What is a mortgage servicer and why should you contact them? Knowing the answers to the questions and understanding their role in your mortgage may be the key to avoiding or solving mortgage problems.
Mortgage servicing companies are often hired by mortgage lenders to handle the day-to-day activities involved with mortgages. The lender and mortgage servicer are often different entities. Just as the owner of your mortgage contract and be bought or sold over the lifetime of your contract, so can the rights to service your mortgage. Servicers collect and credit monthly payments and handle your escrow account and have broad powers when a home owner is in foreclosure.
An escrow account is a fund held by the servicer to pay property taxes and home owner’s insurance policies as well as home owner’s association fees that protect their lien interest in the home. Lenders require you to have homeowners insurance on your home. If your servicer has requested proof of insurance and you haven’t responded to the request, the servicer may take out Forced Placed Insurance and charge you for the policy. This insurance usually costs more than insurance you can get for yourself and it doesn’t cover as much while costing hundreds of dollars more. This insurance protects the lender in case there is a loss of your home. If there is a loss of the home while a forced placed insurance policy is in place, the payout goes to the lender, not the home owner. Be sure to read your mail and respond promptly to any requests made by the servicer and keep copies of any correspondence. If you have coverage and feel it is adequate for your home, contact your servicer to provide a copy of your insurance policy to your servicer. If you feel your insurance in inadequate, the forced placed insurance will ensure the lender will receive compensation if there is a loss of your home and cover the balance owed on your mortgage. In the meantime, search for home owner’s insurance on your own and provide a copy of the policy to the mortgage servicer. Once you as the home owner has obtained adequate coverage, have the servicer remove the force placed coverage and refunds the cost of the forced placed policy, make sure they remove any late fees or interest you were charged. When a home goes into foreclosure, the servicer stops accepting mortgage payment, thus also escrow payments for insurance. Forced placed insurance will be purchased for the homeowner to cover the home during foreclosure proceedings and added to the cost of the mortgage.
If you are uncertain what are occurring on your mortgage, you are entitled to receive a free annual statement of escrow activities. Contact your servicer and ask for this statement. Under the Real Estate Settlement Procedures Act (RESPA) is Qualified Written Requests (QWR). This letter of request to the servicer is for clarification of all billing and accounting issues. In the QWR you can request information on loan payments and escrow payments. As some mortgages have changing interest rates, it can be unclear when and how these rates change and the home owner should have access to proof of how the loan was adjusted and when adjustment were made. RESPA also allows for standard good faith estimates of settlement costs to help you shop around for and make clearer the ultimate costs of settlement. Also
Contact your servicers if you are charged a late fee and you feel this is not correct. Send the servicer a dispute letter. The dispute letter should be sent with copies of receipts and bank statements showing payment was received on time. Send this letter requesting a return receipt. Keep making your mortgage payments on time. Keep good records of all correspondence with your servicer(s).
Mortgage servicing agencies handle thousands of mortgages and errors occur. Consumer complaints about mortgage servicing shows problems occur most often when servicing is transferred from one agency to the next, according to the National Consumer Law Center. You are to be notified 15 days before the transfer takes place. They are to give you the new servicer’s name, address and phone number, and how to reach someone having authority to act on behalf of the loan owner regarding such things as payment issues or receiving legal notices. You have the right to have the servicer tell you the owner of your mortgage loan as mortgages can be sold among lenders. There is a 60 day ‘safe harbor’ period after the transfer date. If your payment arrives late because it went to the previous servicer but arrives within the 60 day period, the servicer must treat it as an on time payment.
Whenever you contact your servicer, you may well speak with a different person each time and get conflicting or confusing information from one person to the next. Be sure to record the date you make your calls along with the caller’s ID # and the subjects you discussed and information you were given. Keep this information with your mortgage paperwork for easy access when making additional contact with your servicer. It is recommended to keep a pad of paper and pencil by your phone in case you receive an unexpected call about your mortgage.
Sources: http://www.consumer.ftc.gov/articles/0190-making-payments-your-mortgage-servicer;
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/respa_hm;
http://www.foreclosuredefenseresourcecenter.com/forensicloan-loan-audits/qualified-written-request/
Author (2013). The national consumer law center guide to surviving debt. Boston, MA: National Consumer Law Center Publications.
