Check your escrow

Washington law lets certain homeowners pay less property tax, or none. The rules are in RCW 84.36.379 through 84.36.389. A veteran qualifies at a combined service connected rating of 40 percent or higher, or with a total disability rating for a service connected disability. People aged 61 and over can also qualify. Either way, combined disposable income has to fall under the thresholds the statute sets.

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You apply through your county assessor. If you qualify, the assessor reduces or removes the tax on your home. That is the whole of what the county does. The assessor does not contact your mortgage company, and no law makes them.

The exemption usually has to be renewed. Renewing keeps the county side correct. It does nothing at all to the mortgage side, and that is where this goes wrong.

Escrow is an account your mortgage company (the loan servicer) holds on your behalf. Each month it collects part of your property tax and insurance along with your loan payment, holds the money, and pays the tax bill when it comes due. Your monthly payment is the loan payment plus that escrow piece.

Once a year the servicer runs an escrow analysis. It estimates next year's tax, divides by twelve, and sets your monthly escrow amount. Federal law requires that analysis and sets out how it must be done, at 12 CFR 1024.17(c).

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The failure is simple. If the servicer's estimate uses the tax rate for a home with no exemption, it collects at that rate every month, even though the county is billing a lower amount or none at all. The money still leaves your account. Nothing about the county's grant reaches the escrow calculation on its own.

Two separate things can go wrong, and they are not the same problem:

• The exemption was granted and the servicer never applied it. The county reduced the bill. The escrow analysis kept the full number.
• The exemption lapsed and nobody said so. A renewal was missed and the tax went back up, which is a different failure with a different fix.

Keep them separate when you write anything down. Merging them into one number is how a real overcharge becomes arguable.

This is the part that costs families the most, because it feels like it should work. You renew with the assessor. The county record is correct. You check it and it is correct. And the payment does not change, because the escrow analysis is a separate calculation run by a separate company that was never told.

A homeowner can renew on time every year and be overcharged every year. Nothing they did was wrong. The county fix and the escrow fix are two different actions, and only the second one changes what you pay.

Say a home is taxed at $3,600 a year with no exemption. With the exemption granted, the county bills $600 a year.

Escrow at the exempt rate against escrow at the non-exempt rate, round numbers

What escrow should collect	What it collects if the exemption is ignored	Difference
$600 a year, $50 a month	$3,600 a year, $300 a month	$250 a month

At $250 a month, a year of it is $3,000. Two years is $6,000. That is money already paid, on top of the loan, by a household that qualified for the exemption and was granted it.

Then it compounds. A higher escrow draw can empty the account faster than expected, which the next analysis reads as a shortage. A shortage gets spread over the following year and the monthly payment rises again. Federal law sets out how shortages and surpluses must be handled, at 12 CFR 1024.17(f). A payment that keeps climbing for no reason the homeowner can see usually has an escrow analysis behind it.

ANALYSIS Illustrative figures. Substitute the two numbers from your own escrow disclosure.

VA loans are transferred often. A common answer to an escrow complaint is that the problem started with a previous company, so the current one is not responsible.

The Fourth Circuit addressed the escrow duty in Harrell v. Freedom Mortgage Corp., decided October 2, 2020. It is a published opinion, and it is the reason this answer is worth pushing back on.

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Washington has its own history here. The state Department of Financial Institutions has taken action against mortgage servicers over servicing conduct more than once, which matters because it shows the state already treats this as enforceable.

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Washington's Consumer Protection Act, RCW 19.86, is the state law most often reached for in a servicing dispute. Say what happened and what it cost. Do not argue the statute yourself.

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You need two documents: your most recent escrow account disclosure statement from the servicer, which they must send you, and your county property tax statement.

1. Does the county show the exemption? Look at the tax statement for the exempt amount. If it is not there, the problem is at the county, not the servicer, and that is a different fix.
2. What annual tax figure did the servicer use? It is on the escrow disclosure. Write it down.
3. Do those two numbers match? If the servicer's figure is the non-exempt amount and the county's is lower, you have found the gap.
4. How many months has it been wrong? Use only statements you actually hold. A month you cannot document is a month you do not claim.
5. Did your payment rise after an escrow analysis? Compare the monthly escrow line across two years of statements.
6. Was a shortage spread across your payments? The disclosure names it. A shortage caused by over collecting is not the same as a shortage caused by a real tax increase.
7. Did you ever tell them in writing? A phone call is not a record. Find the date of anything in writing, and keep it.

Multiply the monthly difference by the number of months you can document. That figure is a floor, not a total. It is the part you can prove.

ANALYSIS A number you can document beats a larger number you cannot.

Federal law gives you a way to raise a servicing error in writing and requires the servicer to respond. It is called a notice of error, and the rule is 12 CFR 1024.35.

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Send it to the address the servicer names for notices of error, which is not always the payment address. That address is in your welcome letter or on their website. Send it so you can prove it arrived.

Keep it short and factual. Name the loan. Say the county granted an exemption on a stated date. Say the escrow analysis used the non exempt figure. Give both numbers and the months. Ask for a corrected escrow analysis, a refund of what was over collected, and a written explanation. Attach the two documents. Nothing else.

Then write down the date you sent it and what came back. A servicing dispute is won on dates.

This page explains a mechanism. It is not legal advice, and no page can tell you what your own case is worth.

This page is the do it yourself half. The accountability half, who owed the duty and what regulators have already done about it, sits with the rest of the record.

See Policy for the regulatory history, and Evidence for the claims register behind every source number on this page.