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Rush to refinance sparks jump in accidental property tax payments
The Cook County treasurer's office automatically blocked more than $51 million in overpayments, about triple the number from the last time taxes were due

Tuesday, September 08, 2020
Crain's Chicago Business
by Dennis Rodkin

As homeowners refinanced their mortgages in record numbers this summer, one result in Cook County was a huge wave of inadvertent double payments of property taxes.

In August, Treasurer Maria Pappas' office detected $51.2 million in duplicate payments compared to $21 million in all of 2019. In all, there were accidental attempts to overpay on 13,324 second-installment tax bills that were due Aug. 3, about three times the number for the first-installment bills, which were due March 1.

 

“Most of this is attributable to refinancings,” Pappas said.

Overpayments occur in refinancings when taxes are paid once by the old mortgage lender and once by the new.

The treasurer's office has not collected that extra $51.2 million; when its software detects an attempt to pay into an account that has no balance due, the payment is blocked and not deposited in a county account.

Double payments can happen in other situations, such as both members of a recently divorced couple trying to pay the taxes on a property or the adult offspring of a senior citizen mistakenly paying bills that were already paid. Pappas said these instances are rare, are generally caught by the same software and “wouldn’t explain the big increase this year.”

The $51.2 million in inadvertent overpayments in August is larger than any single year’s total other than 2012, when the software blocked $54 million in overpayments, Pappas said. The software has been in place since 2009.

DuPage County Treasurer Gwen Henry and Lake County Treasurer Holly Kim said that as yet they have not seen an increase over usual years’ numbers. “There are always a few,” Henry said, “but it hasn’t been unusually high this year.”

Yet there’s still time for a wave to show up in those counties: their payment deadline is Sept. 1, a month later than in Cook. Both treasurers said they also have software in place designed to block extra payments. (In all three counties, taxes can be paid after the deadline this year without a penalty.)

Mortgage rates began dropping with the onset of the pandemic in March and have been at or below 3 percent for much of the summer. That has led to a record volume of refinancing. In the second quarter, refinance lending nationwide was triple the volume from a year earlier, according to a report released Sept. 3 by Black Knight, a mortgage analytics firm based in Jacksonville, Fla.

Black Knight’s report predicts that data for the third quarter will show the refinancing wave “climbing even higher.”

With her chief of staff, Bill Kouruklis, Pappas explained that many mortgage servicers set up property tax payments for large numbers of properties, through third parties, to be paid automatically ahead of the deadline. Depending on the timing of an individual homeowner’s refinance, the servicer of the new mortgage may not be aware that the bill has been covered, Kouruklis said.

While the loan servicers get notification that an overpayment has been rejected and would likely return the amount to the borrower, Kouruklis said homeowners who have refinanced in recent months should check with their loan servicer “to double-check that you haven’t been dinged twice.” The average blocked payment is about $3,840.

Separately, Pappas announced today that about $12.8 million is being refunded to taxpayers. Most of this money, the treasurer's office said in a press release, goes to taxpayers with exemptions—senior citizens, people with disabilities and others—that reduced the amount they owe.

Cook County taxpayers can check whether their property taxes have been overpaid at any point in the past 20 years by looking up “Your Property Tax Overview” at the treasurer’s website.

 


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