Need help

[Lizzyw]

Sorry if this is in the wrong place. I just signed up so I am still getting used to navigating here.

I need some advice. My husband and I bought our first house the end of August 08. It's an FHA 30 yr fixed @6%.

We chugged along for a year making all the payments. Then in December got a statement that our payment will go from $2040 to $2500. Called, the customer service Dep. hadn't a clue only that there must have been a miscalculation in the impound account. Told us to continue making the original payment amount. Ok, fine.

Now this year we have been told that our payment needs to be $2900 as their is a $7000 and change shortage in our Escrow account. Whaaat?


In researching all of this it appears that the underwriter forgot to add the Special Assessment Melaroos tax. The Escrow Officer calculated it properly, but apparently the underwriter missed in entirely, so it isn't on the loan docs at all. On the HUD 1 form it list the impound amount for property taxes and the line below has an option for Special Assessment, that was left blank.

The Mortgage company offered to absorb the shortage but our payment will still go up a few hundred dollars a month. We are on a fixed income as it is. 3 small children and I am a stay at home mom. We spoke with an attorney who only gave us the time of day because we were referred by a friend of his. He basically said that while yes there are probably TILA violations as well as RESPA, it's not worth it to go to court because, frankly, we dont' have the money, and basically our only option is to stop making payments, pocket the cash and get forclosed on.

Does this seem like we have a case. Anyone ever heard of this kind of thing happening? And who would be at fault?

I will try to get them to offer the deal to pay the shortage again, but I am afraid that we won't be able to maintain the monthly payment. Kids get sick, ect....

Is there any recourse for us. Apparently we should have caught the error because we had the information in the paper work about the Melaroos. This was our first time buying a house, how are we supposed to know the calculations were off? Is this a due diligence issue?

Any advice would be greatly appreciated...

[Maurice Bedard]

Hello and welcome to the community! Thanks for sharing your story.

This definitely does not happen too often, but when it does that leaves the borrower screwed, big time. Unfortunately, when you have a purchase money mortgage there are not many laws with teeth to protect you. The truth in lending act mainly covers refinance mortgages on primary residences. Meaning when a borrower has this type a loan, this law can help them in some cases.

Under the real estate and settlement procedures act you may have something.

Section 10: Limits on escrow accounts

Section 10 of RESPA sets limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance and other charges related to the property. RESPA does not require lenders to impose an escrow account on borrowers; however, certain government loan programs or lenders may require escrow accounts as a condition of the loan.

During the course of the loan, RESPA prohibits a lender from charging excessive amounts for the escrow account. Each month the lender may require a borrower to pay into the escrow account no more than 1/12 of the total of all disbursements payable during the year, plus an amount necessary to pay for any shortage in the account. In addition, the lender may require a cushion, not to exceed an amount equal to 1/6 of the total disbursements for the year.

The lender must perform an escrow account analysis once during the year and notify borrowers of any shortage. Any excess of $50 or more must be returned to the borrower.

In looking at this, your loan documents are gonna have much of the answers to your questions and also if you have any possible legal recourse. You need to take them out and examine them to see if there's any special escrow provisions that allow them to do this. I'm assuming that FHA has covered their bases and there's probably this provision in there.

Here is some more info from HUD that may help you file a complaint.

Loan servicing complaints


Section 6 provides borrowers with important consumer protections relating to the servicing of their loans. Under Section 6 of RESPA, borrowers who have a problem with the servicing of their loan (including escrow account questions), should contact their loan servicer in writing, outlining the nature of their complaint. The servicer must acknowledge the complaint in writing within 20 business days of receipt of the complaint. Within 60 business days the servicer must resolve the complaint by correcting the account or giving a statement of the reasons for its position. Until the complaint is resolved, borrowers should continue to make the servicer's required payment.

A borrower may bring a private law suit, or a group of borrowers may bring a class action suit, within three years, against a servicer who fails to comply with Section 6's provisions. Borrowers may obtain actual damages, as well as additional damages if there is a pattern of noncompliance.

Other enforcement actions


Under Section 10, HUD has authority to impose a civil penalty on loan servicers who do not submit initial or annual escrow account statements to borrowers. Borrowers should contact HUD's Office of RESPA and Interstate Land Sales to report servicers who fail to provide the required escrow account statements.

Filing a RESPA complaint


Persons who believe a settlement service provider has violated RESPA in an area in which the Department has enforcement authority (primarily sections 6, 8 and 9), may wish to file a complaint. The complaint should outline the violation and identify the violators by name, address and phone number. Complainants should also provide their own name and phone number for follow up questions from HUD. Requests for confidentiality will be honored. Complaints should be sent to:

Director, Office of RESPA and Interstate Land Sales U.S. Department of Housing and Urban Development Room 9154 451 7th Street, SW Washington, DC 20410 Email Phone: (202) 708-0502

[Lizzyw]

Hello and welcome to the community! Thanks for sharing your story.

This definitely does not happen too often, but when it does that leave that to the borrower big time. Unfortunately, when you have a purchase money mortgage there are not many laws with the teeth to protect you. The truth in lending act mainly covers refinance mortgages on primary residences. Meaning when a borrower has this type a loan, this law can help them in some cases.

Under the Realestate and settlement procedures act you may have something.

Section 10: Limits on escrow accounts




In looking at this, your loan documents are gonna have much of the answers to your questions and also if you have any possible legal recourse. You need to take them out and examine them to see if there's any special escrow provisions that allow them to do this. I'm assuming that FHA has covered their bases and there's probably this provision in there.
[/QUOTE]

Yes there is. Something to the effect that if there is a shortage they can raise your payment amount, ect. But that usually applies to when your taxes are raised. With this situation, certain taxes were left out entirely.

Here is some more info from HUD that may help you file a complaint.

[/QUOTE]
Loan servicing complaints


Section 6 provides borrowers with important consumer protections relating to the servicing of their loans. Under Section 6 of RESPA, borrowers who have a problem with the servicing of their loan (including escrow account questions), should contact their loan servicer in writing, outlining the nature of their complaint. The servicer must acknowledge the complaint in writing within 20 business days of receipt of the complaint. Within 60 business days the servicer must resolve the complaint by correcting the account or giving a statement of the reasons for its position. Until the complaint is resolved, borrowers should continue to make the servicer's required payment.
[/QUOTE]
By servicer, you mean the mortgage company, right?
We sent them a letter back in Jan. and they replied early February with the offer to absorb the neg impound account amount. Does this mean they resolved it even though we didn't accept the offer one way or the other? Can we still hold them to the offer?

[/QUOTE]
A borrower may bring a private law suit, or a group of borrowers may bring a class action suit, within three years, against a servicer who fails to comply with Section 6's provisions. Borrowers may obtain actual damages, as well as additional damages if there is a pattern of noncompliance.

That takes a lot of $$$$$$$$$$$$$
[/QUOTE]
Other enforcement actions


Under Section 10, HUD has authority to impose a civil penalty on loan servicers who do not submit initial or annual escrow account statements to borrowers. Borrowers should contact HUD's Office of RESPA and Interstate Land Sales to report servicers who fail to provide the required escrow account statements.
[/QUOTE]
They did and have.
[/QUOTE]

What happens after a complaint? From my understanding it's like reporting someone to the BBB, right?

So is the situation really either,
A: Ask if the initial offer still stands?
B: File a complaint and walk away?
C: Take them to court?

Sorry if I sound stupid, a little stressed out here and very naive of the whole situation.

Seems like we really got Scre**ed

[Maurice Bedard]

Sorry for my writing mistakes in my post. I am using speech recognition software and it doesn't work 100% accurately. Sometimes I miss my mistakes and then come back and go, wow, that is bad.

You are by no means stupid or naive. This is an unforeseen circumstance that you couldn't have possibly of predicted.

OK, so they seem to be covered as I expected. You need to make this decision on your own and see if it is all worth it. What are the pros and cons. If they work with you on a loan modification, great. If not, it is time to make your exit plan. But I think they may because of this hardship due to an escrow increase.

You might want to try obtaining assistance from www.995hope.org 888-995-hope.

Everything will work out in the end. You are doing everything that you can right. Maybe this wasn't meant to be or maybe it is. In the end, you will know and you will be OK with that ending.

[Lizzyw]

Sorry for my writing mistakes in my post. I am using speech recognition software and it doesn't work 100% accurately. Sometimes I miss my mistakes and then come back and go, wow, that is bad.

You are by no means stupid or naive. This is an unforeseen circumstance that you couldn't have possibly of predicted.

OK, so they seem to be covered as I expected. You need to make this decision on your own and see if it is all worth it. What are the pros and cons. If they work with you on a loan modification, great. If not, it is time to make your exit plan. But I think they may because of this hardship due to an escrow increase.

You might want to try obtaining assistance from www.995hope.org 888-995-hope.

Everything will work out in the end. You are doing everything that you can right. Maybe this wasn't meant to be or maybe it is. In the end, you will know and you will be OK with that ending.

Thanks for the relies. This is what I was afraid of. Not having any real recourse.

This is so unfair. Someone made a mistake and we lose our house over it? This is not right.

[Lizzyw]

Sorry, I meant replies...

[Maurice Bedard]

lol..No worries. I write over 10,000 words a day and there's no way I can catch every mistake. Especially with this darn speech recognition software. I was getting repetitive strain injury from typing so much.

Yes, this does ****. I've come to the conclusion after three years that consumers have very little protection when they go to obtain any type of loan. The laws are based on contract laws and once you sign the dotted line you agree to everything in that contract. Even things that you do not understand or you may think have little significance. It'll is always that stuff that comes to bite people in the a$$ in the end.

[Lizzyw]

lol..No worries. I write over 10,000 words a day and there's no way I can catch every mistake. Especially with this darn speech recognition software. I was getting repetitive strain injury from typing so much.

Yes, this does ****. I've come to the conclusion after three years that consumers have very little protection when they go to obtain any type of loan. The laws are based on contract laws and once you sign the dotted line you agree to everything in that contract. Even things that you do not understand or you may think have little significance. It'll is always that stuff that comes to bite people in the a$$ in the end.

Interesting point about contract laws. Wouldn't that bode true vice versa, in that what we signed stated there was no "special assessment taxes"

I dunno, maybe I'm clinging to a glimmer of hope that is non existent...

If we do forclose, what are the chances of ever buying a home again? I mean, we have only had this house just under 2 years. Man, this is going to make us look horrible.