Q: My loan has been transferred from mortgage company to mortgage company with alarming speed, and somehow during this process the escrow amounts never seemed to change, but the sewer assessment lien which had been taken out for the previous seven years has not been deducted for the past two years. Now, I’ve been informed by the city that I am delinquent. My latest mortgage company insists it has no responsibility in this matter, while the previous company is no longer in existence. I’m just wondering whether this is happening on a wide scale or whether it’s unique to me. – D.P., Edmonds
A: Many years ago, when you wanted a mortgage to buy a home, you went down to the folks at your neighborhood bank, they opened up the vault, gave you the money and you made your monthly payments to them. But those days are long gone. Today, mortgages are bought and sold like stocks and bonds. You get your mortgage from a bank or mortgage company, and once it closes the loan is sold into the secondary market, where it is pooled with many other loans and used as collateral for mortgage-backed securities, which are then sold to individual investors.
The Federal National Mortgage Association, commonly called Fannie Mae; the Federal Home Loan Mortgage Corp., commonly called Freddie Mac; and the Government National Mortgage Association are the three main secondary market agencies for mortgage-backed securities.
The servicing of your mortgage, which means collecting the monthly loan payments and disbursing the funds to the appropriate accounts, may or may not be handled by the investor who holds the mortgage.
For example, you might get your mortgage from ABC Mortgage Co. A few months later, ABC sells your loan to XYZ Mortgage Co., but ABC retains the servicing rights on the loan. The loan servicer earns a tiny fraction of each loan payment as its servicing fee. A year later, ABC Mortgage sells the servicing of your loan to one of the large national loan servicing companies. And so it goes. Over the course of 10 years, you might find yourself mailing your monthly mortgage payments to three or four different loan servicing companies.
Regardless of the number of times that your loan servicing is transferred, your monthly mortgage payment should not change, nor should there be any change in the monthly payment or current balance of your escrow or impound account, which contains the funds to pay your annual property taxes, homeowner’s insurance and other property charges such as your sewer assessment lien. Usually, there are no mistakes, but as your letter points out, sometimes things happen.
In most cases, errors in escrow accounts are the result of honest mistakes rather than a deliberate attempt by the mortgage servicer to shortchange the borrower. Your current mortgage servicing company should take responsibility for paying the sewer lien.
If there is not enough money in your escrow account to cover the payment, the servicing company should advance the money and collect the shortage from you over a 12-month period. You should not have to pay any interest, late fees or penalties due to the delinquency because it was the loan servicer’s fault for not making the payments.
At closing, mortgage borrowers typically have to pay a tax-lien service fee. This fee goes to a service company whose sole responsibility is to monitor the public records on the property to ensure that the property taxes and any other assessments are paid in full each year so there are no delinquencies that could force a tax sale and jeopardize the lender’s security interest in the property. Obviously, the tax service company didn’t do its job in your case.
Federal law gives mortgage borrowers certain consumer rights, whether or not the servicing of your loan is ever transferred. If you have a question about your escrow account or any other servicing problem with your loan, the lender must respond to a qualified written request within 20 business days, and make appropriate corrections to your account or provide you with a written clarification of the dispute within 60 days of your request.
During this 60-day period, the lender cannot provide information to any credit reporting bureau regarding any overdue payments related to your written request. Be aware that you cannot simply scribble a note to your lender on the loan payment coupon that you mail in. A qualified written request must be in the form of a letter that includes your name, loan account number and your reasons for the request.
Any time the servicing of your mortgage is transferred to a new company, check the new payment coupons very carefully to make sure that your loan balance, interest rate, loan payment and escrow or impound amounts are correct. Don’t automatically assume that everything is all right. 99 percent of the time, there won’t be a problem, but if there is a mistake, you want to correct it as soon as possible.
Mail your real estate questions to Steve Tytler, The Herald, P.O. Box 930, Everett, WA 98206. Fax questions to Tytler at 425-339-3435, or e-mail him at economy@heraldnet.com
Steve Tytler is a licensed real estate broker and owner of Best Mortgage, Inc. You can visit the Best Mortage Web site at www.bestmortgage.com.
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