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We will examine whether your mortgage monthly payments were applied according to rules set in your mortgage. For example, according uniform covenant 2 of the mortgage, the mandatory order of payment application is: 1. interest, 2. principal, 3.escrow taxes and insurance, 4. late charges, 5. other advances (legal, property inspection, BPO). Also there are two separate actions when the creditor or servicer receives the money: 1) accept or reject the money, and 2) the money accepted can be put in an escrow account, or be applied according to that priority order. If servicer accepts the money one day it has to apply it the same day it was received, otherwise that is a TILA violation. (Because "accepted" is one thing, and another thing is "applied"). The servicer is incurring in the following consequences when misapplying the borrower's payments: i. Violation to TILA, they didn't apply the money when they accepted. ii. Breach of contract iii. Breach of duty of good faith and fair dealing iv. If there is a chapter 13, then it would be contempt of court order and automatic stay violation because everything is property of the state. If we need to use an analogy we can think of a building in different levels, where a suspense or escrow account would be the basement; interest would be level one; the principal would be level two; taxes and insurance would be level three; other charges would be level four. However, servicers sometimes do not apply your mortgage payments the way is supposed to be applied. However, the post date payments are applied to the basement, instead of applying it to interest, principal, taxes/insurance, other fees. Additionally, when the account is in arrears (for example 32 days is arrears), there is supposed to be an automatic inspections; however, most servicers do not perform those inspections and those fees become bogus unless somebody challenges them. 60 days in arrears would trigger an automatic Broker Price Opinion (BPO). And sometimes a late payment would be applied first to inspections, BPOS, late fees, instead of applying first to interest, principal, etc. (according to the mortgage), and that is a clear violation to covenant number 2 on the order of payments. For example, if there is a $2,000.00 payment, the servicer might take $350 for late charges, $350 for inspections fees, and so on. They violate the mandatory order or priority of the uniform mandatory covenant: interest, principal, taxes/insurance, and then for other charges. Servicers reverse this order, b/c they pay first the inspections fees, BPO, late fees, and then after that they pay the interest and principal. A life of the loan examination will reflect how the mortgage payments were applied to the account and how other bogus fees were erroneously assessed. |