Usually, when homeowners take out mortgages, they deal with the lender directly, and then the loan is later transferred to a third party known as a loan servicer. The loan servicer handles the collection of payments and applies the homeowner’s payment to the principal and the interest portions of the loan. The loan servicer is also the party that initiates foreclosure proceedings if the homeowner fails to make the required payments.
Mortgage loans are often transferred multiple times during the life of the loan, and as long as the transfers are completed properly under the law, they are legal. Just because the loan was not originally taken from the loan servicer does not mean that the loan servicer is not the proper party to initiate foreclosure proceedings against the homeowner on an unpaid mortgage. Issues of standing usually arise in mortgage foreclosure lawsuits where the party initiating the lawsuit lacks the paperwork to show how the loan was transferred from the original lender.
In most cases, when a lender transfers a loan to another lender or loan purchaser, there is an assignment of the loan to a mortgage loan servicer, and this assignment lets the servicer stand in place of the lender or the loan purchaser, with the rights of the lender or purchaser, which allows the servicer to sue the borrower in the event the borrower misses payments on the loan. If the assignment of the loan to the servicer was improperly done, or if the servicer lacks the proper documentation to foreclose the loan, then the borrower may have a defense to a foreclosure action began by the servicer.
As part of their duties, loan servicers also handle escrow accounts for borrowers who chose to use them. The servicers are also responsible for ensuring that these funds are passed on to the next servicer is the loan is reassigned, in order to ensure proper crediting of payments to the borrower. Failure to credit payments to the proper borrower can create confusion and lead to improper foreclosure on a borrower who would otherwise be current on his payments. Borrowers should keep detailed records of when they send in their payments, keep proof of cancelled checks or other evidence of having made payments, especially if they have a history of being charged late fees by the servicer after sending in a payment on time. If a borrower is charged extra fees, he should make sure he asks for a detailed explanation of the fees to ensure they are legitimate and authorized under the original mortgage note.
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There are foreclosure defenses that are based on the fact that the entity bringing the foreclosure action does not properly own the loan, or that they cannot provide the original loan documents. It is sometimes difficult for homeowners facing foreclosure to determine if these defenses apply to them without consulting an attorney. If you are facing foreclosure and want to discuss what you can do to fight it, contact the North Miami foreclosure attorneys at Charlip Law Group, L.C. for a consultation.