Mortgage originators and mortgage servicers track property tax due dates in different ways. At its root this difference is connected with different ways to define the term “Due Date.”
At origination the dates used correspond with the date that a tax bill is made available by the taxing authorities, according to state laws. Those dates are used to calculate the initial escrow deposit and set up the initial escrow account disclosure statement. While this is typically referred to as the “due date” in that context, it is technically the tax Billing Date.
A servicer will track property tax “due dates” using one of a few possible dates. The primary choice is the Economic Loss Date. This is the date after which a taxing authority will start to assess late fees, interest charges, and/or other penalties. This Economic Loss Date is at least 30 days after the Billing Date, but can be as much as four months later.
Another possible date is the Discount Date. Some taxing authorities offer a reduction in the tax bill amount if paid early and offer this date as the cutoff for this discount. If a taxing authority offers a Discount Date, the servicer is obligated to pay the bill on an escrowed loan no later than this date.
A third option corresponds with taxes where the Billing Date occurs before the end of the calendar year and the Economic Loss Date occurs in the new year. In these cases most mortgage servicers will pay the escrowed tax bill by the end of the year, enabling the borrower to claim that bill on their income tax returns. In these cases the servicer will use December 31 as the “due date.” While most servicers do everything in their power to meet this commitment, it is technically a courtesy offered to escrowed borrowers. There are no regulatory requirements that a servicer meet this expectation.
Let’s use Michigan as an example to illustrate these differences:
Bill Date: July 1
Economic Loss Date: September 14 (in most areas)
At origination this bill will typically be set up with a 7/1 due date. But when moved into servicing, that will be changed to 9/14.
Bill Date: December 1
Economic Loss Date: February 14 (in most areas)
At origination this bill will typically be set up with a 12/1 due date. But when moved into servicing, that will be changed to 12/31 because the ELD falls in the new year.
Important Note: Most states have standard guidelines for their tax dates, but there is no guarantee that local taxing authorities will always adhere to those guidelines. It is not unusual for neighboring counties to have different dates, or for neighboring cities within the same county to have different dates from each other and from their county. So it is not safe to assume that two authorities in the same state will follow the same Billing / ELD structure. The best practice is always to check the tax authority's website, or call them directly to verify the most current dates.