Servicer charging ridiculous so-called "lender-paid expenses"

10 Replies

We bought a property subject to existing mortgage. It was behind on payments and was scheduled for foreclosure auction in Texas. Before we brought the mortgage current, the servicer had told us that the Cash Advances for inspection and appraisal that were lender paid can be waived after the mortgage has been brought current. After we brought the mortgage current, the servicer initially denied to waive the Cash Advances. Upon further request, they opened a research ticket which resulted in them coming up with a lot more lender paid expenses than the Cash Advances we asked to waive. The lender paid expenses include Sheriff Costs, Appraisal Fees, Property Inspection Fees, Foreclosure Fee, Title Exam, Certified Mailing Fees, Posting Cost fees, and Recording of the substitute trustee. If we hadn't purchased the property subject to and brought the mortgage current, the lender would have kissed a bulk of the principal good bye. But now that they know we're an investment company, we have been charged with these fees. In retrospect, we would have rather paid the $367 Cash Advance instead of requesting a research ticket because of which they are claiming we owe them $1321 more. Per http://www.alabamaconsumer.com/2014/03/mortgage-servicers-love-hit-consumers-bogus-fees-charges/ it's the servicer charging for it, not the true owner of the loan, and they could be violating FDCPA.

Questions:

1. Can the servicer charge these ridiculous fees?

2. How can we not pay these so called lender paid expenses which weren't initially included in the mortgage reinstatment statement or payoff quotes? 

Before you bought you should have got everything in writing. Just let the servicer know that your lawyer will look over everything to see if any fraud has been committed.

Joe Gore

Originally posted by @Joe Gore:

Before you bought you should have got everything in writing. Just let the servicer know that your lawyer will look over everything to see if any fraud has been committed.

Joe Gore

 Joe: Neither the Reinstatement Quote nor the Payoff Quote stated all the access lender-paid expenses which were added on afterwards. They both only included the drive-by appraisal and drive-by property inspection. Clearly, charging these fees to the borrower during foreclosure is like kicking a man when he's down :)

For the most part ALL Promissory Notes and their security instrument provide for the Mortgagee (or it's agents such as the Servicer) to Advance to preserve and protect their interests in the real property.  So, there is nothing out of line here really.

Stop referring to the Advances made as "Cash Advances" they are not "cash", they are advances but the borrower does not get cash.  Since the borrower is responsible for re-payment of those costs, they are advances.  

All that said, we can look at the brief list you mentioned and see what is in it:

Sheriff Costs - Service Process fee?  - If foreclosure was initiated, then this may be the Service Process Fee - serving all the interested parties with notice of the action.
Appraisal Fees - A re-evaluation of the property as a result of foreclosure.  Pretty Standard.
Property Inspection Fees - When a property is delinquent for a period of time the Servicer will have agents inspect the property for negligence.  Since the Mortgagee has a right to preserve, this is acceptable.  This is NOT a property inspection like you get when you buy a house.
Foreclosure Fee - This is questionable as it is a broad term.  If this is the fee paid to legal to initiate and process the foreclosure action, then it would be allowed. 
Title Exam - This goes hand in hand with processing a foreclosure action since all parties on title would need to be served.
Certified Mailing Fees - Standard fees.  
Posting Cost fees - I am not sure what this is.  Slang term.  Perhaps Public notice in the paper?  
Recording of the substitute trustee - this too is a part of the foreclosure process in many cases and is a fee passed on to the borrower.

So, there is really only one fee there which is questionable and that could just be slang term being used and is most likely legit.

The problem you may encounter here is that one demand was for a reinstatement and the other is simply the responsibility of the Borrower per the documents.  So, if you requested a Reinstatement Amount and they delivered that to you, then you paid that, that does NOT void any other re-payment of advances made on the account.  Those advances can not be used to string the reinstatement along but they are due and payable by the borrower.  

Honestly being all in for about $1,400 is not unreasonable AT ALL.  It is romantic to cry wolf on these but 99.999% of the time, all these fees are in line as they are reviewed in the foreclosure action and become a part of the total amount due to redeem.  

The general idea here, a Mortgagee stands to recover ALL costs associated with preserving, protecting and enforcing it's interests in the real property.  Read the documents, it's in there.  

Be happy you have not been hit with a Due On Sale or Alienation Clause which would mean the Mortgagee calls the entire account due and payable or they will foreclose. 

As Dion said, standard stuff.  Get used to it on mortgages in arrears.  Luckily there weren't any taxes and force placed insurance.

I recently paid three times as much in fees to reinstate an itty bitty loan ($25K).  It was the combination of lender "advances" for taxes, late fees, and then the foreclosing trustee fees.  All of which were similar to your list.  The only one that I questioned was a legal fee of $700.  I knew that loan had accidentally been made to one borrower that was not on title, and that the foreclosing trustee had used a legal team to try to fix the issue with affidavits.  I told them their legal work to fix a title problem they created couldn't be charged to the borrower.  I was blowing hot air as I never thought they would even respond to my request. Remarkably they removed the fee. The fees allowed are statutory so it's not a bad idea to learn the scope of what they can legally charge to the borrower.  Trouble is there are SO many types of charges legitimately related to reinstatement and initiating foreclosure.  

Lucky the Promissory Note does not allow interest to be charge on those Advances.  Some due.

Originally posted by @Wayne Brooks:

As Dion said, standard stuff.  Get used to it on mortgages in arrears.  Luckily there weren't any taxes and force placed insurance.

Get used it is right.  From the reinstatements I've done so far, I marvel at how the average borrower could manage to jump through all then hoops and understand all the charges.  

Originally posted by @Dion DePaoli:

Lucky the Promissory Note does not allow interest to be charge on those Advances.  Some due.

 ^^ See what I did there??  "due"  (it was on accident)

Originally posted by @Sam S.:

If we hadn't purchased the property subject to and brought the mortgage current, the lender would have kissed a bulk of the principal good bye.

Just a suggestion, but try to rid yourself of this kind of thinking.  It will show through when negotiating and may backfire.  You didn't reinstate the loan as a favor to the lender. You didn't necessarily save the lender from a huge loss.  You have no way of knowing how the lender would have come out in a foreclosure (or with a deed in lieu or short sale) as you are not privy to their bottom line, how much they are into the note for at this point, their tax situation, their mortgage insurance, etc.  

Keep your eyes on the prize, which is reinstating in a timely and cost effective manner for your purposes.  Working with lenders when the loan is in default, be it to payoff, reinstate or short sale is tedious at best. Your calmest, most patient and most non-reactionary manner will get you the farthest.

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