WE’RE HEARING about mortgage servicing problems from both the CFPB and John McDermott. Yes I may have entered into escrow hell on my recent refi. My particular hell is not described in the CFPB’s supervisory highlights released this summer. The CFPB report involves a two-year review of servicing practices and as one might expect some problems affecting consumers were discovered.
The areas reviewed by the CFPB included servicing transfers, payment processing and loss mitigation. The mistakes found on servicing transfers were kind of boring. Typically they involved failing to disclose a transfer and general boo-boos with document handling. The payment processing problems were more interesting.
Problems with payment processing involved failing to give notice of an address change for payments. You would think a servicer could get this right since getting paid is usually a priority for most businesses. Tax escrow screw-ups included failing to pay on time and a more classic one of changing the month when the taxes are paid from December to January. Working the old interest rate float on someone else’s money resulted in many consumers taking a tax deduction for real estate taxes in the wrong calendar year.
My escrow hell involves the payment of my real estate taxes. My loan funded June 28 and taxes were due July 1 with a grace period to Sept. 14. The title company collected the July tax at closing to pay it. In early August the taxes were still unpaid and I emailed the title company who then paid the tax. Next I received a letter from the servicer telling me they paid the tax and now I have an escrow shortage and my monthly loan payment was going up $240.
Now I get to waste time fixing the problem. I found out from my taxing office that the title company and not the servicer paid the taxes and got a copy of the cancelled check. I wrote to the servicer to explain the mess and hopefully they will correct my monthly payment so I do not have to overpay each month. Stay tuned for details.
In case you missed it while you were on summer vacation HUD issued a notice (H 2013-22) on Aug. 15 about FHA purchases to make it easier to qualify for someone who experienced a recession related economic event. Since refis seem doomed to higher rates this new FHA underwriting guideline for purchases should be required reading to help improve your bottom line.
FHA will now consider someone otherwise ineligible for loan approval due to standard waiting times because of a bankruptcy, foreclosure, short sale or other late payments if certain conditions are met. The credit dings have to be related to an economic event beyond the person’s control which resulted in a job loss and or income loss of 20% or more for at least six months. Other conditions include completing satisfactory counseling, re-establishing satisfactory credit for at least one year and meeting all other HUD requirements.
Finally we travel to the great state of Nebraska to look at a recent decision by the state’s commission on the unauthorized practice of law. The unauthorized practice of law is when someone pretends to be a lawyer and gives legal advice. The person in question in this case was selling “kits” on his website to help homeowners with foreclosure. This one appeared to be less of a scam towards consumers and more like someone who had too much time on their hands and not enough of the right medication.
Based in Chelsea, Mich., John McDermott is a real estate and elder care attorney who represents both consumers and businesses. He can be emailed at email@example.com.