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Your Rights When Paying Your Mortgage

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Dealing with your mortgage can feel confusing and frustrating. But you have rights when it comes to making your payments and how your servicer manages your account.

What Is a Mortgage Servicer?

Did you know there’s a difference between your lender and your servicer? The lender is the company that you borrow the money from — typically a bank, credit union, or mortgage company. When you get a mortgage loan, you sign a contract and agree to pay back the lender.

The servicer is the company that handles the daily management of your account. Sometimes, the lender is also the servicer. But often, the lender arranges for another company to act as the servicer. It’s important to know your mortgage servicer because it’s the company that

  • processes your mortgage payments
  • answers questions about your loan balance and payment history
  • pays your insurance and taxes, if you have an escrow account. An escrow account is where you set aside money to pay insurance and taxes. The account is managed by the servicer, who ensures that the lender knows the money is there to pay those bills when they’re due. To find the name of your servicer, check your mortgage statement or your coupon payment book. It’s not uncommon for your servicer to change. Within a few weeks of the change, you’ll get notices from your old servicer and your new one. The notices give you the contact information for the new servicer, the date they start accepting your payments, and what to do if you have a question or complaint.

How To Avoid and Fix Problems With Your Servicer

Typically, the servicer must credit a payment to your account the day they get it. That way, you don’t owe extra fees and the payment doesn’t look late to the lender. Late payments show up on your credit report and may affect your ability to get credit in the future. Too many late payments can lead to default and foreclosure.

Review and keep your records

Review all letters, emails, and statements when you get them from your mortgage servicer. Be sure their records match yours. Most servicers (except very small ones) must give you either a coupon book (often every year) or a statement every billing cycle (often every month). Servicers must send periodic statements to all borrowers who have adjustable rate mortgages, even if they decide to send them coupon books.

Your coupon book or statement will have your servicer’s contact information. That way, you can learn more about your account, get an explanation of a charge, or confirm that they’re crediting your payments properly and on time.

If your statement is late — even by just a few days — call the mortgage company to track it down in case there’s a problem with your account. If your account shows that you’re paying late, you could be in default on your loan. Late payments and a default are reported to a credit bureau and will appear on your credit report. That could affect your ability to get credit in the future. Get an explanation for anything you don’t understand.

If you get a notice that your servicer has changed, call your current servicer to confirm the new mortgage servicer — before you send in your next payment. This will make sure your payment goes to the right servicer, avoid delays in processing, and can help you avoid a scam.

Even if you don’t have any problems with the servicer, keep your mortgage statements, coupon books, records of your payments (for instance, canceled checks, bank account statements, online account histories), and every document you send to the servicer. If you have a problem down the road, you’ll want those records to confirm your payment history and any communications with the servicer.

Confirm your loan balance and account information

If you’re looking to refinance or pay off your loan balance before the end of the loan term, you’ll need to confirm the payoff amount with the servicer. The payoff amount is what you still owe on your loan. It’s not the same as your current loan balance because the payoff amount includes the interest accrued up through the day you expect to pay off the loan, and any fees you haven’t yet paid. Call your servicer to get your payoff amount as of a specific date.

Before you decide to pay off your mortgage, consider these questions.

1. Will you owe a prepayment penalty? Check your monthly billing statement, coupon book, or the paperwork you signed at the loan closing (typically in the Note or Addendum) to see whether you’ll owe a prepayment penalty if you pay your loan back early. Usually, a penalty applies only if you pay off the entire loan (most likely when you sell or refinance the home).

2. Do you owe other money? It may make more sense to pay off other loans, credit cards, and car loans first — especially if you’re paying a higher interest rate on them.

3. What’s your situation? Decide whether it works in your favor to pay the loan early. Do you plan to stay in your home for the long term? Are you nearing retirement? Will there be tax implications to paying off your mortgage? Does any benefit offset having to pay a penalty?

Raise and resolve disputes or errors

If the servicer made a mistake or charged you a fee you don’t owe, correct it as soon as possible. But keep making your regular monthly mortgage payment. Don’t subtract the disputed amount from your mortgage payment. Some servicers will refuse to accept what they consider a “partial” payment. They could return your check and charge you a late fee, or claim that your mortgage is in default and start foreclosure proceedings.

Don’t write your dispute on your payment coupon or a copy of your monthly mortgage statement. Instead, contact your servicer in writing and explain the problem (known as a “qualified written request”)

  • Use the Sample Complaint Letter to write your request, including your account number and an explanation of why you think your account is incorrect.
  • Gather any documents that support your request. Your records should include copies of your statements, coupon book, and paperwork showing that you made your payments (for instance, canceled checks, bank account statements, online account histories, and other letters to the servicer). These can serve as proof of your payment history and your interactions with the servicer.
  • Send your letter — and copies of any documents that support your request — to the mortgage servicer’s customer service address by certified mail, and request a return receipt. This may be a different address from where you send your payments.
  • Keep a copy of your letter and the originals of the documents you sent.

Know your rights under the law

Under the Real Estate Settlement Procedures Act (RESPA), your servicer must

  • acknowledge your letter (“qualified written request”) in writing within five business days of getting it
  • correct your account or determine instead that there is no error — generally, within 30 business days
  • send you a written notice of the action it took and why, and the name and phone number of someone to contact for more information or help

You have a 60-day grace period after a transfer to a new servicer. That means you can’t be charged a late fee if you send your on-time mortgage payment to the old servicer by mistake — and your new servicer can’t report that payment as late to a credit bureau.

Missing Mortgage Payments: Default and Foreclosure

Usually, if you miss one or more payments on your mortgage loan, your loan is considered to be in default, but you might have special rights during the during the COVID-19 pandemic. To learn more, read these resources from the Consumer Financial Protection Bureau: Mortgage forbearance during COVID-19: What to know and what to do and CARES Act Mortgage Forbearance: What You Need to Know.

In other circumstances, the servicer might order “default-related services” to protect the value of the property — like inspections, lawn moving, landscaping, and repairs. The servicer will charge your loan account for these services, which can add up to hundreds or thousands of dollars.

If the lender decides to move ahead with foreclosure, that process can also add hundreds or thousands of dollars in additional costs to your loan. That can make it even more difficult for you to keep up with payments, make your back payments, and keep your home.

If you’re facing foreclosure, stay in touch with your servicer and try to work out a plan to pay the back payments you owe, modify your loan, enter into a repayment plan, or get a temporary reduction or suspension of payments. If your loan was in default when your new servicer took over, they might be considered a debt collector and you may have additional rights.

The CFPB has more information about servicing your loan.