Consumer complaint received 2019-08-23
Company: Flagstar Bank, N.A.
State: TX
Product: Mortgage
Sub-product: Conventional home mortgage
Issue: Trouble during payment process

Complaint:
On XX/XX/XXXX we received a Notice of Cancellation from XXXX for nonpayment of premiums originally by XX/XX/XXXX in the amount of {$1700.00} for our policy effective XX/XX/XXXX through XX/XX/XXXX. The new due date would be {$1700.00} if paid by XX/XX/XXXX and we would not have a lapse in coverage. I contacted the insurance department on XX/XX/XXXX and learned that our Insurance renewal due date was showing as XX/XX/XXXX in the system so even though the renewal bill was received timely by Flagstar it was not paid. 

I investigated further as to why they would have an incorrect date for our insurance and examined my Flagstar transaction history. I noticed a payment made to XXXX in the amount of {$1400.00} on XX/XX/XXXX for a policy number that did not appear to be ours. I then went and reviewed my XXXX account transaction history and confirmed that my premium in the amount of {$1300.00} had been paid at closing on XX/XX/XXXX and credited to our XXXX policy as of XX/XX/XXXX. No other payments were credited to the account from Flagstar. I contacted Flagstar customer service who then transferred me to the Insurance Department. 

The representative I spoke with advised that the bill paid in XX/XX/XXXX was for the prior owner of our property. She stated that the renewal bill had our address listed but contained the account number for the prior owner and had the names of the prior owners. Because the address matched our property address the payment was issued from our escrow account. She advised the check had our loan number written on the check however, XXXX has confirmed that the check did in fact have the prior owners loan number written on the check. XXXX has advised that Flagstar will need to contact them in regards to curing this error as the policy is active and they can not refund the amount to me or Flagstar or transfer the funds from their account into mine. 

We paid a {$3500.00} shortage on XX/XX/XXXX covering this payment made to XXXX that was not ours to pay. Our insurance premium was not timely renewed and caused an increase in our premium. I would like to know how this happened as it is very evident that there is a lack of controls with validating insurance renewals and properly updating accounts. Pursuant to RESPA 1024.17 ( k ) ( 1 ), If  the terms of any federally related mortgage loan require the borrower to make payments to an escrow account, the servicer must pay the disbursements in a timely manner, that is, on or before the deadline to avoid a penalty, as long as the borrower 's payment is not more than 30 days overdue. Flagstar has failed to timely pay our insurance renewal and has fraudulently taken funds from our escrow account and paid someone else 's premiums creating a deficiency and shortage in our escrow account that should not have occurred due to their failure to reconcile and accurately account for our escrow line items.

Company public response: Company has responded to the consumer and the CFPB and chooses not to provide a public response
Company response to consumer: Closed with explanation