When A Mortgage Servicer Misapplies Your Payments: Your Rights Under Federal Servicing Rules
For most homeowners, paying the mortgage on a monthly basis is a routine practice. However, this does not mean that there will be no hitches along the way. Sometimes, mortgage servicing companies misappropriate monthly payments, assess wrong fees, or even wrongly classify an account as delinquent. The repercussions of such actions are dire since they can damage your credit or even trigger a foreclosure of the property.
What is a mortgage servicer?
The mortgage servicer is the entity in charge of the mortgage loan account after it’s been issued. The servicer handles duties like collecting monthly payments, handling the escrow accounts for tax and insurance payments, and handling correspondence about the mortgage loan.
It is crucial to note that the mortgage servicer might not necessarily be the entity that issued the loan since mortgage loans can be purchased several times by different financial institutions throughout their lifespans.
Errors in payment processing could cause problems for the borrower because of the servicer’s role in managing the loans.
Common mortgage servicing errors
Misapplication of payments is another problem that borrowers encounter. There are many reasons why a borrower experiences this kind of problem. One reason is that the servicer applies payments towards fees or interest rather than the principal. This is despite the fact that the loan agreement states that the order should be the opposite. Also, a servicer might apply payments to an account other than the one indicated by the borrower.
The second problem that occurs in mortgage servicing is a mistake regarding the escrow accounts. It is the responsibility of the servicer to collect funds for covering the cost of property tax and home insurance. Escrow mismanagement could result in incorrect billing or a sudden rise in monthly payments from the borrower.
Finally, there are cases where the servicer reports a borrower to a credit bureau as being delinquent despite the fact that they have made every payment on time.
Federal protections for borrowers
US federal law offers many important protections for borrowers who are having difficulties with mortgage servicing. According to the Real Estate Settlement Procedures Act (RESPA) and associated mortgage servicing laws, homeowners are entitled to dispute any mistakes regarding mortgage servicing and ask for loan information.
The first way to do so is through the Notice of Error letter. When receiving this letter, the servicer should look into the case and provide an answer according to the time frame stipulated in the law.
Another option is the Request for Information letter. This letter allows homeowners to ask for documents or other information concerning their loan. It can be helpful when borrowers want to know whether their payments were made properly.
For Ohio residents, knowledge about such federal rights can play an important role while handling any mortgage servicer errors. Timely action on the problem can protect you from losing both your credit and your house.
Talk to a Dayton, OH, Mortgage Defense Attorney Today
Kohl & Cook Law Firm, LLC, represents the interests of homeowners who are at risk of losing their homes to foreclosure. Call our Dayton foreclosure defense lawyers today to schedule an appointment, and we can begin discussing your case right away.
