Property Tax Escrow Requirements On Mortgage Loans In The Commonwealth - Q4 1999By the Division of Banks
Division has no jurisdiction relative to federal statutes governing tax escrow. Therefore, it has no jurisdiction over the issue of a mortgage company informing a Massachusetts property owner that a federal law requires the company to escrow funds for payment of real estate tax bills.
On the state level Massachusetts General Laws chapter 167E, section 2, subsection B, paragraph 5 requires that state-chartered banks in the Commonwealth collect real estate tax escrow payments from borrowers if the amount of the loan exceeds 70% of the value of the real estate. A similar statute exists for state-chartered credit unions. However, there is no comparable statute governing the collection of real estate tax escrow by mortgage companies in this state. It is within the discretion of the mortgage company or their investors whether to collect escrow payments on a certain mortgage loan. Massachusetts General Laws chapter 183, section 61 does, however, require that all mortgagees who collect property tax escrow payments from borrowers on owner-occupied, 1-4 family properties in the Commonwealth must pay interest on these funds at a rate to be determined by the mortgagee.
( Note: See Chapter 19 of the Acts of 2000, effective May 3, 2000, amending chapter 167E, section 2, subsection B, paragraph 5 of the General Laws.)