Mortgage Servicing Disputes
Mortgage servicing is the ongoing administration of a mortgage loan after it is originated. The servicer may collect and apply payments, administer escrow accounts, calculate amounts due, and coordinate foreclosure activity. The company servicing the loan may not be the company that owns it, and that distinction can matter a great deal when a problem develops.
- Focus
- Servicing accuracy
- Governed by
- RESPA, TILA & Reg X/Z
- Tools
- QWR, RFI & NOE
- Based in
- Miami, FL
Why It Matters
Why Servicing Matters
The servicing system creates much of the factual record later relied upon in foreclosure. Servicing can affect:
- payment application
- principal and interest balances
- suspense accounts
- escrow
- taxes and insurance
- servicing fees
- property-related advances
- payment-change notices
- default determinations
- payoff statements
- reinstatement figures
- loan modifications
- loss-mitigation applications
- foreclosure referrals
An error early in the servicing process can affect later account balances and default calculations.
Loan Types
Types of Mortgage Loans
Mortgage-servicing regulations do not necessarily apply identically to every type of loan. The legal analysis may differ among:
- conventional closed-end first mortgages
- second mortgages
- home-equity loans
- HELOCs
- government-insured or guaranteed mortgages
- privately owned loans
- other residential mortgage products
Before asserting a servicing right, it is important to determine whether the particular statute or regulation applies to the loan involved.
Federal Law
Federal Regulation of Mortgage Servicing
Several federal laws and regulations govern different aspects of residential mortgage servicing.
RESPA and Regulation X
The Real Estate Settlement Procedures Act and Regulation X establish servicing requirements applicable to many residential mortgage loans. Depending upon the loan and circumstances, these rules may address matters such as:
- servicing transfers
- escrow administration
- requests for information
- notices of asserted servicing errors
- force-placed insurance
- delinquency communications
- loss mitigation
- certain foreclosure-related procedures
TILA and Regulation Z
The Truth in Lending Act and Regulation Z contain additional requirements concerning mortgage and home-equity credit. Depending upon the transaction, these may include requirements involving periodic statements, payment processing, disclosures, and other account information.
HELOCs are open-end credit and must be analyzed under the provisions applicable to that type of credit rather than assuming that every closed-end mortgage rule applies.
Getting Answers
Obtaining Information About Your Mortgage
Federal servicing law can provide useful tools for determining what occurred in an account.
Qualified Written Request — QWR
A Qualified Written Request is a written RESPA servicing communication that may identify the borrower and account, describe a servicing problem, or request information relating to servicing. The substance of the communication is more important than simply placing "QWR" at the top of a letter.
Request for Information — RFI
A Request for Information may be used, where the regulations apply, to seek information relating to servicing. Depending upon the circumstances, relevant requests may concern:
- payment histories
- escrow records
- fees and advances
- servicing transfers
- transaction histories
- ownership information
- other records relating to administration of the loan
An RFI can be an important investigative tool when the homeowner does not have enough information to understand how the servicer reached its current account balance or default determination.
Notice of Error — NOE
A Notice of Error identifies an asserted mortgage-servicing error and requests investigation and correction where appropriate. The practical distinction can be summarized as:
RFI — What happened? Provide the relevant information.
NOE — I believe a servicing error occurred. Investigate and address it.
A communication may sometimes contain both types of requests.
Successors
Successors in Interest
Mortgage problems often arise after the death of a borrower or a transfer of ownership within a family.
Federal servicing rules provide procedures through which certain persons who acquire an ownership interest in mortgaged property may be recognized as successors in interest. Once qualifying successor status is confirmed, important mortgage-servicing rights may become available.
This can be particularly significant where an heir, surviving spouse, child, or other qualifying successor needs information about the loan, wishes to address a delinquency, or faces foreclosure involving inherited property.
Investigation
Reconstructing a Servicing Problem
When the account balance or default is disputed, useful questions may include:
- What payments were received?
- When were they credited?
- How were they applied?
- Was money placed in suspense?
- Why did the monthly payment change?
- Was escrow calculated correctly?
- What fees or advances were added?
- Did a servicing transfer alter the account history?
- Does the payoff figure reconcile with the transaction history?
- Did the asserted servicing error contribute to the alleged default or foreclosure?
The objective is to reconstruct what occurred rather than relying solely on the servicer's current characterization of the account.
Consumer Protection
Mortgage-Related Consumer Protection and Counterclaims
The firm's analysis is not limited to whether a lender can prove its claim. Depending upon the facts, the type of loan, the parties involved, and the conduct at issue, conduct by a creditor, servicer, debt buyer, foreclosure law firm, or other qualifying debt collector may itself give rise to affirmative claims or counterclaims under the Fair Debt Collection Practices Act (FDCPA), the Florida Consumer Collection Practices Act (FCCPA), the Real Estate Settlement Procedures Act (RESPA) and applicable Regulation X servicing requirements, the Truth in Lending Act (TILA) and Regulation Z, and other applicable federal or Florida consumer-protection statutes and regulations.
This conduct may be examined both before a foreclosure action is filed and during the litigation itself, where applicable. Examples may include:
- false or misleading statements concerning the amount, character, or legal status of the debt
- demands for unauthorized interest, fees, advances, escrow amounts, or other charges
- inaccurate payment-change, default, reinstatement, or payoff information
- servicing errors that contributed to or created an asserted default
- misleading representations concerning ownership, standing, or enforcement rights
- failures to properly respond to servicing information requests or asserted errors, where applicable
Not every servicing dispute or collection communication creates an actionable claim. Statutory coverage, limitations periods, damages, causation, and the identity of the proper defendant must be evaluated on a case-by-case basis.
Think a servicing error affected your account?
A consultation reviews your payment history, escrow records, and notices to determine what actually happened.