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Top Ten Mortgage Servicing Abuses

responsiblelending.org | July 29, 2014

Banks and loan companies sometimes charge late fees even when homeowners pay on time.

“Robo-signing” is one type of mortgage fraud that has received a lot of press, but loan companies find many ways to rush foreclosures or generate fees at homeowners’ expense. Here, in no particular order, are many of the top loan servicing abuses.

1. Misapplied payments: Even when payments are made on time, the company mistakenly rejects the check or applies it to the wrong account. The result is unjustified late fees and often other penalties as well. For homeowners, misapplied payments are a huge headache; for loan servicers, misapplied payments mean a chance for more income.

2. Illegal fees: It’s not legal to charge the homeowner when the loan company pays for property monitoring or price opinions from brokers, but it happens.

3. Two-faced “help”: Many homeowners who are actively working with their mortgage servicer to work out their loan are surprised to learn that the company is also actively pursuing foreclosure. (This is called “dual tracking.”)

4. Blocked refinances: Loan servicers don’t like to lose the steady income flowing from their mortgages, so it’s in their best interests to stall attempts to refinance with a different company. Some loan servicers have refused to provide loan payoff information, preventing refinances and even home sales.

5. Squelched legal rights: Loan companies often include “waivers” with their loan modifications, which essentially say, “If you accept this modification, you give up your right to pursue any legal actions against us no matter what egregious acts we commit.”

6. Botched taxes and insurance: Many mortgages have an escrow account for taxes and insurance that the loan company manages—or not. When the company fails to pay these expenses on time, the homeowner is stuck with the penalties. And some companies require expensive hazard insurance (to cover damage from accidents, storms, etc.) even when insurance is already in place.

7. Zipped lips (no communication): When loan servicers believe a homeowner is late on a mortgage, it’s important to send a notice. Sometimes they do, sometimes they don’t.

8. Whirlwind foreclosures: Each state has laws governing the foreclosure process and when a lender can initiate foreclosure. In the rush to foreclose, some loan companies ignore key steps required by law.

9. Crazy foreclosures: This one is hard to believe, but it happens: the loan servicer begins foreclosure proceedings even though the homeowner is current on the mortgage.

10. “Robo-signing” and other fraud: Loan companies fail to review key documents or falsify court documents used to evict—often because the companies haven’t kept accurate records of ownership, payments and escrow accounts that would enable legal foreclosures.

 

Back to July 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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