As a result of our successful appeal efforts, and in reporting those assessment reductions to our clients, a common question we often receive is, “When will my monthly mortgage payment be adjusted to reflect the reduction in the property tax assessment?”
The standard procedure for lenders or mortgage companies is to review the homeowners’ escrow accounts once a year, after the tax bills issue, before making any adjustments. Therefore, for those who choose to send the administrative Decision letter showing the revision to your assessment from the Assessor and/or Board of Review, hoping to receive immediate relief in your monthly payment, your action would be ineffective and would not cause an immediate adjustment of your mortgage payment.
Jason Brodsky, Branch Manager of American Portfolio Mortgage Corporation, stated that lenders do an annual analysis of the escrow holding account and send notification to homeowners in the fourth quarter of the year (September or October). Illinois law allows lenders to hold only two months of cushion for real estate taxes.
If, after the issuance of the property tax bill(s), there are not enough funds being paid on a monthly basis to cover the principal and the real estate taxes, the lender raises your monthly escrow contributions. If there is a surplus, or future payments will exceed the two month cushion being paid from the monthly payments, then the lender lowers your monthly contributions or sends the homeowner (i.e. mortgagor) a refund if their escrow amount now exceeds the two month cushion after the real estate tax reduction.