It may be possible to add the property taxes to the loan principal, but it would depend on the specific language in your loan agreement. Our advice is to ask your bank counsel to review the note and mortgage document for an answer to this question. 

Going forward, we recommend establishing a uniform policy for the treatment of delinquent property taxes as part of the implementation process for the TILA-RESPA integrated mortgage disclosure rules, which require you to disclose “the consequences if the consumer fails to pay property costs” on the new Closing Disclosure form. 

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.38(l)(7)(i)(B) (The Closing Disclosure must include a “description of the consequences if the consumer fails to pay property costs, including the actions that a State or local government may take if property taxes are not paid and the actions the creditor may take if the consumer does not pay some or all property costs, such as adding amounts to the loan balance, adding an escrow account to the loan, or purchasing a property insurance policy on the consumer’s behalf that may be more expensive and provide fewer benefits than what the consumer could obtain directly.”)