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Mortgage Servicing and Loan Modifications: 2.6 Escrow Account Issues

Escrow accounts are generally required by lenders in order to ensure the payment of taxes, insurance, or other charges. These accounts are most commonly established and initially funded at the time of the loan settlement. After settlement, a portion of the borrower’s mortgage payment is typically allocated to the escrow account.

Mortgage Servicing and Loan Modifications: 2.8 Mishandling of Insurance Proceeds

Almost all mortgage loans require borrowers to maintain hazard insurance to protect the lender’s interest in the property. The typical security instrument language gives the lender161 broad discretion to determine what types of insurance are required (fire, flood, earthquake, wind, and so forth) and the amount of coverage.162 The lender is also authorized to change these requirements during the life of the loan. The lender (or servicer) must be named as a loss payee on the insurance policy.

Mortgage Servicing and Loan Modifications: 2.9 Improper Lockouts

The standard mortgage loan security instrument permits the lender to protect its interest in the property and its rights under the security agreement if the borrower defaults on the loan or abandons the property.181 The actions that a lender may take include protecting, assessing, repairing, and securing the property.

Mortgage Servicing and Loan Modifications: 2.10.1 Overview

One of the most difficult problems facing a borrower attempting to sort out a servicer’s accounting is the piling on of fees.189 Servicers charge a variety of fees ranging from the ubiquitous late payment fee to phone payment fees and fax fees for payoff statements.

Mortgage Servicing and Loan Modifications: 2.10.3 Pay-to-Pay Fees

Pay-to-pay fees, sometimes called “convenience fees” are extra charges that creditors make their customers pay when paying a bill. Examples are a $5 charge to make a payment online, via the company’s website, or a $20 charge to pay by phone.222 The amount of these charges is usually far greater than what it actually costs the creditor to provide the service.

Mortgage Servicing and Loan Modifications: 2.10.8.1 Generally

Late charges are probably the fee that borrowers are most familiar with. Mortgage loan contracts typically provide a grace period—for instance, ten or fifteen days beyond the due date of an installment payment—during which borrowers may pay the installment without penalty. When the payment is made after the expiration of the grace period, the note may authorize the imposition of a late fee. Late charges may only be assessed to the borrower if the contract specifically authorizes them.

Consumer Arbitration Agreements: 2.1a The Equal-Treatment Principle and the Liberal Federal Policy Favoring Arbitration

A threshold issue pertinent to cases decided under the Federal Arbitration Act (FAA) involves two interpretive principles that the United States Supreme Court, and subsequently many lower courts, have read into section 2 of that statute. The first of these is the so-called equal-treatment principle, the notion that Congress passed the Federal Arbitration Act to place arbitration agreements on equal footing with other contracts.

Consumer Arbitration Agreements: 2.2.1 Introduction

A preliminary matter in any challenge to the enforceability of an arbitration clause is whether the enforceability determination is to be made by a court or by the arbitrator. In general, consumers and workers often prefer to raise questions about contract validity and scope with the court because, when successful, these arguments strip arbitrators of their authority to resolve the dispute. The arbitrator might therefore have an interest in finding that the clause is enforceable.

Consumer Arbitration Agreements: 2.3.1 Introduction

If a consumer or worker files an action in state or federal court, the defendant has two procedural options to compel arbitration: it can file a motion in that court action or it can file a separate action in federal court under section 4 of the Federal Arbitration Act (FAA).37 Section 4 provides:

Consumer Arbitration Agreements: 2.3.5 Does the Rooker-Feldman Doctrine Prevent a Section 4 Federal Court Action?

Parties attempting to keep arbitration disputes in state court may argue that the Rooker-Feldman doctrine, which bars lower federal courts from reviewing state court judgments, prevents district courts from considering petitions to compel arbitration after a state court has refused to compel arbitration and has permitted the action to go forward in state court.86 The Rooker-Feldman doctrine applies in a narrow set of circumstances in which a party files a federal court action as an attempt to overturn a state-court ruling.

Consumer Arbitration Agreements: 2.3.6 Venue

FAA section 4 states that, if a court is satisfied that a valid arbitration agreement exists, it shall require the parties to arbitrate “in accordance with the terms of the agreement.”92 Section 4 also states that the arbitration proceedings “shall be within the district in which the petition for an order directing such arbitration is filed.”93 Courts generally hold that a party cannot move to compel arbitration in one district court when th

Mortgage Servicing and Loan Modifications: 3.1.1 Introduction

This chapter focuses on the obligations directly imposed on servicers under the Real Estate Settlement Procedures Act (RESPA), and the remedies available to borrowers under RESPA to redress breaches of these obligations.1 The practices of servicers may give rise to claims under other federal statutes, such as the Truth in Lending Act and Fair Debt Collection Practices Act, but this chapter covers only the regulation of servicers and the duties imposed on them under RESPA.

Mortgage Servicing and Loan Modifications: 3.1.2 Overview of Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act (RESPA), as originally enacted in 1974, focused primarily on the settlement process for home purchase and refinancing transactions. It was designed to ensure that consumers in real estate transactions would receive timely information on the nature and costs of the settlement process and would be protected from abusive practices, such as kickbacks. In addition, RESPA placed limitations on the use of escrow accounts.

Mortgage Servicing and Loan Modifications: 3.2.2 Applicability to Servicers

The servicing requirements of RESPA apply to “servicers.”48 A servicer is defined as the “person”49 responsible for the servicing of the loan, which can be the maker or holder of the loan if such entity also services the loan.50 The term “servicing” is defined as “receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, including amounts for escrow accounts . . .