Loan with escrow account. Without informing the bank, Borrower paid their annual property taxes in late November. In preparation to pay property tax out of the escrow account in early December, bank reviewed tax roles and found that prior year's tax assessment had been paid. After that and without informing the bank, Borrower contacted the county and asked for their money back as they remembered that they have an escrow account. County refunded the tax payment to Borrower. In performing the annual escrow analysis, bank just discovered that the prior year's tax payment had been returned to the borrower and that a late fee had been added to the tax amount due. Must the bank pay the late fee, or does the documentation of the events leading up to the late fee warrant the bank paying the late fee out of the escrow account?

It becomes a customer service issue at this point. You are not going to find any guidance. You probably have the documentation to charge it to the borrower as they are the ones that created the problem in the first place. I think it becomes a business decision at this point based on the customer relationship. You could not pay a bill that was not due, and I am not sure you are under any obligation to continue to review the tax rolls for this sort of occurrence.

Thanks, Mr. Carey.