Skip Maine state header navigation

State Search:

Agencies | Online Services | Help

Page Tools Page Tools Email page Map addresses En español En français English

Agency Reviewing its Longstanding Opposition to Tax Service Fees

Whenever an escrow account is required on a Maine residential mortgage for payment of taxes and insurance, the lender or servicer must pay 3% interest per year on the funds held.

By law, this 3‰ may not be reduced by any service fee or other charge assessed for administering the account.

Years ago, certain lenders proposed a ”tax service fee,“ to cover, they said, the cost of a lender calling the town to determine whether the tax year had changed, and to learn where to send payment. Because they proposed to deduct this fee from the escrowed funds, and because this would have reduced the effective interest ”yield“ to below 3‰ per year, the proposal was turned down by state regulators.

Currently, however, lenders are proposing a new version of the “tax service fee.” Charged one time at closing, both on loans that require escrow accounts and those that do not, this charge would be a pass-through of charges assessed by third party tax service providers.

If such a charge is assessed on all accounts, and so long as it is included in the finance charge and APR, lenders may have a strong argument that such fees are permissible. In preparation for a shift in position with respect to these charges, the Office of Consumer Credit Regulation is attempting to secure a copy of a typical contract between a lender and a tax servicer, in order to learn:

• What exactly does the third party provider offer to do in exchange for the fee (typically $70 - $100)?
• If it’s “one charge for the life of the loan,” as claimed by the lenders, what happens if the lender sells the loan?
• If the consumer is assessed the fee at closing, does the consumer have the legal or equitable right to expect that the job will be done correctly (e.g., that the consumer’s taxes and insurance will be paid in a timely manner)?

Readers of the Maine Creditor Update are invited to provide any relevant information by mail, facsimile or e-mail (william.n.lund@state.me.us). Results will be included in a future Update.