Homeowners who fell behind on their mortgage payments and had their account enter 'default' or 'delinquent' status.
It has been alleged that certain banks and mortgage servicers have been charging excessive fees when a borrower defaults on their mortgage loan or has their account considered delinquent. It has been alleged that, for some consumers, these excessive fees have forced them into foreclosure and caused damage to their credit scores.
Banks and mortgage servicers
Certain banks and mortgage lenders are allegedly marking up the fees charged by vendors for performing default-related services by 100% or more. Default-related services may include property inspections, property preservation costs, appraisal costs and attorney fees.
Homeowners who were charged excessive fees after being late on their mortgage payments may be entitled to compensation. When a mortgage borrower defaults on their loan or enters delinquency status, their lender is permitted to assess fees related to various default-related services, such as property inspection, that are designed to protect their interest in the property. It has been alleged, however, that certain banks and mortgage servicers have been overcharging borrowers for these services, some of which are unnecessary, in an attempt to quietly profit from already-struggling homeowners.
Mortgage Default Fees: How Do I Know If I Was Overcharged?
Default-related services are typically performed by third-party vendors, and rather than charge the borrower for the actual cost of the default-related services, some banks and lenders are allegedly assessing significantly marked-up fees. To determine whether you may have been charged excessive fees, examine the mortgage statements you received after you were late on your payments and went into a delinquent or default status on your loan. If you notice any fees that you do not recognize, it is possible that you may have been overcharged.
Depending on your lender, these fees may read as the following on your statement:
Furthermore, if you ever received an Acceleration Warning Letter (or Notice of Intent to Foreclosure), you should check these documents for any unrecognizable charges.
What are Delinquency Expenses?
Many banks are said to be listing their default-related services as delinquency expenses, and identifying these charges as third-party expenses for a number of services, including property inspection and appraisal costs, required as a result of the default. According to recent allegations, some banks and mortgage servicers are not fully disclosing the true nature of these fees and failing to itemize these services, providing no way for the borrower to determine which services they were charged for and the cost of each service. Furthermore, it has been alleged that some banks and lenders are using loan management systems which automatically order property inspections and charge borrowers for these services after their accounts have been delinquent for a certain number of days, regardless of whether these inspections are actually necessary.