Underwater mortgages are one of the primary reasons people consider filing Las Vegas bankruptcy. If you are having trouble making your mortgage payments, then obviously you should talk to a bankruptcy lawyer promptly. One thing that can make an underwater mortgage worse, however, is when mortgage servicers engage in questionable if not fraudulent behavior. Fortunately, many of these activities will be curtailed by the Consumer Financial Protection Bureau’s new rules on mortgage servicing, but it’s still worthwhile to know about some things servicers can get away with. For instance, one is placing mortgage underpayments into what’s called a “suspense account.” What are these?
- A suspense account is a temporary account that corporations or banks use to place money that is of suspicious or unidentifiable origin. For instance, if someone makes a deposit and uses a nonexistent account number, the money will be placed into a suspense account until the correct account can be found.
- For mortgage servicing, problems arise when homeowners make insufficient payments on their mortgages. Normally, when a homeowner makes a payment to a servicer, the servicer puts the money in an escrow account. Then it distributes the mortgage payment to the creditor, the homeowners insurance to the insurance company, the property tax to the government, and a fee to itself.
- When a homeowner underpays on a mortgage, particularly when the monthly payment increased and the homeowner wasn’t notified, the servicer should put the money into the escrow account as before, and inform the homeowner of the shortfall. If the homeowner fails to make the payment in a timely fashion, the servicer can charge late fees.
- When mortgage servicers misbehave, they put incomplete mortgage payments into their suspense accounts and nothing into their escrow accounts. This allows the bank to charge punitive late fees, regard the account as in default, and report the underpayment to the credit bureaus.
- Even if the next month’s payment is enough to cover the shortfall in the first, but is still too small to be a full payment in itself, the bank will do the same thing all over again. In other words, it penalizes mortgagors for two payments instead of one.
- If the process occurs without notice to homeowners, at some point the servicer will send out pre-foreclosure notices, which will demand homeowners satisfy all past due payments, as well as interest and fees. Since it’s demanding a lump-sum payment that homeowners might not be able to satisfy, they can end up in an otherwise avoidable foreclosure because the bank essentially stole the homeowners’ mortgage payments.
If something like this happened to you, and especially if you are facing foreclosure, it’s critical to talk to an experienced Las Vegas bankruptcy lawyer about your situation before it gets worse. Filing bankruptcy can halt a foreclosure proceeding.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.