The largest debt for most people is their mortgage. And their primary asset is their house. Since the neighborhood bank gave you a loan to buy a property and collected your loan payments, things have changed. Keep reading to learn the five facts we think everyone with a mortgage should know. If you are behind on your mortgage and are considering bankruptcy, contact Law Offices of Terrence Fantauzzi at (909) 552-1238 for help.
- Your balance due is not the principal balance
- Payments are applied to the oldest unpaid month
- Reimbursements cannot be credited
- Escrow accounts can be padded
- The owner of the note does not make the statement
When you ask someone how much they owe on their mortgage, they will list the principal amount. The residual portion of the original loan amount that hasn’t been repaid is known as the principal balance. However, you can also owe money for late payments that are primarily interest, late fees, escrow advances, or the trash fees that are typically tacked upon defaulted loans.
If the loan has been changed to include a non-interest bearing sum or another non-standard adjustment, determining the principal balance becomes much more difficult. Therefore, the amount required to pay off the loan upon sale or refinance may very possibly include past-due fees in addition to the cost of determining the amount you must pay to discharge the debt.
If you stop paying on a mortgage and then start up again, your payment will be applied to the oldest month that is still outstanding. Therefore, if you haven’t made the payment that was initially due in February, the payment you make in June can be applied to that month instead.
Even though you sent a check in June, the servicer will state that you are still owed money for that month. Everything depends on how payments are credited in accordance with the provisions of the note.
Your payment may occasionally be deposited into what appears to be a separate “pocket” that is designated “Suspense” by loan servicers. They do indeed have your money, but they haven’t added it to the debt you owe. “Suspense” is where the money is.
The only circumstance in which holding monies in limbo seems acceptable is when the payment is insufficient to pay off the debt in full. Service providers are not required to credit part-payments. As a result, they hold onto the funds until they have enough to make the regular payment. A mortgage statement that does not mention any monies kept in suspense therefore does not provide the full picture.
You have an escrow account if the lender is responsible for paying your property taxes and homeowners insurance. As a safeguard against the borrower’s nonpayment, the lender is permitted by federal law to collect an amount greater than the total of the year’s taxes and insurance.
The additional funds, or “cushion,” cannot exceed 1/6 of the annual expenses. Your money is still yours; the servicer simply holds it in case it needs to make a payment when you haven’t. Get a yearly escrow analysis that includes projections of your expenses for the following year as well as income and expenses from the escrow account for the previous year. What you pay in future escrow payments is based on that forecast.
Loan “servicers” have been in charge of collecting payments ever since loans were pooled and sold to investment trusts on Wall Street. The note’s owner pays a business to deposit your payments, maintain track of your costs and fees, and take legal action if you default on your payments.
In most cases, the servicer merely has the authority to collect the debt on behalf of the note’s holder. And service providers alter. As frequently as we replace the oil in our automobile, sometimes. Details concerning anything unexpected in the loan account sometimes be lost when a loan is handed over from one servicer to another.
If you have questions or are considering filing for bankruptcy, contact Law Offices of Terrence Fantauzzi at (909) 552-1238 to request a bankruptcy consultation.