The banks love escrow fees: so much that they may not be using them to pay insurance carriers

The banks and servicers love those escrow fees....seems like they must make some money off of all the escrows that sit in accounts for an entire year or 6 months before payment. I am assuming banks have figured out a way to profit from the escrows, since many loans are approved only if the borrower agrees to escrow for taxes and insurance.

Evidence has come out that banks and servicers are not paying the insurance bills and taxes in a timely manner even if the borrowers are up to date with there payments.  This could be a sign of significant cash flow problems.  The banks are hiding the truth about the situation and refusing to help the recovery by insisting they get paid 2 or 3 times over when it comes to mortgages.  They have had one bailout, but the possibility of  another bailout is not out of the question. 

The idea of not paying insurance on property is just a flying red flag that something is very wrong in the mortgage and housing industry.  The banks would never allow a home to go uninsured for any length of time because they were protecting their investment.  The property was their savior and if their was a fire and the home destroyed, the banks would insist on being paid off first from the insurance. 

Invisible Bankers: Everything the Insurance Industry Never Wanted You To Know


Now they are getting a taste of what it is like to be underwater.  If the home is not any where near worth the value of the mortgage there is much less incentive to care about insurance on the property.  There will soon be major issues regarding insurance payments and appraisals if we keep heading downward with home prices.  Read more here regarding the next shoe to drop in housing. 

This may be a sign of cash flow problems but it may also just be more evidence at their willingness (the banks)to break their own agreement that says they will pay the taxes and insurance when due. Seems like it is another case of following laws only when they benefit the banks.