Mortgage servicer problems and how to fix them

If your mortgage servicer makes a mistake, such as an escrow error, a payment that was not credited, insurance you did not need, or a mix-up after a transfer, send a written "notice of error" to the servicer's designated address. Under federal mortgage servicing rules (RESPA and Regulation X), the servicer must acknowledge it within five business days and generally fix the error or explain why there was none within 30 business days. If you are behind on payments, the same rules give you time to apply for help before foreclosure can start.

Your servicer is not always your lender

The servicer is the company that collects your payments, runs your escrow account, and handles help if you fall behind. It may not be the company that made your loan, and loans are often transferred between servicers. Your monthly statement names your current servicer.

Common servicer problems

Escrow shortages and errors

If your servicer pays your property taxes and homeowners insurance, it reviews your escrow account at least once a year and sends you an escrow statement. A shortage usually means your taxes or insurance went up, but errors happen too: a bill paid twice, a tax exemption missed, or insurance paid to the wrong company.

• compare each disbursement with your actual tax bill and insurance declarations page
• check that your homestead or other exemptions appear on the tax bill
• ask whether you can spread a shortage over 12 months instead of paying it all at once
• if there is a surplus of $50 or more and you are current, the servicer generally must refund it within 30 days of the review

The servicer may keep a cushion of up to one-sixth of the year's escrow payments, about two months. If your insurance was cancelled or a tax penalty was charged because the servicer paid late from a funded escrow account, that is a servicing error to raise in writing.

Misapplied payments

Servicers generally must credit a full monthly payment as of the day they receive it. A partial payment may be held in a "suspense" account until it adds up to a full payment, which is allowed if your statement shows it. Watch for:

• late fees charged on a payment that arrived on time
• extra principal payments applied to future interest or escrow instead
• payments sent to the old servicer after a transfer and never forwarded

When you pay extra, write "apply to principal" on the payment or choose that option online, then check your next statement.

Force-placed insurance

If the servicer believes your homeowners insurance lapsed, it can buy a policy and charge you. It is usually far more expensive and protects mainly the lender. Before charging you, the servicer must send a first notice and then a reminder notice, generally at least 45 days and 15 days before the charge. If you send proof that you had coverage, the servicer must cancel the force-placed policy within 15 days and refund premiums for any overlap.

Servicing transfers and the 60-day protection

When your loan moves to a new servicer, you should get a "goodbye" notice from the old servicer and a "hello" notice from the new one, generally at least 15 days before and within 15 days after the transfer. For 60 days after the transfer, a payment sent on time to the old servicer cannot be treated as late, and you cannot be charged a late fee for it.

• confirm the transfer by calling the old servicer on a number from an old statement
• set up autopay again with the new servicer if needed
• check your escrow balance, principal balance and any payment plan carried over correctly
• download your payment history from the old servicer before access ends

Notice of error and request for information

These two letters are your strongest tools. A notice of error says the servicer got something wrong. A request for information asks for documents or facts, such as your payment history or who owns your loan.

1. Find the designated address. Many servicers name a specific address for errors and information requests. Check your statement or the servicer's website. Sending it elsewhere can weaken your rights.
2. Write a short, specific letter. Include your name, loan number and property address, and describe the error or the information you need.
3. Send it trackably, by certified mail or another method with proof of delivery, and keep a copy.
4. Track the deadlines. The servicer must acknowledge in writing within five business days and generally respond within 30 business days. It can extend that by 15 business days if it tells you why. Errors about a payoff statement must be fixed within seven business days.

While it investigates an error about a payment, the servicer generally cannot report that payment as late to the credit bureaus for 60 days.

If you are behind: loss mitigation and foreclosure protections

If you miss payments, federal rules require your servicer to try to reach you by phone by about the 36th day of delinquency and to send a written notice of options by the 45th day. Other key protections:

• The 120-day rule. In most cases, a servicer cannot start foreclosure until you are more than 120 days behind. Use that time to apply for help.
• No dual tracking. If you send a complete loss mitigation application more than 37 days before a scheduled foreclosure sale, the servicer cannot move forward with the sale until it decides on your application and any appeal.
• A decision in writing. For a complete application received more than 37 days before a sale, the servicer generally must evaluate you for all available options within 30 days. If you are denied a loan modification, you may be able to appeal.

Options may include forbearance, a repayment plan, a loan modification, a partial claim on some government-backed loans, a short sale, or a deed in lieu of foreclosure. Foreclosure procedures and extra protections such as mediation programs vary by state, and some small servicers are exempt from parts of these rules.

Free help from a HUD-approved housing counselor

HUD-approved housing counseling agencies offer free or low-cost help with budgets, loss mitigation applications and talking to your servicer. Call HUD at 800-569-4287 or search for a counselor at hud.gov. Never pay an upfront fee to a company promising to save your home.

When to escalate

If your notice of error goes unanswered or the problem keeps coming back, file a complaint. See what to do if a company ignores your complaint. The Consumer Financial Protection Bureau (CFPB) and your state's mortgage regulator both take complaints about servicers. You can also compare mortgage companies' complaint records or look up your servicer.

This guide is general information, not legal advice. Foreclosure law and some servicing rules vary by state and by loan type.

Questions and answers