Impound Accounts

[Tech Dude_IHB]

The good faith estimate on my loan included an impound account. I have not had one in ten years and am quite able to put money aside and mailing it to the OC Accessor twice a year.



To me, all an impount account does is require me to bring more to the table at closing, THEN paying the extra amount each month with my loan. Seems to me I am tying up indefinitely thousands of dollars with the loan servicer when I can have those funds - still reserved - sitting in my own account to pay taxes. Then they have some hourly worker key punch and handle my taxes instead of me.



Other than those who cannot put money aside, can't keep track of bills, or have a very low equity to value loan, is there ANY reason to have an impound account?

 

[usctrojanman29_IHB]

[quote author="Tech Dude" date=1258348234]The good faith estimate on my loan included an impound account. I have not had one in ten years and am quite able to put money aside and mailing it to the OC Accessor twice a year.



To me, all an impount account does is require me to bring more to the table at closing, THEN paying the extra amount each month with my loan. Seems to me I am tying up indefinitely thousands of dollars with the loan servicer when I can have those funds - still reserved - sitting in my own account to pay taxes. Then they have some hourly worker key punch and handle my taxes instead of me.



Other than those who cannot put money aside, can't keep track of bills, or have a very low equity to value loan, is there ANY reason to have an impound account?</blockquote>
There's only 1 reason...many lenders will have lower pricing on the interest rate if a borrower has an impound account for property taxes and insurance (due to the decreased risk to the lender). That being said, if you put down more than 30% or 40% then there will probably not be any pricing benefit from the lender to have an impound account.

 

[tmare_IHB]

There is no reason to have an impound account if you put enough money down. I have dealt with far too many mistakes to ever want to deal with the bank anymore than I have to. Our property taxes were decreased last year, however the bank refused to reduce our payments for many months, holding all of my money until they decided to give it back. When I first bought my house, the supplemental bill was over 6K and even though the bank was holding far more than that, they said it was their policy not to pay supplemental bills, so I promptly canceled the impound account. I don't know about you, but I really don't have time to deal with that kind of crap. Just say no!

 

[Soylent Green Is People_IHB]

California loans do not have a price/rate benefit if you have an impound account. All rate sheets will say .25 for impound (N/A CA, WA..). If someone says you'll get a better deal with an impound account, they are simply not being straight forward about things.



Impound accounts can have issues, but out of the X million or so impound accounts out there you have to expect a problem rate with a few accounts. If your with a big servicing company you'll likely not see any issue. I'm not advocating or arguing against an impound account, but some perspective is needed.



The State of California mandates a 2% rate of return on your impound account. If you have $5,000 in your account your talking about a 1.0 percent rate differential - $50.00 - assuming you can manage your funds above a 2.0% rate of return in this market.



Since you cannot get better terms with an impound account, and since an impound account is an option when your loan to value is under 80% LTV (90% for some banks) impounds are a convenience issue and not much more.



My .02c



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