The Real Estate Settlement Procedures Act
I am going to use the term “mortgage” to refer generally to an individual’s promise to repay the loan he or she used to purchase their home.1 If you own your home subject to a mortgage, I can all but guarantee that your mortgage is held by a securitized mortgage trust. In other words, your mortgage was likely bought from your original lender and placed into a portfolio with hundreds or thousands of other mortgages. This portfolio is likely managed by very, very well-paid individuals. But mortgage servicing – collecting monthly payments, paying the appropriate taxes, etc. – is usually accomplished through the hiring of a Mortgage Servicer. This is where the Real Estate Settlement Procedures Act (“RESPA”) becomes relevant.
RESPA is expansive and applies to all federally related mortgages. For the purposes of this writing, I’m going to be referring to the protections afforded to consumers with regard to escrow accounts. When I refer to escrow accounts, I am referring to the customary practice for a mortgage agreement to indicate that a mortgage servicer will collect a certain amount of money monthly and apply it to such items that could jeopardize the mortgage holder’s interest in the home. These items include real estate taxes and homeowner’s insurance and other items that could possibly result in a lien being placed against the home if unpaid. With such drastic consequences, these accounts must be managed properly.
For instance, RESPA, at 2605(g), requires that a Mortgage Servicer who falls under the provisions of RESPA must pay all real estate taxes and insurance premiums and other items as they become due. To pay these items late would result in liability to a Mortgage Servicer which include (1) actual damages suffered by the homeowner, (2) statutory damages of $2,000 for each violation, and (3) attorney’s fees and costs associated with bringing the case. To bring a case under RESPA 2605(g), an individual most file suit within 3 years from the date of violation. Often times, violations of section 2605(g) are often undiscovered until a delinquent tax notice or letter from an insurance company. As that’s the case, it imperative that you act quickly if you believe your mortgage has been serviced incorrectly. Call Roland Stock for a free consultation today.
1 A Promissory Note is the promise to repay your home loan, technically. The Mortgage is a document by which you pledge your home as collateral to secure your home loan. Most people refer to their loan as their “Mortgage.”