FTC FACTS for Consumers

FOR THE CONSUMER 1-877-FTC-HELP

ftc.gov FEDERAL TRADE COMMISSION

Mortgage Servicing: 

Making Sure Your 

Payments Count

W hen you get a mortgage, you may think that the lender will hold and service your loan until you pay it off or sell your home. That’s often not the case. In today’s 

market, loans and the rights to service them often are bought and sold. In many cases, the 

company that you send your payment to is not the company that owns your loan.

A home is one of the most expensive purchases you’ll make, so it’s important to know who is 

handling your payments and that your mortgage account is properly managed. The Federal Trade 

Commission (FTC), the nation’s consumer protection agency, wants you to know what a mortgage 

servicer does and what your rights are.

Mortgage Servicers: Their Responsibilities; Your Rights 

A mortgage servicer is responsible for the day-to-day management of your mortgage loan account, 

including collecting and crediting your monthly loan payments, and handling your escrow account, 

if you have one. The servicer is who you contact if you have questions about your mortgage loan 

account.
Facts for Consumers 2

Escrow Accounts

An escrow account is a fund held by your 

servicer that you pay into for property taxes and 

homeowners insurance. Your escrow payment 

typically is part of your monthly mortgage 

payment. The servicer then uses your escrow 

account to pay your taxes and insurance as 

they become due during the year. If you do not 

have an escrow account, you must make those 

payments on your own.

If your mortgage servicer administers an escrow 

account for you, federal law requires the servicer 

to make escrow payments for taxes, insurance and 

any other escrowed items on time. Within 45 days 

of establishing the account, the servicer must give 

you a statement that clearly itemizes the estimated 

taxes, insurance premiums and other anticipated 

amounts to be paid over the next 12 months, and 

the expected dates and totals of those payments.

The mortgage servicer also is required to give you 

a free annual statement that details the activity of 

your escrow account, showing, for example your 

account balance and reflecting payments for your 

property taxes, homeowners insurance and other 

escrowed items.

Transfer of Servicing

If your loan is transferred to a new servicer, 

you generally get two notices: one from your 

current mortgage servicer; the other from the new 

servicer. In most cases, your current servicer 

must notify you at least 15 days before the 

effective date of the transfer, unless you received 

a written transfer notice at settlement. The 

effective date is when the first mortgage payment 

is due at the new servicer’s address. The new 

servicer must notify you within 15 days after the 

effective date of the transfer. 

Both notices must include:

•	 the name and address of the new servicer

•	 the date the current servicer will stop 

accepting your mortgage payments

•	 the date the new servicer will begin accepting 

your mortgage payments 

•	 telephone numbers (either toll-free or 

collect), for the current and new mortgage 

servicer, for information about the transfer 

•	 whether you can continue any optional 

insurance, such as credit life or disability 

insurance; what action you must take 

to maintain coverage; and whether the 

insurance terms will change 

•	 a statement that the transfer will not affect 

any terms or conditions of your mortgage, 

except those directly related to the servicing 

of the loan. For example, if your contract 

says you were allowed to pay property 

taxes and insurance premiums on your own, 

the new servicer cannot demand that you 

establish an escrow account. 

•	 a statement explaining your rights and what 

to do if you have a question or complaint 

about the servicing of your loan. 

There is a 60-day grace period after the transfer: 

during this time you cannot be charged a late fee 

if you mistakenly send your mortgage payment to 

the old servicer.
Facts for Consumers 3

Transfer of Loan Ownership

The ownership and servicing rights of your 

loan may be handled by one company or two. If 

ownership of your loan is transferred, the new 

owner must give you a notice that includes:

•	 the name, address and telephone number of 

the new owner of the loan

•	 the date the new owner takes possession of 

the loan

•	 the person who is authorized to receive legal 

notices and can resolve issues about loan 

payments

•	 where the transfer of ownership is recorded.

The new owner must give you this notice within 

30 days of taking possession of the loan. It is in 

addition to any notices you may get about the 

transfer of the servicing rights for your loan.

Posting Payments

The servicer must credit a payment to your 

loan account as of the day it is received. Some 

consumers have complained that they’ve been 

charged late fees, even when they know they 

made their payments on time. To help protect 

yourself, keep detailed records of what you’ve 

paid, including billing statements, canceled checks 

or bank account statements. You also may be 

able to check your account history online. If you 

have a dispute, continue to make your mortgage 

payments, but notify the servicer in writing (see 

Sample Complaint Letter) and keep a copy of 

your letter and any enclosures for your records. 

Send your correspondence by certified mail to the 

address specified by the servicer, and request a 

return receipt. You also may wish to fax or email 

your letter and any enclosures. Be sure to follow 

any instructions the servicer has provided and 

confirm the fax number or email address before 

sending your letter. Keep a copy of transmittal 

confirmations, receipt acknowledgments and 

email replies.

Force Placed Insurance

It’s important to maintain the required property 

insurance on your home. If you don’t, your 

servicer can buy insurance on your behalf. This 

type of policy is known as force placed insurance. 

It usually costs more than typical insurance even 

though it provides less coverage. The primary 

purpose of a force placed policy is to protect the 

mortgage owner. 

Read all correspondence from your mortgage 

servicer. Your mortgage servicer may ask that 

you provide a copy of your property insurance 

policy. Respond promptly to requests about 

property insurance, and keep copies of every 

document you send to your mortgage servicer.

If you believe there’s a paperwork error and that 

your coverage is adequate, provide a copy of 

your insurance policy to your servicer. Once the 

servicer corrects the error, removes the force 

placed coverage and refunds the cost of the force 

placed policy, make sure they remove any late 

fees or interest you were charged as a result of the 

coverage.

Fees

Read your billing statements carefully to make 

sure that any fees the servicer charges are 

legitimate, including fees that may have been 

authorized by you or the mortgage contract to 

pay for a service. If you don’t understand what 

any fees are for, send a written inquiry asking for 

an itemization and explanation. Also, if you call 

your mortgage servicer to ask for a service, like 

faxing copies of loan documents, make sure you 

ask whether there is a fee for the service and how 

much it is. 
Facts for Consumers 4

Special Considerations for Loans In Default 

If you fail to make one or more payments on 

your mortgage loan, your loan is in default. 

The servicer may then order “default-related 

services” to protect the value of the property. 

These services may include property inspections 

to make sure you are still living in the home 

and maintaining the property. If the property is 

not being properly maintained, the servicer may 

order “property preservation services,” like lawn 

mowing, landscaping and repairing or boarding 

up broken windows and doors. The costs for 

these services, which can add up to hundreds or 

thousands of dollars, are charged to your loan 

account. If the servicer starts to foreclose on 

your property, additional costs like attorneys 

fees, property title search fees, and other charges 

for mailing and posting foreclosure notices will 

be charged to your loan account. That can add 

hundreds or thousands of dollars more to your 

loan, and make it even more difficult for you to 

bring the loan current and avoid foreclosure.

If you find yourself in this situation, stay in 

touch with your servicer. Servicers have different 

policies about when they will order defaultrelated services. Some may not order property 

inspections or property preservation work if you 

let them know each month that you are still living 

in the home, keeping it well maintained, and are 

working with them to resolve the default on your 

account. Even so, it’s important to review your 

billing statements carefully and question added 

fees. If fees appear on your statement under 

general headings like “other fees” or “corporate 

advances,” contact your servicer – in writing – as 

soon as possible to get an explanation of those 

fees and a reason they’ve been charged to your 

account.

Struggling to Make Your

Mortgage Payments?

If you are struggling to make your 

mortgage payments – or you’ve 

missed payments – contact your 

servicer. It’s critical to keep the 

lines of communication open when 

you’re trying to resolve issues 

with your account. If you have 

difficulty reaching or working with 

your servicer, call 1-888-995-HOPE 

for free personalized advice from 

housing counseling agencies 

certified by the U.S. Department of 

Housing and Urban Development 

(HUD). This national hotline – 

open 24/7 – is operated by the 

Homeownership Preservation 

Foundation, a nonprofit member 

of the HOPE NOW Alliance of 

mortgage industry members and 

HUD-certified counseling agencies. 

For free guidance online, visit 

www.hopenow.com.

Payoff Statements

A payoff statement is a document that specifies 

the amount needed to pay a loan in full. 

Generally, servicers must give you this statement 

if you ask for it and follow the instructions. 

Your servicer must provide the statement within 

a reasonable time – generally 5 business days – 

after receiving your request.

Inquiries and Disputes

Under federal law, your mortgage servicer must 

respond promptly to written inquiries, known 

as “qualified written requests” (see Sample 

Complaint Letter). If you believe you’ve been 

charged a penalty, late fee or some other fee by 
Facts for Consumers 5

mistake, or if you have other problems with the 

servicing of your loan, write to your servicer. 

Include your account number and explain why 

you believe your account is incorrect. Send 

your correspondence to the address the servicer 

specifies for qualified written requests.

The servicer must send you a written 

acknowledgment within 20 business days of 

receiving your inquiry. Then, within 60 business 

days, the servicer must correct your account or 

determine that it is accurate. The servicer must 

send you a written notice of the action it took and 

Sample Complaint Letter

Here is a sample qualified written request. Use this format to address complaints under the Real 

Estate Settlement Procedures Act (RESPA).

Date

Your Name

Your Address

Your City, State, Zip Code

Subject: Your loan number

Attention: Customer Service

Name of Loan Servicer

Address

City, State, Zip Code

This is a “qualified written request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I am writing to:

Describe the issue or the question you have and/or what action you believe should be taken.

Attach copies of any related written materials.

Describe any conversations with customer service about the issue and to whom you spoke.

Describe any previous steps you have taken or attempts to resolve the issue.

List a phone number in case a customer service representative wants to call you.

I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business 

days and must try to resolve the issue within 60 business days.

Sincerely,

Your name

why, as well as the name and phone number of 

someone to contact.

Do not subtract any disputed amount from your 

mortgage payment. Your servicer might consider 

this a partial payment and refuse to accept it. 

Your payment might be returned to you or put 

in a “suspense” or “hold” account until you 

provide the rest of the payment. Either way, your 

servicer may charge you a late fee or claim that 

your mortgage is in default and start foreclosure 

proceedings.
Facts for Consumers 6

1-877-FTC-HELP FOR THE CONSUMER

FEDERAL TRADE COMMISSION ftc.gov

June 2010

Federal Trade Commission

Bureau of Consumer Protection

Division of Consumer and Business Education

Fair Debt Collection

By law, a debt collector is a person who regularly 

collects debts owed to others. Your mortgage 

servicer is considered a debt collector only if your 

loan was in default when the servicer acquired it. 

If that’s the case, you have additional rights. Read 

about them in Debt Collection FAQs: A Guide for 

Consumers at ftc.gov/debtcollection.

To learn more about mortgages and what to do 

if you’re having difficulty making payments, 

visit ftc.gov/YourHome. 

The FTC works to prevent fraudulent, deceptive 

and unfair business practices in the marketplace 

and to provide information to help consumers 

spot, stop and avoid them. To file a complaint 

or get free information on consumer issues, 

visit ftc.gov or call toll-free, 1-877-FTC-HELP 

(1-877-382-4357); TTY: 1-866-653-4261. 

Watch a new video, How to File a Complaint, 

at ftc.gov/video to learn more. The FTC 

enters consumer complaints into the Consumer 

Sentinel Network, a secure online database and 

investigative tool used by hundreds of civil and 

criminal law enforcement agencies in the U.S. 

and abroad.