Decoding a Mortgage Payment Refusal
When you borrow cash from a mortgage company for your new home or to refinance an existing mortgage, you enter into a mortgage agreement that carries specific instructions on how you are to pay back the loan. In general, you pay a mortgage company per month until you either refinance or buy another home. This agreement also includes how to request additional money and what happens if you don’t make your monthly payments. In the unfortunate event that you don’t pay your mortgage , your mortgage company may refuse your payment but there are laws in place that prevent them from doing it for no particular reason.
Mortgage payments are a form of equitable bargain, meaning both you and the mortgage company agree upon a period to pay your loan, in addition to a fixed monthly amount. The mortgage company expects you to keep your end of the deal by paying every month. When you default, you may be able to rectify the situation with benefits from your state’s laws, but it’s up to the company to determine whether or not it would refuse your payment if you miss the mark.
Reasons for Payment Rejection
Mortgage companies typically reject payments for a number of reasons. Here are some common reasons why your mortgage company may be declining your payment:
Payment not for the correct amount: The mortgage company may be seeking a specific amount or up-to-date payment through an electronic payment system that won’t process a lesser amount, or they may only be accepting the full amount through their online payment portal.
Payment not for the correct sub-account: If your mortgage payment is split up into a number of different sub-accounts, the mortgage company may only be accepting payments made on a specific sub-account and not others.
Payment not accepted as payment in full: If there is still a balance remaining after the payment is made, the mortgage company may reject the incoming payment.
Payment made through an unaccepted payment method: Some mortgage companies don’t accept certain payment methods at all, such as credit card payments (though they may allow debit payments) or payments by mail.
Escrow account issues: If your mortgage payment includes escrow fees, and those fees must be paid separately from the principal amount, the mortgage company may be declining your payment due to an escrow issue. Likewise, if your payment exceeds the amount owed on your escrow account, the mortgage company may be rejecting your payment until the total sum is paid off.
Legal Perspective on Payment Refusal
Even if a bank, a mortgage loan originator or a mortgage company is in the middle of a foreclosure action, the owner still has the obligation to make the monthly payments so to be able to catch up at any point. If the owner receives the usual notice but believes that the mortgage company wrongfully declined to accept the payment or wrongfully proceeded with the foreclosure action, he will have to make a legal stand in order to retain his rights. The reason is that as long as the owner has neither made the objection against the refusal to accept the payment nor attempted to correct the situation so to avoid the late payment, even good reasons such as indeterminacy or unclarity in the mortgage contract are not a valid excuse to simply refuse the payment and provoke the foreclosure process.
To prove this, recent practice has shown that even when the borrower complains that the mortgage company was wrong to refuse the payment, a court will uphold the lender’s right to decline the payment if the borrower knew or should have known that the mortgage company was right to do so. Case in point is the case of Bank of Am. v. Packer, 2012 WL 3781905 (N.C. App. 2012). Furthermore, in it, there is notably a line that applies particularly to mortgages including such an ambiguity: "[t]the trial court erred by finding a violation of the FDCPA where plaintiff’s refusal to accept the payment was neither false, deceptive, nor misleading" (id. at *10). So while the refusal for a valid reason will not be a ground for opposition to a foreclosure attempt, the borrower certainly has the legal right to go after the lender if he feels that he has been wrongfully refused when he had a good reason to reverse the late payment.
The fairness, reasonability and validity of the mortgage company or bank’s refusal in refusing to accept the mortgage payment are to be determined by the laws and regulations regulating mortgage and mortgage lending. Although they may vary from one state to another and may not even all apply to a certain case, violating them may entitle the borrower to take action and stop the refusal to accept a mortgage payment.
What to Do When Your Payment is Refused
When your mortgage company refuses to accept your payment you should do the following:
1. Call the mortgage company and ask for a specific name, address and phone number of the person you should send the payment to. Request this information in writing. There are many different departments within a mortgage company, sometimes dependent upon where the loan is located; that do not communicate with each other.
2 . Make sure that you get something in writing from the mortgage company showing where they want payments sent to. This is important because it helps to show that the mortgage company knows where you are sending the payments. Especially in a foreclosure action, every payment made helps to show that the borrower was acting in good faith.
3. Mail the payment to the new address and keep copies of all checks and correspondence.
4. Consult an attorney when this type of issue arises.
Preventing Payment Refusal With Your Lender
Ensuring Payment to the Lender’s Account
A borrower can take steps to avoid payment refusals and to minimize any negative impact in the event that a lender refuses payment. First, the key in preventing this issue is diligently making the monthly loan payments in accordance with the borrower’s agreement with the lender. This process is generally very straightforward, as most lenders accept methods such as electronic funds transfer or default monthly payments from a borrower’s checking account. However, if a borrower seeks to prepay a loan, make a "catch up" payment, pay off the loan or make a bi-weekly payment, these transactions may not be accepted by the lender. The best way to prevent a payment refusal is to avoid situations where it may occur.
Second, the borrower must be persistent in keeping an accurate record of payments made to the lender. This is particularly important in the event of a lawsuit. If a borrower is diligent in making payments in accordance with his or her lender’s requirements and documentation of these payments, the borrower can prove he or she is not in default of the loan, thus avoiding the negative consequences of an unrelated payment refusal.
Third, the borrower should stay in contact with the lender if a payment needs to be made in a manner inconsistent with the loan agreement. This will allow the borrower to communicate the reason for a different payment method and potentially avoid a payment refusal.
Finally, the borrower should familiar with the provisions of the loan agreement and checklist any exceptions because each loan agreement is unique and specific. It is always good practice to keep a copy of the loan agreement readily available. If a borrower is unsure of his or her right to prepay a loan, monthly catch up payments or pay off the loan, this information is typically set forth in the loan agreement. Additionally, it is wise for the borrower to verify with the lender all available payment options that will be accepted, before issuing a check.
When to Get a Lawyer
If you have attempted to resolve the issue with your mortgage company and they continue to refuse your payment it is time to seek help from an attorney. If your mortgage company has refused to accept any payment, then they are well aware that you are in default and likely have proceeded to foreclosure. If they have refused partial or less than complete payments then the refusal is likely a technical move stating that you are still in default and at some point they will have also began foreclosure proceedings.
Once you find yourself in the position of being foreclosed on it is most important that you get qualified legal assistance . If you wait until the foreclosure is on the brink of taking place you may have very few options. Your window for resolution will be quite small and there is a chance there are only a few days available to take legal action.
Be ready with all necessary documentation when dealing with your attorney, as the details of your loan, payment history, and correspondence with your lender will be paramount in uncovering their motives and possible mistakes. The more information you have assembled—especially upon the suggestion of an attorney—the better your case will be.