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The law firm of Milberg LLP is investigating Sovereign Bank concerning possible violations of New York State law. According to our investigation, Sovereign Bank, in at least one occasion brought to our attention, has imposed a 0.25% service fee on mortgage accounts when customers do not also open an escrow account to escrow taxes. Our investigation gives us reason to believe that this may not have been an isolated incident.
Some mortgage loans require the creation of an escrow account to help borrowers gradually accrue money for taxes and premiums. Escrow accounts were introduced to avoid missed payments to the government and are ultimately used to prevent foreclosure on properties. Lenders, such as Sovereign Bank, often provide escrow services to borrowers along with mortgage loans, but the borrower may elect to establish an escrow with an alternate bank or pay the government directly.
Escrow accounts are similar to savings account, but borrowers are obligated to make monthly deposits as indicated in their loan documents. The payments accrue, with interest, and the mortgage lender becomes responsible for paying the homeowner’s property taxes and insurance premiums.
According to Milberg’s investigation, Sovereign Bank (and possibly other mortgage lenders) may be charging a 0.25% fee to borrowers who choose not to create an escrow account or select an outside institution for the services. This may be a violation of a New York State law that prohibits charging fees to borrowers who agree to pay taxes directly to the government instead of through escrow accounts. Provision § 254-d of New York’s Real Property Law provides:
No mortgagor on a loan secured primarily by an interest in real property shall be charged a fee by the mortgagee because the parties have agreed that the mortgagor shall pay real property taxes on such real property directly to the taxing authority or authorities and not in escrow to the mortgagee or the mortgagee’s agent.
Similar provisions exist in other states, including California, Minnesota, and Illinois.
If you believe you have been charged a service fee for choosing not to create an escrow account for taxes and would like more information regarding this investigation, please fill out the form on the right or contact the following attorney:
Andrei Rado, Esq.
Milberg LLP
One Pennsylvania Plaza, 49th Fl.
New York, NY 10119-0165
Phone number: (800) 320-5081
Email: arado@milberg.com
Milberg LLP has been representing defrauded consumers for more than four decades and serves as lead counsel in federal and state courts throughout the United States. Please visit the Milberg website for more information about the Firm.
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