If your loan servicer doesn’t credit your account or misapplies your mortgage payment, here’s what to do.
When it comes to mortgage accounts, loan servicers sometimes make mistakes. Your loan servicer, for example, may apply your payment to the incorrect account. Another common blunder occurs when a borrower’s loan servicing privileges are transferred to a new servicer; the previous servicer is normally supposed to send any payments to the new servicer. However, payments might slip between the cracks, and you may not receive credit for a monthly mortgage payment made to the previous servicer.
If you suspect your mortgage servicer made a mistake with your payment, the first action is to contact them. If a phone call doesn’t solve the problem, you can send a “notice of error” to the service provider. If that doesn’t work, you can register a complaint with the Consumer Financial Protection Bureau or hire an attorney. While the issue is being resolved, continue to make your normal mortgage payments. Otherwise, you risk defaulting on your loan and facing foreclosure.
How Should Your Servicer Process Your Mortgage Payments?
The primary job of a mortgage servicer is to collect and process payments on behalf of the lender or current loan owner, known as the “holder.” In general, the procedure is as follows:
How Do Errors in Mortgage Payment Processing Occur?
Servicers make mistakes from time to time when processing payments, such as accidentally allocating funds to another borrower’s account or placing them in a suspense account. These types of mistakes can cost you money and damage your credit.
Example. Assume you send your $2,000 monthly mortgage payment to your mortgage servicer. The monies are unintentionally transferred to a different borrower’s account by the servicer. The servicer then incorrectly reports your payment to the credit bureaus and charges you a late fee.
How Do Errors in Servicing Transfers Occur?
Sometimes the lender or loan holder serves as the servicer, and other times it hires a third party to do so. The third-party servicer may then engage a sub-servicer or sell the servicing rights to another company. In the mortgage industry, servicing transfers are common.
When your mortgage servicer changes, both the previous and new servicers must inform you of the change; in most cases, your previous servicer must notify you of the change at least 15 days before the transfer’s effective date, and your new servicer must provide a transfer notification no later than 15 days after the transfer date. Alternatively, the servicers can submit a combined notification 15 days before the transfer. The message will tell you when your previous servicer will stop accepting payments and when your new servicer will start accepting payments, among other things. It will also provide you with a phone number for a new servicer employee or department to contact if you have any queries about the servicing transfer or the transfer date.
You should begin sending payments to the new servicer once the transfer date arrives. If your mortgage payment is automatically deducted from your bank account, make sure the account is updated to send the payment to the new servicer. However, the new servicer cannot charge you a late fee or classify a payment as late for 60 days after the effective transfer date if you submitted it to your previous servicer on time. The payment should be forwarded to the new servicer or returned to you by the old servicer.
However, there are situations when the previous servicer fails to forward the money to the new servicer or returns it to the borrower. As a result, the payment is not credited to the borrower’s account by the new servicer.
How to Correct the Servicer’s Error
Suppose you suspect your servicer made a mistake with your payment. In that case, you can call them, submit a “notice of error,” file a complaint with the Consumer Financial Protection Bureau or hire an attorney to represent you.
If your money isn’t credited to your account, the first thing you should do is phone the servicer and explain the situation. If the individual you’re speaking with can’t fix the problem right away, ask when you may expect a resolution and a callback. Please note the person’s name and the time and date you spoke with them.
If a phone call doesn’t cure the problem, you can send a “notice of error” to the servicer. You have the right under the federal Real Estate Settlement Procedures Act (RESPA) to send your servicer a letter informing them that they made an error on your account. The servicer must correct the problem within a certain length of time.
Send copies of the canceled check or bank account statements with your letter to confirm that you sent the payment. For your records, keep a copy of the letter and any attachments. Only submit copies of original items, such as canceled cheques and your message. Sending your letter-certified mail with a return receipt is usually the best option. Make sure to submit the letter to the servicer’s designated address for notices of error.
How Should the Servicer React to Your Notice of Error?
The servicer is required by federal law to:
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