Memphis Property Taxes - Notify Mortgage Servicer

[Mark S.]

This is my first go around with Memphis, TN property taxes. I have closed loans in my name and quitclaimed to my single member LLC. Many have said one way the lender finds out is when it comes time to pay property taxes. I’m hoping to fly under the radar, or just as importantly, have the lender turn a blind eye. Memphis taxes are due by end of August. I just received tax notices in the mail for city taxes. My tax/insurance are escrowed as part of my mortgage payment each month. I don’t want to pay any late penalties if the mortgage servicer doesn’t pay on time. I am debating whether or not to call them to see if I need to forward these notices to them to pay property taxes. I obviously don’t want to “rat myself out” at the same time. Would you call the mortgage servicing company about remitting property tax payments or just trust they do it automatically in a timely fashion?

[Carl Fischer]

@Mark S.

Do not expect them to pay the taxes. What do they have to know the taxes are due? Nothing or an invoice/tax bill that has your LLC name on it. Does the LLC name incorporate your name so the bank could make the leap and know it's yours? You should have had the taxes paid by you when doing the loan, and not escrowed, if this was your plan all along. You may be able pay the taxes and get the bank to remove them from monthly invoice. Sometimes title insurance, liability and hazard insurance are also affected by this type of move. Check on those products status before you need them.

[Mark S.]

@Carl Fischer, it's a single member LLC with the same mailing address as my personal mailing address, so that part should be obvious to them. I was not given the option to pay the taxes out of pocket (ever, even with a personal residence) when financing the property and was always under the impression that taxes and insurance had to be escrowed on a financed property. I had the LLC added as an additional insured on the insurance. My title company said that title insurance would not be affected by the quit claim deed transfer to my single-member LLC (and this is who I used to complete this transaction - no charge).

I would imagine that the mortgage servicing company receives a notification as to when taxes are due, and also knows the specific deadlines for particular states/counties as to when taxes are due, so that they're alerted. After all, as part of the loan servicing process, it's their responsibility to pay the property taxes and insurance. If there's an issue when they go to do that with a name mismatch, then I guess that's another issue, but you would think they would attempt to get in contact with me about it. I don't want to just mail a check from the LLC bank account for property taxes and then try to fight with the servicer about getting those funds back from escrow. Doesn't seem like something they'd do.

Just trying to figure out a way to ensure they get paid and not throw myself under the bus at the same time.  With the amount of investors that supposedly use LLCs for rental property after quit claiming from their personal name, I'm sure there are many that have been through this before.  This is my first time.  Just looking for a little guidance.  

[Mark S.]

I called the 800# to mortgage servicer, followed the prompts, and according to the recording, they obtain property tax information directly from the PVA and will ensure property taxes get paid on time. No need to send in tax bill. Guess I cross my fingers, hope they actually pay on time, and hope a due on sale letter doesn’t follow immediately behind.

[Benjamin O'Brien]

I have 11 homes in Memphis which I have owned going on 6 yrs. Of the 7 I have financed, I have never had an issue with the property taxes being paid late or not paid. Also, I have all of these homes quit claimed into LLCs and not had an issue regarding this to date.