By Pat Hedges , SVP, Senior Tax Operations Manager
When it comes to taxes, paying the right amount is important, but so is paying on time, as anyone who’s missed a tax deadline and been hit with late fees and penalties can attest.
Unlike income and business taxes that have well-known due dates for filing and paying — and which usually only change if they fall on a holiday — property tax deadlines are set by various taxing agencies across the U.S., with more than 30,000 of them at the state, city, county, school district and special-district level. Each of these has its own distinct deadlines and events that can affect the final due-date calendar for a tax year or installment. Not only do the due dates vary for these different agencies, they can also be amended or extended based on a variety of factors. Most agencies are dependent on assessment and rate setting regulations that can involve various entities. In some cases, elections must be held to finalize rates.
For mortgage servicers that pay — and monitor payment of — taxes on behalf of homeowners, managing this vast network of tax entities is no small feat. It requires constant calendar monitoring and management to ensure various deadlines are met, taking into account shifting due dates and identifying which agencies offer pre-payment discounts and other payment guidelines that are unique to individual agencies. Paying taxes at this vast enterprise level means that missing even a single deadline can affect hundreds, even thousands, of homeowners and trigger a wave of incoming customer service calls from, understandably, frustrated homeowners who are counting on their servicer to be on top of their tax payments.
To help new associates at servicers understand some of the nuances of managing escrow calendars, here are some key definitions:
- Statutory Due Date: this is the deadline by which taxes are due as dictated by a government or taxing agency statute or law.
- Economic Loss Dates (ELDs): this is the final date after which penalties will begin accruing if property taxes aren’t paid. The ELD for a specific period can differ from the statutory date. Penalties are typically based on a percentage of the unpaid base tax and can vary widely. These fees generally run from 0.5% to 2.5% for each month past ELD, but can also be charged as a flat rate. For example, California agencies and select New York jurisdictions (Nassau, Suffolk, Westchester counties) charge a flat 10%.
- Discount date: this is the deadline to receive a discount for paying taxes early. About 10 states heavily use discount dates. For instance, in Florida, the true economic loss date is March 31st, however, homeowners can receive a 1% discount for each month (up to 4 months) that they pay their taxes early. So, a homeowner can benefit from a 4% total discount if their taxes are paid by November 30th. Because LERETA manages tax services for a variety of mortgage servicers, we know the importance of paying attention to these early payment discount deadlines and factoring this into escrow estimates. Our goal is to offer the deepest discount the homeowner.
- Early Mass Payment Date (ELDE): this is a LERETA-specific reference for dates that are set in certain jurisdictions to indicate an earlier payment date expected from servicers that will be making bulk payments. This date is also set when the agency will send homeowners notifications if taxes aren’t paid by a certain date, even though penalties will not begin until the economic loss date These notifications can confuse homeowners unnecessarily and prompt them to call their servicer thinking a deadline has been missed. Managing the nuances of various due dates allows us to ensure our lender clients aren’t caught off guard by frustrated homeowners and also ensures that homeowners don’t have to go through the frustration of thinking something has been missed, when in fact, it hasn’t been.
- Extended Economic Loss Date (ELDX): this refers to jurisdictions that experience a delay in processing and must extend the tax due date. It’s important to understand that these agencies rely on state laws, state elections and other external factors that can delay the creation of tax bills. For instance, an agency might communicate that although their statutory due date is December 31st, they won’t be ready on time and may not release bills until December 15th. As a result, they will extend the due date to January 15th or 30th or even later. Seeing the ELDX date value is confirmation that the agency has officially confirmed the extension.
- Late Release Unknown Code: this is a code we use to identify when an agency knows it will be extending their payment due date, but is still unsure what the extended due date will be. While this isn’t date-specific, it’s still helpful to indicate that there is, in fact, a delay and the revised due date will be forthcoming once the agency finalizes its calendar.
Not only do these extensions and unknown late release dates require more management and communication with homeowners, these shifting deadlines can also affect the timing of delinquency reporting. If the delays are a few weeks or less, there isn’t an issue. If, however, tax bill delays push out payment deadlines by months, it requires adjusting the delinquency reporting to allow the agency to post on-time payments and accurately capture true delinquencies. For example, Ohio counties routinely extend their final tax year installment due dates well past the June statutory due dates. Delinquency reporting scheduled dates have been set with this commonly occurring delay in mind. Monitoring and adjusting delinquency reporting dates ensures protection for homeowners against premature requests for resolution of non-existent tax delinquencies.
Given inevitable delays and changes in due dates, our teams at LERETA begin checking in with agencies early — at least 60 days out — to determine tax bill and billing file delivery dates and whether there might be a delay. Once an agency confirms a deadline is extended, we communicate and monitor the situation daily so that absolutely no time is lost in gathering tax bills and providing reporting to customers to support tax payments and delinquency follow up.
For more information contact us at sales@LERETA.com.
