing subsidiary, GMAC Mortgage Corporation, on grounds that it was padding its escrow accounts in violation of Federal and state laws.
The lesson here is that it can happen, and lawyer Bob Perkins believes that it does. He believes that exact recording charge amounts are easily obtained, but agents simply decide to avoid pursuing the exact figure, preferring instead to estimate—which allows them to estimate higher, and then pocket the overage against the actual fee. Most people won't notice, he says, and any who do question the validity are usually placated with the claim that exact amounts are difficult to obtain, and estimating is standard precise.
READ MORE LEGAL NEWS
Now, if you have only ever lived in one home, and you haven't been faced with the need to refinance, chances are you're out only a few dollars. However, many people will undertake several moves in their lifetime, and may have had to refinance several times above that number. For these consumers, the loss in real estate overcharges can be substantial.A class action lawsuit is being investigated, in an effort to recoup losses and damages incurred at the hands of unscrupulous Title Insurance companies and their escrow agents.
In the end, don't be afraid to ask a lot of questions. If the recording fee is, indeed just a guess (and always higher), then you should have the right to the difference.
If you don't get a straight answer, then you have the right to call a real estate overcharge lawyer.
