It’s very comforting to think that your bank is looking out for the customers. Or at least knows consumer laws and respects them. Wrong. I just had a rude awakening to the reality and saved almost $600 in the process.

I have a mortgage with a bank that shall remain unnamed (although, if they do something like this again, their name will be posted).  The mortgage is conventional in every sense of the word, with the escrow handled by the bank. Now, when somebody else pays your taxes and insurance you only get to know what was paid after the fact. This was not good enough for me, so I decided to trade convenience for control and contacted the bank to cancel my escrow. The reply I got was not too encouraging.

They said, that, not only the mortgage had to be in good standing, with no PMI and no overdues within the last 12 months, but also that I had to pay 1/4 of 1% of the outstanding premium to get out of the escrow, which came out to almost $600. Yes, they clearly had some vested interested in keeping my escrow and not letting it go.  I bet the interest they make on the padded balance of my escrow is a big part of it.

However, I remembered something from several years ago that peaked my interest at the time. There was a letter from the bank regarding the escrow account status that they were required by law to mail at the 5th anniversary. Hmm, I thought, what does that law say about the escrow fees….20 minutes of Googling produced a pointer to the Minnessota Statue  § 47.20, subdivision 9(g), that stated:

The mortgagee shall not charge a direct fee for the administration of the escrow account, nor shall the mortgagee charge a fee or other consideration for allowing the mortgagor to discontinue the escrow account.

Moreover, most other states have similar clauses in the laws regarding the lending authority of financial institutions. So, I challenged the bank  on this. The reply I got was just short of mindblowing:

 The escrow account will be canceled and the funds will be transferred to you. There will be no fees charged.

That’s it. No apologies, no acknowledgments. Just a statement of a fact. Not that I expected apologies, but, hey, the bank screwed up big time, it would’ve been at least appropriate to recognize the error. Anyhow, I got what I needed, saved a lot of money and got my lesson in bank’s care of customers. Talk about corporate greed.