Late Tax Bills Result in Higher Mortgage Payments for Some Taxpayers

Oak Park, Illinois –Cook County's second installment property tax bills will be about four months late this year. Instead of the typical late-June mail date with an August 1 due date, bills will likely be mailed at some time in November with a due date about thirty days later, at some time in December. The delay is the result of computer compatibility problems between the two county agencies that process tax appeals.

The late bills are having an unexpected impact on some Oak Park property owners who pay taxes through mortgage escrows. If those property owners were among the one in five homeowners who experienced double-digit annual tax increases as a result of the reassessment that impacted Oak Park tax bills last year, they may be experiencing excessive increases in their tax escrow payments this year.

Monthly escrow payments are determined by dividing a property's annual tax bill (the combined total of first and second installments from the same year) into twelve monthly payments. Put simply, a property with an annual bill of $12,000 should pay $1,000 per month into the escrow. But because second installment tax bills are late this year, mortgage companies do not yet know what this year's annual tax bill is and thus do not have the information needed to set the correct payment.

In the absence of this year's second installment bill, mortgage companies have instead been using last year's second installment bill when setting tax escrows, and pairing it with this year's first installment bill to estimate the annual tax bill. But in Cook County's tax system, estimating taxes by pairing bills from two different tax years often generates the wrong result. For mortgage holders whose properties had big tax increases last year, the incorrect estimates are resulting in escrow payments that are too high. (See attached chart.)

Is there any way to convince a mortgage company to reduce an overestimated tax escrow? Over the years I have talked to many mortgage companies on behalf of taxpayers and offer three suggestions for communicating with them. Of these suggestions, I have found that a mortgage company is most likely to accept the first suggestion and least likely to accept the last.

1. When the second installment bill comes out, compare it with the projected bill on the Escrow Account Disclosure Statement sent by your mortgage company. If the actual bill is lower than the projected bill, ask the company to ‘reanalyze the escrow' in light of the lower bill. This should result in a lower tax escrow payment.
2. If your mortgage company is mistakenly estimating a large tax increase, it may also assume that you have a 'shortage’ in your escrow and ask you to pay it over a twelve month period. Upon request, however, many mortgage companies allow customers to pay escrow shortages over twenty-four months instead of twelve. If the request is granted, this will cut the shortage portion of the escrow payment in half while doubling the time in which to pay it. If the mortgage company is overestimating the escrow, however, the shortage should be reduced or eliminated in less than twenty-four months.
3. Ask the mortgage company to calculate your tax escrow by taking last year's annual tax bill and increasing it by 5%. This will provide a more accurate estimate of this year's annual taxes than most mortgage companies are providing. Unfortunately, however, many mortgage companies insist on actual bills, not estimates, before changing their escrows.

Property taxes in Cook County are already pretty confusing, and the relationship between late tax bills and mortgage escrows can create even more confusion. But taxpayers who experienced double-digit tax increases last year are understandably concerned this year about mortgage escrow payments that reflect additional large tax increases. I hope this article sheds some light on why this is happening and provides taxpayers with strategies for talking to mortgage companies when their tax escrows are too high.

Taxpayers with more questions should feel free to call the Oak Park Township Assessor's office for additional help.

Release date: October 26, 2022