Big business – trying to become overwhelmingly bigger – have shown that they will rip off the American public. Sadly, they will do this in partnership with other institutions other financial, governmental and private institutions.
We have spent months looking into real estate taxes and the results make you realize how slanted to “the rich get richer” is this process of banks “escrowing” your taxes.. The end of that little ditty is “the rich get richer and the poor get poorer.” Problem with that is the poor are marketed to in ways to make them believe they are really doing very well, especially as compared to the poor in other countries. In fact, the machinery – the mechanism by which the rich get richer comes from the hard work and back breaking life lived by the poor. All the penny pinching most folks do would not have to be done if these little things in life were changed so the money of the middle class and the poor is kept by them and not “given” to those in the upper stratosphere of wealth.
Real estate taxes is a biggy.
The reason banks have become bullies and push people around as badly as they do can be traced directly back to real estate taxes. A mechanism used to make sure banks can use tens of billions of dollars of poor to middle class folks money to do whatever they choose and the banks and some other financial institutions benefit grandly because they pay nothing for the use of that money. Some of the money squandered by financial institutions in this last “fall out” came from your giving your real estate taxes to banks to use as they please – for free. They were way too wealthy to be careful – why should they, it wasn’t their hard-earned money. It was majorly your money given to banks to do with as they please returning nothing to you. We have not been able to find one bank that would give us anything “for free”. Everything banks offer comes with a high price tag to those to whom their “largesse” is offered. Some of the things they claim are “free” are the things which come with the highest price tags.
How does this happen?
When you take out a mortgage you are asked to escrow your real estate taxes – in other words – the bank will add a monthly charge to your mortgage-plus-interest due each month for the purpose of collecting and keeping your real estate taxes until they pay the city or other government entity which has determined that is what you owe. You make your payments to the bank monthly, they make their payments to the city every six months. Divide what you owe the governmental institution that collects real estate taxes into twelve and that is added to your monthly mortgage total. Just think of how you could live if you had that deal with the public. What a fantastic hedge fund you could create or other such investment vehicle – or you could just squander it all on nothing.
In addition, banks have other ways to force the issue.
One cute way is to wait until after the mortgage closes – with nothing said to you about real estate taxes and then the bank will surprise you when you receive statements including, adding in, additions to your mortgage. That would be mortgage-plus interest – plus 1/12th your real estate tax bill. Complain and several possibilities come into play – you are told ‘if you show us you can handle the two bills then in three to six months you can pay your own real estate taxes.’ Until then you have to pay your real estate taxes to us each month in addition to your mortgage plus interest. What do you get from the bank in return? An amount of interest equivalent to what you would receive if you had that money in a savings account, stock account, other account you may have? – not on your life. You get nothing.
But – you were investigated and went through a whole process during which the bank determined you qualified for the mortgage. They look at your income compared to the expenses you will incur with your new mortgage so you already qualified and should not have to “prove” anything.
Another thing said to people – Sorry, we must have had a misunderstanding. We escrow real estate taxes for everyone. You are not an exception. We did talk about that with you – no they didn’t – and, they then claim, ” you must not have understood.”
Why do banks play these games?
It brings them billions of dollars into the bank for their use – free. It is what allows them to bully you and the rest of the world in other ways.
We urge you to pay your own real estate taxes. Do whatever you have to do so you control the payment of those real estate taxes.
How do they work with real estate taxes in other ways?
Your city or whatever agency set real estate taxes in place, determines how much you pay for real estate taxes. They also put in place ways to help those who are having problems so they don’t loose their homes. They pass such through their City Council or other relevant agency and the bank counters and makes sure that is in name only – not a reality anyone can actually use when they need that kind of help.
One way many cities are working to help the elderly stay in their homes is by allowing people who are 65 or 75, or whatever age the city determines, to be able to apply to have their taxes deferred. There are also tax deferrals given to citizens, not yet at the required age for the elderly, based on other needs. You accumulate interest on the amounts deferred and when you die or sell the house the city is repaid including interest and the elderly person has had some breathing room and has been able to make decisions they could not make otherwise. One very large decision is that such a policy allows the elderly and others to stay in their homes. That also lifts some major expenses from the city which otherwise would probably have to subsidize housing for people in these situations were this not possible.
At least that is how it is supposed to work – in theory.
In actual fact, it does not work like that. We contacted several cities and discovered they had practically no elderly people with deferred real estate taxes. Why? Because the banks decided they would not go along with such a program and denied the person the right the city granted. Since cities have written an ‘escape’ clause into such programs – the bank power is what determines if those programs are viable or not.
The escape clauses, which are 100% active in such programs, says you can defer your taxes if your bank agrees to such a deferral – and they know full well when they come through with such a statement the bank will not agree to the deferral no matter how much equity an elderly person has in their home. – It is clear this is a game and not a real attempt to help the elderly and others bridge a time of life when they need such help.
There are many such ways games are being played while the city looks good to its elderly citizens and passes the buck to the bank. Banks are happy to go along with that program. They receive billions for their effort.
What to do: To pay your real estate taxes you have many options, especially if you need to put money aside monthly so you will have what you need when the time comes to pay the taxes. You can open a stock account with one of the online brokerage firms and put the amount into that account. Put so much in each month – or every other month – whichever best suits your finances. You can open a savings account, with a bank or credit union or, and put in whatever you need over a monthly or bi-monthly or what works best for you based on the time interval over which you receive your income. With an online brokerage, a savings account, a credit union account or whatever you choose, you can send your taxes to the city electronically or you can transfer the money to your checking account and pay the city by check. You have untold options on how to handle this.
Even if it turns out you will not make huge amounts of money – at least it is your money and you are receiving whatever earnings come from the use of your money. When you control your money you have a kind of power that helps to keep you financially viable in this society.
You need to always keep tight control of your money. Do not let anyone automatically transfer money from your account. At some point that will go against you and you will feel the helplessness of not being able to do anything about whatever is being done to you and such things happen lots – by accident – on purpose – by theft.
Laws are not going to mitigate what the banks are doing. You need to do that by paying your real estate taxes to the entity which determined you have to pay so much to them to own a house. There are problems with that, but this blog is focused on you controlling your money and paying to the entities you need to pay to when you need to pay to them and not otherwise allowing other institutions to come in, take over your money, use it for free for whatever they so choose and leave you minus what you could have if you kept control of those functions.
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