Though mortgage payments make most borrowers think of traditional banks, most mortgage holders make their payments to separate mortgage servicers. Mortgage servicing companies collect mortgage payments, handle escrow accounts, credit and charge fees to the mortgage account, and initiate "default-related services" including foreclosure. Borrowers should monitor and maintain close contact with their mortgage servicers to ensure that mortgage payments are accurately credited, to protect themselves from various fees, and even to help avoid foreclosure.
Who Owns My Mortgage?
In many cases, the bank that issued a mortgage sells that mortgage to a third party. Mortgage loans can change hands many times, often leading to some confusion for borrowers as to who actually owns their mortgage loan.
Furthermore, the owner of the mortgage is not always the company that receives and processes the mortgage payment. This is because the mortgage owner (either the lender issuing the mortgage, or a subsequent purchaser of the mortgage) can sell or contract out the right to service that mortgage loan. Depending on how ownership rights in a mortgage loan get sold and divided, the mortgage servicer may be the mortgage owner, such as a bank, or may be an independent loan servicing company.
When ownership of the mortgage loan changes hands, the borrower should receive notice of the change from the new owner within 30 days of the transfer. When the mortgage servicer changes, the borrower should receive notice from both the old and the new mortgage servicer. If a borrower has questions about who currently services their mortgage, he or she should quickly contact the mortgage servicer to which they have most recently been making payments.
A mortgage servicer might even acquire a mortgage or servicing rights after the mortgage is already in default. In this case, the mortgage servicer is a debt collector under federal law, and the borrower has additional rights against unfair debt collection.
What Can a Mortgage Servicer Do?
Mortgage servicers perform a wide variety of tasks in relation to mortgages. In addition to basics like receiving and giving the borrower credit for mortgage payments, they can proactively take many actions on a mortgaged home, particularly if the borrower fails to meet terms within the mortgage agreement.
Most importantly, when a borrower misses one or more payments, the mortgage servicer may initiate "default-related" services. This includes foreclosure, as well as other options which kick in more quickly. These may include inspection of the property to make sure the borrower is still living there and properly maintaining the property. Depending on the mortgage, if the mortgage servicer finds the property in disrepair, the mortgage servicer can arrange for necessary work or repairs to be performed, such as landscaping. Like fees associated with foreclosure proceedings, the mortgage servicer bills the mortgage holder for the costs of repairs to the property.
Similarly, if the mortgage holder has not purchased home insurance required by the mortgage agreement, the mortgage servicer may purchase "forced place" insurance on the borrowers behalf. Forced place insurance usually costs more and provides less coverage than borrower purchased insurance. Again, the mortgage servicer bills the mortgage holder for the costs.
Disputes with Mortgage Servicers
While it is vital that borrowers struggling to make payments keep close contact with their mortgage servicers, mortgage holders should also monitor and keep close contact with their mortgage servicer. Scrutiny of mortgage statements can confirm that the servicer properly credits the borrower for payments made, and also alert the borrower to unexpected or unclear fees.
Should a mortgage holder dispute a fee charged by the servicer, the borrower should quickly notify the mortgage servicer, but should not deduct the disputed amount from their mortgage payment. Deducting disputed fees from mortgage payments can lead to additional fees and might trigger mortgage default terms.
A knowledgeable foreclosure attorney can help you navigate the complexities of your mortgage and deal with your mortgage servicer. By quickly addressing the problem, you might be able to negotiate a solution or, at the very least, prevent the tacking on of additional fees associated with mortgage default and foreclosure.