Mortgage Service Providers

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 What is a Mortgage?

A mortgage is essentially a real estate lien on an individual’s property that is placed by a bank or another financial institution for the repayment of money which the individual borrowed from the bank in order to pay for the property. A mortgage includes two portions, a promissory note and a deed of trust.

A promissory note, or a legal contract which states that the borrower agrees to repay the lender even if the individual sells the property. In general, the promissory note includes terms where one party promises to repay a specific amount of money to the lending party within the time frame specified.

A mortgage, also known as a deed of trust, acts as a lien on the property which guarantees that the lender will get their money back even if the borrower does not pay. Mortgages are used to help individuals purchase property when they do not have the money available to do so immediately and to ensure that the lender gets their money back.

What are Mortgage Service Providers?

A mortgage service provider manages mortgages that are sold or transferred to them to manage. When individuals take out a mortgage from a bank to purchase their home, the bank will often sell, assign, or transfer that mortgage to a mortgage service provider to manage.

A mortgage service provider then manages the mortgage by sending monthly statements and collecting payments from the home purchaser.

Is it Legal for a Bank to Transfer My Mortgage to a Mortgage Service Provider?

In general, banks include provisions in their loan agreement contracts with a home purchaser that grants the bank the right to transfer the mortgage. Therefore, in many cases, the home purchaser has typically consented to the mortgage transfer ahead of time.

Unfortunately, most home purchasers do not get to choose which mortgage service provider that their mortgage is transferred to. Additionally, a mortgage may be transferred more than one time.

How Do I Know If My Mortgage Has Been Transferred?

Federal regulations require that a bank provide advance notice of a mortgage transfer. The notice must include:

  • The name, address, and phone number of the Mortgage Service Provider;
  • The date of the transfer;
  • Information about any impact the transfer will have on mortgage insurance; and
  • A statement that the assignment, sale, or transfer of the servicing of the mortgage does not affect any term or condition of the security instrument other than those terms directly associated with the servicing of the loan.

What Issues Can Arise with Mortgage Service Providers?

There may be some issues that may arise which are associated with mortgage service providers. In most cases, because a mortgage service provider often has a limited interest in the actual value of the mortgage, their primary motivation is to minimize servicing costs.

Some of the actions a mortgage service provider may take to minimize servicing costs may include streamlining defaulted into foreclosure instead of working with the home buyer to adjust or refinance the mortgage. In some cases, these practices may be unlawful.

What are Mortgage Claims?

A mortgage claim is a legal proceeding which involves the mortgage loan of a home or other type of residential property. Mortgage claims typically involve a dispute between a homeowner and a lending company.

Mortgage claim lawsuits may result in a homeowner losing their home while a mortgage lender may be losing, or has already lost, mortgage payments. Because of this, mortgage claims may be complex and contentious.

In many cases, a mortgage lawsuit results in a lender being granted a lien, which allows them to take possession of a borrower’s property in order to make up for the payments. In addition, once the borrower fails to pay their mortgage or deed of trust, the lender maintains the right to begin foreclosure proceedings.

What Happens If I Fail to Pay My Mortgage?

As previously noted, a mortgage is a form of security interest which attaches to a piece of property which is paid with borrowed money. The security interest acts as collateral for the repayment of a loan which the individual borrowed from a bank or other financial institution to pay for the property.

Mortgage litigation is a term that is used to describe a lawsuit which involves disputes over mortgage repayment issues. In these cases, the borrower is given an opportunity to explain why they believe their lender is being unreasonable or why they cannot make their payments.

The lender then has the opportunity to respond and present their own arguments regarding the issues involved. Generally, the goal of mortgage litigation is to resolve payment disputes between the parties.

It is very important for a borrower to have an attorney during any mortgage litigation. Most mortgage companies have attorneys on staff who handle the types of issues frequently and are more familiar with the system and process than a borrower.

How Long Can I Not Pay My Mortgage Before Foreclosure?

As noted above, foreclosure is an issue that may arise with mortgage service providers. The length of time that a borrower can go without paying their mortgage prior to foreclosure is not always straightforward.

The terms of a mortgage agreement will provide information regarding the availability of a grace period for missing payments. Once the borrower fails to repay their mortgage, a lender has the right to begin the foreclosure process.

The foreclosure process is a process by which the lender takes possession of a home because the borrower defaulted on their mortgage payments. Once a foreclosure process is complete, the lender typically sells the property at a public auction and uses the proceeds to cover their losses.

If the sale of the property does not cover the amount which is owed to the lender, a borrower may be required to make up the difference. This is called a deficiency judgment which is entered against a borrower to cover the remaining amount of the loan.

In general, the foreclosure process begins after three months of nonpayment and after a borrower has been notified of the default. Proper notification of a default is different in every state. In most cases, the notice will state that the borrower has become delinquent in their payments and, due to nonpayment, the lender has the legal right to repossess the home.

Even if a lender begins the foreclosure process, the borrower may be given a grace period in which they have an opportunity to repay a missed payment. The length of the grace period depends on the laws in the borrower’s state, unless it was specifically addressed in the mortgage agreement.

In addition, if a borrower does not pay their mortgage by the end of the specified grace period, a lender may report the borrower to the credit bureau. This may bring down the borrower’s credit score and it will also appear on the individual’s credit history.

Should I Contact an Attorney?

It is essential to have the assistance of a mortgage attorney for any issues you may be experiencing with your mortgage service provider. Your attorney can review your situation, investigate the issues you are having with your mortgage service provider, and take the necessary steps to help resolve your issue.


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