Below is a question I received on my website, as well as the answer. For the most part most lenders do a pretty good job of this but sometimes they don’t and you have the power to question them if they think they are collecting too much from you…
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A $100. increase on my 30 year fixed mortgage!!
My loan was originally being serviced by Bank of America when we bought this property 5 1/2 years ago. We have never missed a payment or been late. Last January our loan was sold to Penny Mac for servicing, I have had nothing but problems with this company! The online payment center still won’t let me go all way through to pay, the automated phone payment frequently disconnects me, and usually after six tries when I do get an operator they have a $15.00 fee for helping me, Ugh!! Now my question: Can this company charge me an extra $100. a month because of their annual Account Analyst that has predicted that because of the rising costs of servicing my PITI 30 yr. fixed HUD loan my escrow acct. will be short by $1,300.00? If they can do that, it means that my terms HAVE changed and it is no longer a 30 yr. fixed loan! It’s not my fault that Southern California has an unstable economy, why should I have to pay for that! I tried to go back to B of A and they just sent me an automated form letter. Do I have any legal recource at all?? Please help, the payments are scheduled to start next month. L. B.
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Everything goes back to the original terms of your mortgage. Something you signed at closing (there are different variations of what this document is called) dictates what a lender/servicer can and cannot do when it comes to adjusting your impound account.
Generally speaking they do have the ability to adjust what is needed on the impound portion of your payment on an FHA loan and this does not change the terms of your loan so long as only the impounds are affected. You are however able to challenge this. HUD (the Department of Housing & Urban Development) created rules to make sure lenders are not collecting too much.
The money in your escrow account is YOUR MONEY and is always your money until it is paid out. But the onus is on you to ensure you are not paying too much. As I am not an attorney I can only say so much, but I can share with you a link to HUD’s guidelines in the subject…
Basically lenders/servicers are only allowed to keep up to a maximum of 1/6 of the total cost of taxes and impounds as a “cushion” over and above the amount they collect so they have enough to make the next payment for your taxes or insurance. The issue here is what figure they are basing that calculation on.
From your question it sounds like you believe that is an arbitrary number, or a number based on an estimate of future expenses that may or may not be accurate. If that is actually the case I would think you have a valid complaint.
Your next step would be to make a “qualified written request” to the lender about the amount they are collecting (send it separate from your payment). They then have 20 days to respond and 60 days to resolve the complaint, including providing documentation that shows their calculations and where it is coming from. If they don’t solve it to your satisfaction you can then file a complaint with HUD.
One thing to remember is, if they are right about needing the extra $1,300, homeowners insurance and taxes are YOUR responsibility even if there are impounds on your loan. If they are short $1,300 for taxes next year it is highly likely that you will have to come up with the money all at once to make sure your taxes are paid on time and with no penalty. Some lender/servicers will pay the extra amount on your behalf but they will bill you for the difference and may increase your impounds by double the amount you were short when that was due (say $200 a month instead of $100) to A.) pay them back, and B.) to make sure there is enough so the next payment can be made when that comes around. Hope that helps.
P.S. If values have gone up quite a bit where you live it might make sense to look at a Conventional loan via a refinance. As opposed to an FHA loan you may not have to have impounds on a Conventional loan. You may be able to lower your payment and have the ability to pay your taxes and insurance on your own and not have to worry about the impounds. Something to think about. I get calls every day for people wanting to get out of their FHA loan and into a Conventional.