- The Washington Times - Thursday, August 11, 2005

Q:I just sold and settled on my house in Maryland and have relocated to

Indiana. We signed the papers very quickly and now realize we have several questions. The settlement company has not been much help.

Can you answer the following questions?

• The payoff amount at settlement was higher than the amount on the payoff letter from the mortgage company. Why is that?

• My proceeds were reduced by $500 for the water/sewer bill, which is far more than what is owed. Will I get the balance returned?

• My proceeds were reduced to pay for real estate taxes from the beginning of the year through the settlement date, even though my tax payments are escrowed in the mortgage payment.

Any assistance will be greatly appreciated.

A: First, you should insist on speaking with a knowledgeable person at the settlement company. I haven’t seen your settlement statement and am unfamiliar with your file, so I’m unprepared to give you solid answers. However, I’ll certainly make some guesses as to where I think the problems lie.

The first question is easy to answer. When a mortgage company issues a payoff letter, the remaining balance is equal to the principal balance of the loan from the time of the last payment. If today is Aug. 12, your last mortgage payment should have been made on Aug. 1. Mortgage payments are made in arrears, which means your last payment covered July’s interest. Settlement on Aug. 12 would mean the loan isn’t paid off until that day. The settlement company is adding 12 days of interest to your payoff figure, making it higher.

The only thing I would surmise regarding your second question is that the settlement company has determined that your water bill covering some amount of time before the settlement date has not been paid. You are responsible for the water used until settlement, although $500 seems excessive.

Insist on a full explanation. My guess is that the settlement company will make the appropriate payment and return the balance to you.

Regarding your third question, the settlement company should have checked with the county to determine when the last tax payment was made by your lender. It then will charge you, the seller, the prorated taxes from the end of the last paid tax period through the settlement date. When your lender receives its payoff check, it should then forward you the escrow balance that represents collected, but unused, funds.

Speak with your settlement agent to confirm my answers.

Henry Savage is president of PMC Mortgage in Alexandria. Send e-mail to henrysavage@pmcmortgage.com.

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