A List of Some Mortgage Servicer Abuses

The financial industry doesn’t want us to talk about the rampant fraud going on in the foreclosure process today.  They want to always steer the argument to “deadbeat” borrowers.  They’d like you to think that all of the improper and illegal practices are just of a “technical” nature and “paperwork” issues.  There is a whole range of different homeowners who are being foreclosed upon, including many that are victims of mortgage servicing abuse.  These homeowners have legitimate claims when the servicers start adding improper, illegal and bogus fees to pad their revenue. If a homeowner has a legitimate claim against these improper fees, that won’t stop the servicer from continuing with a foreclosure proceeding. One of the areas Max teaches his attorneys to investigate are these improper fees.  They aren’t a rare occurrence, they happen all of the time.  This is why Max includes it in his attorney training.

Here is list of some of the more common abusive practices by mortgage servicers.

  • Payments not timely credited to borrowers’ accounts resulting in unauthorized late fee and other charges
  • Failing to credit payments and instead depositing them in “suspense” accounts so that borrowers appear to be late, and/or delinquent rather than applying payments to principal and interest as required by contract
  • Misusing funds placed in suspense accounts to repay improper fees charged to the borrower’s account or unwarranted force placed insurance charged to the borrower’s account
  • Misusing funds placed in suspense account to create interest income for servicers
  • Charging fees not authorized by contract or allowed by law
  • Intentionally confusing and misleading monthly statements
  • Force placed insurance when hazard insurance has not lapsed, when borrower has provided proof of insurance, and/or when servicer has taken no steps to confirm whether or not it has lapsed
  • Force placed insurance that is exorbitantly priced, including charging borrowers for force placed insurance based on a much higher value property
  • Inappropriate or unauthorized default related servicing fees, such as fees for property monitoring or BPOs
  • Unlawful “monitoring fees” while debtors are under bankruptcy repayment plans
  • Failing to provide payoff quotations to borrowers or their counsel preventing refinancings and short sales
  • Charging prepayment penalties when payoff quotations are provided making refinancing and short sales much more difficult
  • Failing to make timely payment of borrowers’ escrow funds hazard insurance or taxes
  • Failing to properly set up escrow account in the first place – i.e. charging the borrower too little to cover insurance and taxes resulting in force placed insurance and tax delinquencies
  • Failing to send proper notice of default
  • Initiating foreclosures during right to cure periods or during a HAMP mod or other mod evaluation
  • Initiating foreclosures immediately following transfer from prior servicer and without proper notices to borrowers
  • Initiating foreclosure when borrower is not in default because of misallocation of payments
  • Initiating foreclosure when borrower has sent in the required amount to cure the default
  • “Forbearance Agreements” that add inappropriate fees and charges to loan balance
  • “Waiver of claims” provisions in loan mod agreements
  • Denial of loan mods based on claimed investor limitations when PSA indicates no such limitations