When you apply for a home mortgage, you may think that the lender will hold and service your loan until you pay it off or you sell your house. That’s often not the case. Loans and the rights to service them are bought and sold every day.
What You Need to Know
A home may be the most expensive purchase you ever make. That’s why it’s important to know who is handling your payments and that your mortgage account is properly credited. It’s also important to know what a mortgage servicer does and what your rights are.
- A mortgage servicer is responsible for collecting your monthly loan payments and crediting your account. A servicer also handles your escrow account, if you have one.
- An escrow account is a fund that your servicer holds. You pay money into this fund to cover charges like property taxes and homeowners insurance. The escrow payments typically are included as part of your monthly mortgage payment. The servicer pays your tax bill and your insurance bills as they become due.
- If your mortgage servicer administers an escrow account for you, the servicer is generally required to make escrow payments for taxes, insurance, and any other charges on time. Within 45 days of establishing the account, the servicer must give you a statement that clearly itemizes the estimated taxes, insurance premiums, and other anticipated charges to be paid over the next 12 months, and the expected dates and amounts of those payments.
- The mortgage servicer has to give you a statement every year that details the activity of your escrow account. This statement shows your account balance and reflects payments for your property taxes, homeowners insurance, or other charges. There is no charge for this statement.
The FTC at Work
The FTC has brought many enforcement actions against companies in the mortgage lending industry, focusing in particular on the subprime market. Several cases resulted in big monetary judgments, with courts collectively ordering that more than $320 million be returned to consumers. These actions targeted deceptive or unfair practices in all stages of mortgage lending, from advertising and marketing through loan servicing, by mortgage lenders, brokers, and loan servicers.