At closing double-check the bank's math

We refinanced our mortgage last year. Somehow our bank failed to include our school taxes into our monthly payments. They did include the county tax portion of our property taxes, but not the part we pay for schools.

We did not realize this, as we pay online, and no longer get a paper statement. Even looking at the online statement, we did not notice that they were not escrowing for it.

This went on for an entire year before it was brought to our attention after they paid our property taxes for the year. The bank never said anything about a low escrow balance or anything that could have given us a clue.

We have always had good credit, but still it took six months to get our loan approved. We sent them all sorts of paperwork, including information about our property taxes.

Now our payments have gone up quite a bit, as we have to pay them back the escrow shortage, and pay the increased amount that we should have been paying all along.

If I were in that line of work, I probably would have noticed the discrepancy in our paperwork at the time of settlement, but I am not knowledgeable in that area. We have had mortgages before, and never had a problem like this.

I feel I paid them for a professional service that was very inadequate. We have very good credit, and we could really have gone to any bank for this loan. We chose this bank, and they did not do a very good job. All they can say is, "Ooops, we made a mistake, sorry." Apparently the laws do not really hold them in anyway responsible.

Did I need to pay yet another professional to look over everything with a fine-tooth comb at settlement?

The only thing they will do is spread the shortage out over a few years. Somehow we have to come up with several hundred dollars more a month. This was not in our budget, and with four kids, it makes things very tight.

Are we wrong to expect them to do more? This problem stems from this bank, and an oversight on their part.

I'm a little confused. You said you gave the bank the amount of your property taxes and had to provide them with a lot of paperwork. When you sat with the loan officer and looked over your paperwork, you could have done a little bit of math -- like (multiplying the escrow amount times 12 -- to see if the amount you'd be paying was enough to cover last year's tax bill.

It sounds to me as though you didn't even look at the documents you signed -- and that's on you, not the bank.

Regardless, you are entirely responsible for your property taxes, not the bank. Yes, you pay them to escrow the taxes, but if they didn't pay them, you'd still owe that money or you might lose your house in a tax sale.

You seem to suggest that since the bank made a mistake, they should pay thousands of dollars of extra property taxes. It doesn't work that way. I asked several real estate attorneys, and they all said that, by allowing you to make up the difference over several years, the bank is trying to make it up to you.

But they aren't going to eat the difference. You're going to have to figure out how to make that work.

So, let's talk about your budget, which surely you thought about before you decided to buy this property. I'm at a loss to understand how your budget was so tight that you can't afford the property taxes you should have known you'd be paying.

Property taxes only go one way: up. And, you need to have some cash set aside to pay for maintenance and upkeep of the house. What happens is something goes wrong at your house and has to be fixed or replaced?

It sounds to me as though you might have bought a house that's too expensive for your budget. If that's the case, you should think about selling or find a way to bring a little extra cash into your household each month, or cut way back on your expenses. By tightening your belt, you should be able to find an extra $100 to $200 in your budget each month.

Update: After responding to this homeowner, she emailed me back to say that after she and her husband got through with the closing, they thought they had several hundred dollars extra each month in their budget. So, they went out and bought a new van. She said that even though her old car was on the verge of going, she would have tried to make it last another year or two. She is going to work on finding other places to save in her budget.

(Ilyce R. Glink's latest book is "Buy, Close, Move In!" If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. Contact Ilyce through her Web site, www.thinkglink.com.)

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