Consumer Law

Lender Battles Could Cost Homeowners

As if struggling homeowners didn’t already have enough to worry about, insolvent lenders could saddle some with unexpected bills.

In a bankruptcy court battle in Delaware between American Home Mortgage Investment Corp. and Freddie Mac, for instance, the U.S.-chartered housing financier says it has seized some $7 million in mortgage payments sent to American Home, reports the Wall Street Journal (sub. req.). However, since Freddie Mac doesn’t have the files to show how the payments should be applied, more than 4,500 homeowners could potentially have problems with unpaid insurance and tax bills and mortgage payments wrongly listed as late. In addition to being charged unjustified late fees, some owners may feel they have no choice but to pay duplicate insurance and tax bills—if they can afford to do so.

And the recent surge of mortgage lender insolvencies means property owners whose loans are held by American Home are far from the the only ones affected.

“Companies receive the loan files that they are supposed to be servicing, but the payments don’t catch up,” says attorney Jill Bowman of James Hoyer Newcomer & Smiljanich, a consumer law firm in Tampa, Fla. “Payments are being deemed late, even when they’re not, because they can’t catch up with the paper.”

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