Many clients come to us at Advocate Legal when their servicer stops accepting their payments. Sometimes the servicer will add insurance or taxes to your loan payment and suddenly return your checks because you are paying the wrong amount. In some cases when the servicer stops accepting payments they will give no reason at all.
When a servicer stops accepting your payments most times they will offer you a loan modification. This will ensure that you don’t seek a legal remedy for their breach of your loan contract. Borrowers are lured into a longer default by the promise of a lower payment they never asked for.
When a servicer stops accepting your payments it seems illogical that they would actually make more money, but they do. This is because your default adds to the principal balance of your loan and also allows them to rack up penalties and fees which they will either charge to you or the beneficiary. If you cure your default, or you accept a forced loan modification, the servicer’s penalties and fees will be added to your principal balance. If you default and foreclose they will collect those fees [off the top(creaming fees)] before any money gets paid to the investor.
When the servicer stops accepting payments from a widow or widower it is usually with the excuse that you are “not on the loan,” which is true but also irrelevant. When a servicer stops accepting loan payments from a surviving spouse because he or she was not on a party to the mortgage they are effectively calling in the Promissory NOTE which is illegal by federal statute. To delay the surviving spouse from seeking a legal remedy, the servicer will offer a loan modification, and eventually, stop accepting those payments using the same argument that you are “not on the loan.”
When the servicer stops accepting your payments it’s a trick to push you into foreclosure and most people fall for it. This is because it is human nature to use your mortgage money for the extra things you want and not put it in the bank to eventually pay your mortgage or an attorney. It is also hard for most homeowners to accept what is happening to them when they haven’t done anything wrong.
If you act quickly after a servicer stops accepting your payments you have a good chance to get your loan reinstated and legal fees awarded by the court. This is because by acting quickly you have shown the court that you are the victim and all you want is to pay your mortgage. The longer you wait, the more likely the court is to believe the servicer when they come into court and say that it was you that stopped paying.