Eventually the funds are sent over by the title company and once received are either deposited into the Escrow Account to balance the account, or refunded to a Corporate Advance if the company already paid to begin their escrow. If they are deposited into the Escrow Account, this causes a delay in them receiving, which again is an economical factor that is at no fault of their own. Once a duplicate deposit is received, more than likely an overage will be in the Escrow Account. Although this works in favor of the borrower, they will not receive the overage until an Analysis is done, which takes place annually, therefore; they wait to receive their money.
Taxes and Insurance also tie into the Escrow Analysis. A problem occurs for the borrower if the previous servicer did not pay taxes as they were required to do before the loan transfers. Late payments for taxes incur penalties, and unfortunately the penalties are paid with the disbursement out of the borrowers Escrow Account. Although the penalties are not an astronomical amount, it still is unjust to charge these to the borrower. The biggest problem in this issue is if the taxes are not paid in time from the new servicer. If the taxes are delinquent, and the new servicer is not aware of this, the tax collector may place the property under a tax sale at the extreme end of this issue. A tax sale frightens the borrower as it should, since they are relying on someone else to take care of this. Once the property goes to tax sale additional fees are incurred. In addition to penalties, it is up to the new servicer to help them re establish their tax payments and save their home from being sold. As these issues are typically resolved, this is not often an issue, however; it is a possibility and borrowers should beware.
When a transfer of servicing takes place a Transfer of Servicing Disclosure is required to be provided to the borrower by their current servicer. This provides information that the loan may be sold. This is required to be provided to the borrower at the time of their application or within three business days. This is particularly important for the borrower to receive since they may not be aware that their loan may be sold. When the loan is actually sold, a Goodbye Letter is sent to the borrower at least fifteen days before the loan actually is sold. Once the funding takes place to the new servicer, the new servicer is required to provide a Welcome Letter. The Welcome Letter advises of the new servicer, as well as the address to make the payment. It is especially crucial for both the Goodbye Letter and the Welcome letter to be sent to the borrower as required. If there are errors by the mortgage companies in sending these letters the borrowers will be misinformed as to where to make their mortgage payment. This process is the cause of payments being sent to the incorrect company.
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