Common Pitfalls: Where Mortgage Servicers Often Stumble In The Second Half

With all eyes now firmly focused on the second half of 2025, mortgage servicers throughout the U.S. face an important period for property tax management. More than 60% of all property tax bills are due between July and December, making the second half of the year extremely critical for the mortgage industry.

Data from FRED (Federal Reserve Economic Data) shows quarterly national totals for state and local property tax revenue. For example, Q4 2024 saw significantly higher collections ($318,706 million) compared to Q3 2024 ($146,749 million) and Q2 2024 ($146,673 million). This supports the idea of a heavier collection period in the latter half of the year, particularly the fourth quarter.

Because of this volume, servicers are presented with unique challenges that can lead to significant errors, increased costs, and borrower dissatisfaction if handled improperly.

Why the second half of the year is critical

The elevated volume of property tax payments due later in the year creates more complexities for servicers. Unlike in the first half, property tax management is heavily influenced by localized assessments and differing jurisdictional requirements. Because of this, servicers must deal with a fragmented landscape of rules, deadlines, and data formats.

Especially with the intensified concentration of deadlines from October through December, the industry faces operational challenges, which places a higher priority on accuracy of forecasting, effective communication, and robust operational resilience as a result of the increased demands.

Common pitfalls: Where mortgage servicers often stumble

Even with their best efforts, mortgage servicers typically falter with property tax escrow payments during this time. A major hurdle remains the constant fluctuation of property tax assessments themselves. These changes often lead to unexpected escrow shortages, catching borrowers off guard with sudden increases in their monthly or scheduled payments.

A lack of clear communication and borrower education exacerbates the issue, often resulting in a flood of inquiries and complaints that places further strain on servicer resources.

Many servicers find themselves struggling to maintain an accurate tax database across differing jurisdictions. This data inaccuracy is usually a symptom of overreliance on manual, inefficient processes that simply buckle under the increased volume of tax deadlines.

Escrow shortages, missed due dates, and penalties are not only costly, they also erode borrower trust and strain customer service departments that are already operating near capacity.

Significant staffing limitations and constraints add another factor, even with dedicated teams. The complexities of regulatory compliance, particularly RESPA guidelines, add another layer of difficulty, as does ineffective third-party vendor management.

These challenges frequently manifest as costly errors, including miscalculated escrow shortages from a failure to accurately project tax increases. Even more critical are missed or delayed tax payments, often a result of incorrect due dates or outdated information, which leads to additional penalties for borrowers.

Other common errors include sending payments to the wrong taxing authority, mismanaging tax exemptions or special assessments, and failing to adequately explain escrow changes to borrowers.

Strategies for success: Best practices for high-volume management

To ensure better success, mortgage servicers must look to implement strategies for high-volume management that begins with proactive planning and forecasting. Servicers should then leverage historical data and predictive analytics to anticipate potential escrow shortages and tax increases, allowing for timely adjustments and clear communication with borrowers.

There are other ways to increase efficiencies, such as establishing dedicated task forces or cross-functional teams focused solely on property tax management during the peak seasons. Streamlined communication protocols, including automated notifications and clear explanations of escrow changes, are essential to proactively address borrower concerns and reduce inquiry volumes. Furthermore, regular training for staff on the nuances of property tax regulations and common issues can further enhance their ability to handle complex scenarios more effectively.

The technology advantage: Enhancing efficiency and reducing costs

Technology may offer significant solutions when managing the property tax surge. Technology, data and automation can serve as a powerful “staffing substitute” or significantly enhance existing teams, allowing servicers to handle increased demand without drastic staff adjustments.

Automated tax data aggregation and verification systems can eliminate manual errors and ensure accuracy across diverse jurisdictions. Automation tools can be deployed to simplify routine tasks such as data entry, payment processing, and reconciliation, freeing up human staff for more complex problem-solving and higher-value customer interaction.

Furthermore, predictive analytics tools can provide earlier warnings of possible escrow shortfalls, allowing servicers to adjust and communicate proactively. Implementing a reliable borrower self-service portal can also empower homeowners to access their tax information, understand escrow analysis, and even submit inquiries, which can significantly reduce the inbound call volume to servicer call centers.

Fortunately, these technological investments can improve efficiency and also contribute to more cost-effective operations during these busy periods.

The role of expertise and collaboration

Finally, recognizing the intricate nature of property tax escrow, servicers should consider the value of external expertise and collaboration. Partnering with specialized third-party vendors with advanced technological solutions and deep industry knowledge can be invaluable.

Reliable vendors who specialize in the areas of data technology and automation for escrow are knowledgeable in navigating the many complexities of data management to ensure regulatory compliance and provide scalable solutions that can adapt to changing volumes. Through this automation, servicers can maintain ownership of core operations while leveraging internal agility and technology-driven tools to free up internal resources to focus on core competencies and high-touch borrower interactions.

Ultimately, a combination of proactive planning, strategic technological adoption, and judicious partnerships will empower mortgage servicers to successfully navigate the property tax storm of the second half of 2025, ensuring accuracy, efficiency, and borrower satisfaction.

Steven Pals is Director of Business Development at Autoagent.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the editor responsible for this piece: zeb@hwmedia.com.