Q: My mortgage was sold to a loan processor in 2011. I got a welcome letter saying my payment was $635 when it really should have been $1,036 per month. I kept calling to ask the company to fix the issue on the account and send the correct amount, but it kept sending the money back.
After calling many times, I finally told the company that I would not pay a dime until it fixes the problem. I knew my credit would get messed up, and I still heard nothing. I stopped sending checks, didn’t pay taxes and didn’t pay insurance, and it has been seven years. I check every year, and the lender has paid the taxes and paid the insurance on the home.
I did get some foreclosure letters off and on the past few years. What is the statute of limitations on this? Where do I go from here?
A: We sometimes get letters that leave us speechless. This is one of them. We really can’t believe that you took the steps that you did to “teach the lender a lesson.”
It’s one thing to try to do the right thing and quite another to choose a path knowing it will kill your credit history, ruin your credit score and put you in a place where you will very likely lose your home. Note that we didn’t say you “might” lose your home, because you have set in motion events that almost certainly will end only one way.
Seven years ago, the servicing of your loan changed hands. Yes, it might have changed hands to a worse servicer, but you had an obligation to make your mortgage payments. Yes, you tried to make those payments, but if the lender indicated that your payment was $635, you could have paid the $635 as indicated. We don’t know how the servicer computed your monthly payment, but it might have made a mistake and eventually figured that out.
If your loan was an adjustable loan, it is possible that your loan adjusted down at the end of the initial period. It’s also possible that the lender decided to eliminate the escrows on your file and wanted only to collect the principal and interest payments on your loan, allowing you to pay your own real estate taxes and insurance payments. There are a number of other possibilities, but we leave them as questions because you didn’t provide the letter from your lender.
You have to understand that it’s possible the loan processor was right in its computation and you were wrong. But let’s assume the lender was wrong in the way it computed your loan payments. If you continued to make the loan payments as requested and kept the balance of the funds in an interest-bearing account, when the lender discovered its error, you’d have the money on hand to pay what was owed on the loan.
The lender would be hard-pressed to charge you late fees or other expenses when it was the lender’s error that caused the problem and you made the payments as indicated to you. Once it discovered the error, the lender would have probably asked you to pay the difference. And, given all that had happened, it would have probably asked you to pay it over time or given you time to come up with the balance that was owed. In either case, you’d have the money, it would have been earning interest, you’d still be on the right side of the deal, and the lender would not put your loan in default.
Unfortunately, now you have a lender that is coming after your home because of your failure to make payments you were required to make under your loan agreement. You’ve taken a tremendous risk, and for what? So that you could show the lender that it made a mistake?
Lenders make mistakes every day. What happened to you isn’t unusual. But you’ve taken a strange path, and we recommend that you hire a good attorney to review your documents and see whether you can save your home.
Given that it appears the lender is actively pursuing foreclosure, your question of a statute of limitations might be moot. In some cases, when lenders sit back and do nothing for years on end (and we’re talking seven, 10 or even 15 years) without a borrower paying on the loan, the lender may lose the right to take action on that loan. But that’s when the lender has no contact for all those years. In your case, the lender has been sending you your monthly payment notices and has even sent you a foreclosure notice.
Please consult with an attorney immediately to figure out where you should go from here.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.