Relief Guide recommends Lending Tree for ethical & responsible
mortgage and refinance lending
When you apply
for a home mortgage, you may think that the lender will hold and
service your loan until you pay it off or you sell your house.
That's often not the case. In today's market, loans and the rights
to service them often are bought and sold.
A home may
be one of the most expensive purchases you ever make, so it's
important to know who is handling your payments and that your
mortgage account is properly credited. The Federal Trade Commission
(FTC) wants you to know what a mortgage servicer does and what
your rights are.
Servicers: Their Responsibilities to You
servicer is responsible for collecting your monthly loan payments
and crediting your account. A servicer also handles your escrow
account, if you have one.
account is a fund held by your servicer into which you pay money
to cover charges like property taxes and homeowners insurance.
The escrow payments typically are included as part of your monthly
mortgage payments. The servicer pays your taxes and insurance
as they become due during the year. If you do not have an escrow
account, you are responsible for paying your taxes and insurance
and budgeting accordingly.
The Real Estate
Settlement Procedures Act (RESPA), enforced by the Department
of Housing and Urban Development, is the major law covering escrow
accounts. If your mortgage servicer administers an escrow account
for you, the servicer is generally required to make escrow payments
for taxes, insurance, and any other charges in a timely manner.
Within 45 days of establishing the account, the servicer must
give you a statement that clearly itemizes the estimated taxes,
insurance premiums, and other anticipated charges to be paid over
the next 12 months, and the expected dates and totals of those
the mortgage servicer also is required to give you a free annual
statement that details the activity of your escrow account. This
statement shows your account balance and reflects payments for
your property taxes, homeowners insurance, and other charges.
loan is about to be sold, you generally get two notices: one from
your current mortgage servicer; the other from the new servicer.
Usually, your current servicer must notify you at least 15 days
before the effective date of the transfer, unless you received
a written transfer notice at settlement. The effective date is
when the first mortgage payment is due at the new servicer's address.
The new servicer must notify you within 15 days after the transfer
notices must include:
- the name
and address of the new servicer.
- the date
the current servicer will stop accepting your mortgage payments.
- the date
the new servicer will begin accepting your mortgage payments.
or collect-call telephone numbers, for the current and new mortgage
servicer, for information about the transfer.
you can continue any optional insurance, such as credit life
or disability insurance; what action, if any, you must take
to maintain coverage; and whether the insurance terms will change.
- a statement
that the transfer will not affect any terms or conditions of
your mortgage, except those directly related to the servicing
of the loan. For example, if your contract says you were allowed
to pay property taxes and insurance premiums on your own, the
new servicer cannot demand that you establish an escrow account.
- There is
a 60-day grace period after the transfer: during this time you
cannot be charged a late fee if you mistakenly send your mortgage
payment to the old servicer. In addition, the fact that your
new servicer may have received your payment late as a result
cannot be reported to a credit bureau.
consumers have complained that they've been charged late fees,
even when they know they made their payments on time. To help
protect yourself, keep good records of what you've paid, including
any billing statements, canceled checks, or bank account statements.
You also may check your account history online if your servicer's
Web site has this feature. If you have a dispute, continue to
make your mortgage payments, but challenge the servicing in writing
(see Sample Complaint Letter to Lender), and keep a copy of the
letter and any enclosures for your records. Send your correspondence
by certified mail, and request a return receipt. Or send it by
fax, and keep a copy of the transmittal confirmation.
It's important to maintain the required property insurance
on your home. If you don't, your servicer can buy insurance on
your behalf. This type of policy is known as force placed insurance;
it usually is more expensive than typical insurance; and it provides
less coverage. The primary purpose of a force placed policy is
to protect the mortgage holder, not the property owner.
correspondence you receive from your mortgage servicer. Your mortgage
servicer may request that you provide a copy of your property
insurance policy. Respond promptly to requests regarding property
insurance, and keep copies of all documents you send to your mortgage
If you believe
there's a paperwork error and that your coverage is adequate,
provide a copy of your insurance policy to your servicer. Once
the servicer corrects the error, removes the force placed coverage,
and refunds the cost of the force placed policy, make sure that
any late fees or interest you were charged as a result of the
coverage also are removed.
Review your billing statements carefully to make sure
that any fees the servicer charges are legitimate. For example,
the fees may have been authorized by the mortgage contract or
by you to pay for a service. If you do not understand what the
fees are for, send a written inquiry and ask for an itemization
and explanation of the fees. Also, if you call your mortgage servicer
to request a service, such as faxing copies of loan documents,
make sure you ask whether there is a fee for the service and what
RESPA, your mortgage servicer must respond promptly to written
inquiries, known as qualified written requests (see Sample Complaint
Letter to Lender). If you believe you've been charged a penalty
or late fee that you don't owe, or if you have other problems
with the servicing of your loan, contact your servicer in writing.
Be sure to include your account number and clearly explain why
you believe your account is incorrect. Your inquiry should not
be just a note on the payment coupon supplied by your servicer,
but should be sent separately to the customer service address.
business days of receiving your inquiry, the servicer must send
you a written response acknowledging it. Within 60 business days,
the servicer either must correct your account or determine that
it is accurate. The servicer must send you a written notice of
the action it took and why, along with the name and telephone
number of someone you can contact for additional assistance.
Do not subtract
any disputed amount from your mortgage payment. Some mortgage
servicers might refuse to accept what they consider to be partial
payments. They might return your check and charge you a late fee,
or claim that your mortgage is in default and start foreclosure