How do you make a mortgage servicer fix an error, and what if it does not?

This page explains federal law as it applies to homeowners in New York: the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2605, and the Consumer Financial Protection Bureau's Regulation X. KOR Law LLP's consumer protection practice handles RESPA and Truth in Lending Act claims involving mortgage servicing and disclosure, and the firm also defends homeowners in foreclosure. Servicing problems and foreclosure often overlap, and the rules below can matter in both.

What counts as a servicing error?

Regulation X lists "covered errors" a servicer must investigate (12 CFR 1024.35(b)). They include:

• refusing a payment that meets the servicer's written payment requirements, or misapplying an accepted payment to principal, interest, escrow or other charges;
• failing to credit a payment as of the date received;
• failing to pay taxes or insurance from escrow on time, or to refund an escrow balance;
• imposing a fee the servicer has no reasonable basis to charge;
• failing to give an accurate payoff balance on request;
• giving inaccurate information about loss mitigation and foreclosure;
• failing to transfer servicing information accurately when the loan moves to a new servicer;
• starting a foreclosure, moving for judgment, or holding a sale in violation of the loss mitigation rules; and
• "any other error relating to the servicing of a borrower's mortgage loan."

How do you send a notice of error, step by step?

1. Find the right address. A servicer may designate a specific address for notices of error, and must tell borrowers in writing; a notice sent elsewhere may not trigger the rules (12 CFR 1024.35(c)).
2. Write the notice. Include your name, information that identifies the loan account, and the error you believe occurred (12 CFR 1024.35(a)). A qualified written request that asserts an error counts as a notice of error. Notes on a payment coupon do not.
3. Send it with proof. Keep a copy and proof of delivery; the deadlines run from receipt.
4. Watch for the acknowledgment. Within 5 business days of receiving it, the servicer must acknowledge the notice in writing (1024.35(d)).
5. Get the answer. The servicer must either correct the error and tell you, or conduct a reasonable investigation and explain in writing why it believes no error occurred, with your right to request the documents it relied on (1024.35(e)(1)).
6. Request the documents. If the servicer finds no error, it must provide the documents it relied on, free, within 15 business days of your request, except confidential or privileged material (1024.35(e)(4)).

What protections apply while the error is being investigated?

The servicer may not charge a fee, or demand a payment that may be owed, as a condition of responding to a notice of error (12 CFR 1024.35(h)). For 60 days after receiving it, the servicer may not report adverse information to a credit bureau about any payment that is the subject of the notice (1024.35(i)(1)); the statute has a parallel rule for qualified written requests about payments (12 U.S.C. 2605(e)(3)). If the servicer reports the account inaccurately anyway, see how to dispute a credit report error under the FCRA.

The statute also lists outright prohibitions: a servicer may not obtain force-placed hazard insurance without a reasonable basis to believe the borrower failed to maintain required insurance, charge fees for responding to valid qualified written requests, fail to act on requests to correct errors about payment allocation, payoff balances or avoiding foreclosure, or fail to identify the loan's owner within 10 business days (12 U.S.C. 2605(k)(1)).

What about force-placed insurance?

Before charging for force-placed insurance, a servicer must send a written notice at least 45 days before assessing the charge and a reminder notice at least 15 days before, and the reminder cannot go out until at least 30 days after the first notice (12 CFR 1024.37(c), (d)). Within 15 days of receiving evidence that the borrower had compliant hazard insurance in place, the servicer must cancel the force-placed coverage, refund the premiums and related fees paid for any overlapping period, and remove those charges from the account (1024.37(g)).

What changes the answer?

• The type of error. Payoff and foreclosure errors have shorter deadlines (12 CFR 1024.35(e)(3)).
• The servicer's designated address. Sending the notice elsewhere can undercut it (1024.35(c)).
• Duplicate notices. A servicer need not re-answer substantially the same error unless you provide new and material information (1024.35(g)(1)(i)).
• Small servicers and reverse mortgages. Small servicers and reverse mortgage servicing are exempt from some Regulation X rules, including the loss mitigation procedures, though not from the error resolution section (12 CFR 1024.30(b)).
• Principal residence. The loss mitigation procedures apply only to a borrower's principal residence (1024.30(c)(2)).
• Prompt correction. A servicer that fixes an error within 60 days of discovering it, before suit or written notice, avoids RESPA damages (12 U.S.C. 2605(f)(4)).
• New York's own foreclosure notices. State law adds separate requirements before a home foreclosure can be filed; see New York's 90-day foreclosure notice.

For example: escrow taxes that were never paid

Common mistakes

• Calling instead of writing. The rules apply to written notices (12 CFR 1024.35(a)).
• Using the wrong address. Check your statements for the designated address (1024.35(c)).
• Vague notices. State the error and the account clearly.
• Not asking for the documents. The servicer must provide what it relied on if it finds no error (1024.35(e)(4)).
• Stopping payments. A notice of error does not stop the loan's payment obligations; the servicer may not require payment as a condition of responding, but the loan terms still apply.
• Missing foreclosure overlaps. If a foreclosure is underway, the loss mitigation rules matter too; see whether you can still get a loan modification after a New York foreclosure case starts.

What to do this week

1. Gather your monthly statements, escrow statements and payment records.
2. Find the servicer's designated address for notices of error.
3. Send a written notice of error describing each mistake.
4. Calendar the 5-day, 30-day and 60-day dates.
5. Pull your credit reports to see how the loan is reported.
6. If a foreclosure notice or summons arrives, get advice at once.

If you have already been served with a foreclosure summons, start with what happens after you are served with a foreclosure summons in New York.

Frequently asked questions

What is a qualified written request?

A written letter, not a note on a payment coupon, that identifies the borrower and account and states why the borrower believes the account is in error or what information is sought (12 U.S.C. 2605(e)(1)(B)). One that asserts an error is treated as a notice of error under Regulation X (12 CFR 1024.35(a)).

What can I recover if the servicer ignores me?

Actual damages, up to $2,000 more for a pattern or practice of noncompliance, and costs and attorney's fees (12 U.S.C. 2605(f)). See what you can recover for a credit reporting or debt collection violation.

How long do I have to sue?

Three years from the violation for servicing claims under section 2605 (12 U.S.C. 2614). See how long you have to sue under the FCRA, FDCPA, or TCPA.

Who owns my loan?

Ask in writing. The servicer must give the owner or assignee's identity and contact information within 10 business days (12 CFR 1024.36(d)(2)(i)(A)). Ownership can matter in a foreclosure; see whether a New York foreclosure can be dismissed because the lender lacked standing.

Does this apply to a vacation home or investment property?

Regulation X's principal-residence limit applies to the early intervention, continuity of contact and loss mitigation rules (12 CFR 1024.30(c)(2)); it is not written into the error resolution section itself (12 CFR 1024.35).