Borrower Beware: Impound Account Nightmares are happening. We have seen an increase of loans being sold as soon as the ink dries at the close of escrow. This is a very common practice. Even though you did the purchase loan with XYZ Mortgage or Bank, your payments may be going elsewhere #1 can’t apply it because they no longer have your loan on the books, #2 never got it and says #1 didn’t account for it in the transfer. Scenario B: The impound account. Often when the transfers happen close to a payment date for taxes or property insurance, the new Servicer doesn’t have any directive that there is an impound account. Sometimes Servicer #1 refunds the check to you, when you call to ask what it is for they say it is an overage, keep it. Then you get a delinquent notice on your property taxes or a cancellation notice on your insurance for nonpayment. I have personally experienced the later. I paid the insurance directly upon notice, then the insurance company returned the payment saying the lender was paying it, when the lender checked there was no balance due so they didn’t pay! It took 2.5 months to straighten this out and 11 notices and conflicting statements from the insurance company.
So be careful, when you receive a notice that your loan has been transferred, make a call and verify that your impound account was also transferred and that the balance matches your previous statement. Also check on your taxes and insurance that they were paid timely the first go round.
With the homeowners insurance crisis in California, you don’t want to have to shop for a new more costly policy and certainly don’t want your credit affected by one bank not transferring a current payment to the new servicer. You would think with technology that it would all go seamlessly, but you know when it doesn’t, it is extremely frustrating to have to try and correct it.
This affects 99% of loans granted in the last 15 years, so if you’ve made a purchase or refinanced this could happen to you! Better safe than sorry, follow up on any transfer letters; you don’t want to find yourself in an impound account nightmare.