What Can I Do If My Lender Doesn't Credit My Mortgage Payments to My Account?

Here’s what to do if your loan servicer misapplies your mortgage payment or doesn’t credit your account.

By , Attorney

Loan servicers sometimes make mistakes when handling mortgage accounts. For instance, your loan servicer might apply your payment to the wrong account. Another typical mistake happens after the servicing rights to a borrower's loan are transferred to a new servicer; the old servicer is generally supposed to forward any payments to the company now handling the account. But occasionally, payments fall through the cracks, and you might not get credit for a monthly mortgage payment sent to the old servicer.

If you believe your mortgage servicer made a mistake when handling your payment, the first step you should take is to contact them. If a phone call doesn't take care of the problem, you can follow up by sending the servicer a "notice of error." If that doesn't work, you can file a complaint with the Consumer Financial Protection Bureau or get an attorney to help you resolve the matter. In the meantime, continue making your regular mortgage payments while the issue is pending. Otherwise, you could risk going into default and face a possible foreclosure.

How Your Servicer Is Supposed to Process Your Mortgage Payments

A mortgage servicer's primary responsibility is to collect and process a borrower's payments on behalf of the lender or current loan owner, called the "holder." Generally, the process works like this: You make a timely mortgage payment. The servicer then applies the money to the interest you owe, principal due, and escrow (if you have an escrow account). If you added extra money to your regular payment, those funds pay off overdue late charges or other unpaid fees. Once those items are paid up, any extra funds go toward reducing the outstanding principal balance on your loan.

How Errors Happen In Mortgage-Payment Processing

From time to time, servicers mess up when processing payments, like by inadvertently applying the money to another borrower's account or putting it in a suspense account. These kinds of errors can cost you and hurt your credit.

Example. Suppose you send your regular monthly mortgage payment of $2,000 to your mortgage servicer. The servicer accidentally puts the funds into a different borrower's account. The servicer then improperly reports your payment as missed to the credit reporting bureaus and charges you a late fee.

How Errors Happen In Servicing Transfers

Sometimes the lender or loan holder acts as the servicer, while other times, it contracts the servicing out to a third-party. The third-party servicer might then hire a subservicer to take on the servicing duties or sell the servicing rights. Servicing transfers frequently occur in the mortgage business.

When your mortgage servicer changes, your old servicer and the new servicer have to let you know about the change. Your old servicer must, in most situations, notify you about the change not less than 15 days before the effective date of the transfer, and your new servicer must provide a transfer notice not more than 15 days after the transfer date. Or the servicers can send a combined notice, not less than 15 days before the transfer. The notice will let you know, among other things, on what date your old servicer will stop accepting payments and the date that your new servicer will begin to accept payments. It will also give you a phone number for an employee or department of the new servicer you can call if you have questions about the servicing transfer, and the transfer date. (12 C.F.R. § 1024.33).

Once the transfer date occurs, you should start sending your payments to the new servicer. If your mortgage payment is automatically taken out of your bank account, make sure you update the account so that your bank sends the payment to the new servicer. However, for 60 days starting on the effective transfer date, the new servicer can't charge you a late fee or treat a payment as late if you sent it to your old servicer on time. The old servicer is supposed to forward the payment to the new servicer or send it back to you. (12 C.F.R. § 1024.33).

But sometimes, the old servicer fails to send the payment on to the new servicer or return it to the borrower. So, the new servicer doesn't credit the payment to the borrower's account.

How to Resolve the Servicer's Mistake

If you believe your servicer made a mistake when handling your payment, you might be able to resolve the matter by contacting the servicer, sending a "notice of error," filing a complaint with the Consumer Financial Protection Bureau, or getting an attorney to help you.

Call Your Servicer

The first step to take if your payment doesn't get credited to your account is to call the servicer to explain the problem. If the person you speak to can't immediately remedy the matter, ask when you should expect a resolution and a return call about the issue. Be sure to get the name of the person you speak to and note the time and date you call.

Send Your Servicer a Notice of Error

If a phone call doesn't resolve the problem, you can send the servicer what's called a "notice of error." Under the federal Real Estate Settlement Procedures Act (RESPA), you get the right to send your servicer a letter letting them know that it made an error on your account, and the servicer must fix the mistake within a specific amount of time.

What to Include With Your Notice of Error Letter

Along with your letter, send copies of the canceled check or of your bank account statements to prove that you sent the payment. Keep a copy of the letter and any enclosures for your records. Don't send any original items, such as canceled checks, along with your letter—only send copies. It's usually best to send your letter by certified mail and request a return receipt. Be sure to send the letter to the address that the servicer designates for notices of error.

How the Servicer Must Respond to Your Notice of Error

Federal law requires the servicer to:

  • correct the error, provide notification of the correction, and give you contact information to follow up or
  • let you know that no error occurred along with the reasons for this conclusion. It also has to include a statement of your right to request documents the servicer relied upon in reaching its determination, information about how you can request such documents, and contact information, including a telephone number, for further assistance. (12 C.F.R. § 1024.35).

How Fast the Servicer Has to Respond to Your Notice of Error

Your servicer must acknowledge your notice of error within five business days. The servicer must respond within 30 business days after it gets your notice. The servicer may generally extend the 30-day period by 15 days if, within the 30 days, it informs you about the extension and tells you why the process is delayed. If your issue involves a servicing transfer that occurred less than a year ago, both the new servicer and old servicer must investigate and respond to your notice of error. Though, be sure to send a notice of error to both servicers. (12 C.F.R. § 1024.35).

When the Servicer Doesn't Have to Respond to a Notice of Error

The servicer doesn't have to address a notice of error in some situations, like if you already sent a letter about the problem or you're asking about a loan that transferred to another servicer (or that was paid off) more than a year ago. But the servicer can't just ignore your notice. It must notify you within five business days after determining that it doesn't have to deal with your notice, and give you the basis for the determination. (12 C.F.R. § 1024.35).

File a Complaint with the Consumer Financial Protection Bureau

You may also file a complaint about the servicer with the Consumer Financial Protection Bureau online or by calling 855-411-2372. The bureau will forward your complaint and any documents you provide to the servicer and work to get a response from them, generally within 15 days.

Talk to a Lawyer

If the servicer doesn't respond to your call, notice of error, or complaint, or disagrees that it made an error, consider talking to a lawyer. An attorney can advise you about what to do in your situation and help you enforce your rights.

If you're facing an imminent foreclosure, talk to a foreclosure attorney right away. Calling the servicer, sending a notice of error, or filing a complaint with the Consumer Financial Protection Bureau is highly unlikely to stop foreclosure proceedings. To halt a foreclosure, you'll most likely need an attorney's assistance. If you're not in imminent danger of foreclosure, a debt relief lawyer, real estate lawyer, or consumer protection lawyer might also be willing to help you.

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