Mortgage Loan Servicing Problems

What Is a Mortgage Loan Servicer?

A mortgage loan servicer is the company that manages your mortgage loan. Servicers act as an agent for the entity that owns your loan (often a securitized mortgage loan trust). They mail you monthly statements, collect your loan payments and manage your loan escrow account (when real estate taxes and/or insurance are included in your loan payments). They also handle loan modifications and “loss mitigation” issues, which includes short sales and foreclosures.

Many homeowners mistakenly assume their loan servicer owns their loan. While that can be the case – particularly for loans issued by a local community bank – mortgage loan trusts and most lenders hire loan servicers to manage the portfolio of loans they own.

Loan servicing is a high volume business with low profit margins. Servicers are paid a relatively small amount for each loan they manage. Consequently, they often cut corners, automate tasks that demand individual attention and provide terrible customer service. Many servicers are slow to respond to inquiries from homeowners and slow to correct mistakes. They generally have automated phone answering systems that require callers to navigate through a bunch of options. They intentionally make it as hard as possible for callers to get a real person on the line.

Mortgage loan servicing rights are frequently sold and transferred from one company to another. This can result in mistakes – like not giving you credit for payments you made, charging you late fees for payments that were made on time or within the loan’s grace period, and failing to pay real estate taxes and insurance from loan escrow accounts.

Dealing with Servicer Problems

If you’re having problems with your mortgage loan servicer, I may be able to help you. While servicers are often slow to respond to homeowners, that may respond more quickly to an attorney. You may also be able to sue your servicer for money damages when its conduct causes you harm. That can include wrongly reporting payments as delinquent to credit bureaus (which can lower your credit score), improperly handling a request to modify a mortgage loan or failing to comply with foreclosure laws.

If you’re having problems with your loan servicer, you have nothing to lose by contacting me. There’s no charge for an initial phone conversation.

Below is a list of some common loan servicing problems and abuses:

Your servicer doesn’t give you credit for a monthly payment you made and won’t correct the mistake. This frequently happens when the servicing rights for your loan are transferred to a new servicer.
Your servicer misapplies your loan payments, including a partial payment, or fails to make required payments for real estate taxes or insurance from your loan escrow account.
You get charged late fees for payments you made on time or within the loan’s grace period (frequently 15 days from the date the payment is due), or get charged for fees that are not allowed by the terms of your mortgage.
Your servicer charges you for “force-placed insurance” (also called “lender-placed insurance”). This is insurance your loan servicer obtains for you when you don’t have insurance on your home or you let your policy lapse. Force-placed insurance can be a scam if the premiums are much higher than the premiums for a typical policy in your area. Why would a servicer get you a more expensive policy? Because it owns or is affiliated with the insurer and sees it as a way to generate additional revenue.
Your loan is delinquent or in default and you get charged for default-related services (like home inspections and fees for property maintenance) that are not allowed by the terms of your loan.
Your mortgage loan servicer is generally considered to be a debt collector (with certain exceptions) when your loan is in default. It therefore has to comply with federal and state debt collection laws and can be held be liable violating them.
The servicing rights for your loan are transferred and you don’t receive notice of the transfer (only for certain types of loan).
Committing foreclosure abuses and failing to comply with foreclosure laws. This can include “dual tracking”, where a servicer is working with a homeowner on a loan modification and simultaneously proceeds with foreclosure.

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