What Are the Most Common Forms of Predatory Mortgage Servicing?
At Liggio Law, we understand how stressful it can be to face unfair treatment by a mortgage servicer. Predatory mortgage servicing practices can cause serious financial harm, especially when borrowers trust their lenders to act in good faith.
As a reverse mortgage abuse attorney in West Palm Beach, Florida, we work hard to protect homeowners from these harmful tactics and fight back against those who take advantage of others during vulnerable times.
Recognizing the signs of predatory mortgage servicing is critical if you want to protect your home and financial future. If you believe you're being mistreated by your servicer, you may have legal options. Read on to learn about the most common forms of predatory practices so you know what to watch for and how a reverse mortgage abuse attorney can help.
Unnecessary or Inflated Fees
One of the most common ways mortgage servicers prey on homeowners is by charging inflated or unnecessary fees. These fees may be hidden in statements or explained poorly, making it hard for borrowers to dispute them. Over time, these costs can add up, leading to financial strain or even foreclosure.
Some servicers use this tactic to create defaults where none should exist. A borrower who misses a payment due to an undisclosed fee may suddenly find themselves facing penalties or foreclosure threats.
As a mortgage abuse attorney, we’ve seen how damaging this practice can be for families trying to stay on top of their payments, and it often leads to other predatory tactics.
This brings us to another critical tactic used against borrowers, which involves the misapplication of payments.
Misapplication of Payments
When borrowers make payments, they reasonably expect the servicer to apply them properly to the mortgage balance. However, some servicers intentionally misapply payments to create false defaults or increase the borrower's balance. This can involve applying funds to fees rather than principal or interest, or even splitting payments incorrectly across multiple accounts.
Misapplied payments create confusion and anxiety, especially when borrowers believe they’re current but receive notices stating otherwise. Over time, the cumulative impact of misapplied payments can put borrowers at risk of foreclosure. Understanding how these misapplications occur sets the stage for another major concern—force-placed insurance.
Force-Placed Insurance Abuse
Force-placed insurance happens when a mortgage servicer obtains homeowner's insurance on your behalf, typically because they claim you failed to maintain adequate coverage. While this practice is legitimate under some circumstances, it becomes abusive when servicers arrange for overpriced policies that primarily benefit the lender, not the borrower.
Often, these insurance policies are much more expensive than market rates and provide less coverage. Borrowers are then charged inflated premiums, which are added to their mortgage balance. This artificially increases monthly payments and can create an unaffordable situation.
A mortgage abuse attorney can help determine whether the servicer had the right to impose force-placed insurance and whether the charges are lawful.
Understanding force-placed insurance leads to the broader issue of how servicers improperly handle loan modifications.
Loan Modification Abuses
Loan modifications are supposed to provide relief to struggling borrowers by adjusting the terms of their mortgage. Unfortunately, some servicers abuse this process by offering modifications they never intend to honor or by losing paperwork repeatedly to keep borrowers trapped in a cycle of missed payments and penalties.
Some tactics servicers use to manipulate loan modifications include:
Delaying decisions: Servicers may intentionally stall the review process, collecting payments without ever granting permanent relief.
Requesting documents multiple times: Borrowers may submit the same paperwork repeatedly, only to be told it was lost, incomplete, or outdated.
Offering "trial" modifications: Borrowers are led to believe they’re approved, but after making payments under trial terms, their modification is denied.
These abuses not only deepen financial distress but also erode trust. Many borrowers who were trying to fix their situation end up worse off than before. After understanding how loan modifications can be exploited, it’s important to explore how servicers use dual tracking to further harm borrowers.
Dual Tracking
Dual tracking occurs when a servicer continues foreclosure proceedings while simultaneously working with the borrower on a loan modification. This practice is particularly cruel because borrowers believe they’re negotiating a solution while, behind the scenes, the servicer moves forward with foreclosure.
Although some regulations now limit dual tracking, it still happens. Borrowers must be extremely cautious and stay alert if they’re trying to modify their loan. A mortgage abuse attorney can intervene to stop illegal dual tracking and help homeowners defend their rights in court.
While dual tracking affects loan modification efforts, deceptive communication is another tactic used to confuse and manipulate borrowers.
Deceptive Communication Practices
Clear communication between a borrower and a servicer is vital, but predatory servicers often rely on misleading language, half-truths, or omissions to confuse borrowers. They might falsely state that payments were missed, create fake deadlines, or provide incorrect information about options available to the borrower.
Some important examples of deceptive communication practices include:
Providing conflicting information: Different representatives give different answers, making it hard to know what is true.
Failing to disclose foreclosure status: Borrowers may not be told that foreclosure proceedings have started.
Offering false reassurances: Borrowers are sometimes told their accounts are "on hold" while foreclosure efforts proceed in secret.
Deceptive communication compounds the challenges borrowers already face. Once borrowers are caught off guard, servicers often introduce additional hurdles, such as manipulating escrow accounts.
Escrow Account Manipulation
Mortgage servicers often manage escrow accounts to pay property taxes and insurance premiums on behalf of borrowers. However, some engage in abusive practices by mishandling these accounts. They might overestimate future costs to demand higher monthly payments or intentionally misapply escrow funds.
Incorrect handling of escrow accounts can result in alleged shortages that justify higher charges. Borrowers who can't keep up with these manipulated payments could face foreclosure, even if they were paying diligently.
Recognizing the impact of escrow account manipulation is essential to understanding broader schemes of servicing misconduct, including failure to credit payments properly.
Failure to Credit Payments Properly
When borrowers make payments on time, they expect full credit toward their loan balance. Unfortunately, some servicers delay posting payments or apply them incorrectly, causing false delinquency reports. This can lower a borrower's credit score and increase fees and penalties over time.
Late fees, penalties, and the threat of foreclosure can quickly escalate due to these improper credits. A mortgage abuse attorney can review your mortgage records carefully to uncover whether your payments were mishandled, and if so, fight to correct the account and seek damages for the harm caused.
Another way servicers misuse their position is by wrongly denying valid Qualified Written Requests (QWRs), which leads us into the next critical issue.
Wrongful Denial of Qualified Written Requests
A Qualified Written Request (QWR) is a formal letter a borrower can send to their servicer requesting information or disputing errors related to their loan. Under federal law, servicers are required to respond appropriately to these letters. However, predatory servicers often ignore QWRs, provide incomplete responses, or outright deny valid claims.
When borrowers can’t access accurate information about their loans, it becomes nearly impossible to defend against unlawful charges or foreclosure. Prompt and proper responses to QWRs are vital for transparency and accountability. Understanding QWR abuses ties into the broader impact of illegal foreclosure practices.
Wrongful Foreclosures
One of the most devastating outcomes of predatory mortgage servicing is wrongful foreclosure. Servicers may move to seize a home even when the borrower is current on payments, has a pending loan modification, or is actively disputing errors. Wrongful foreclosures rob families of their homes and financial security.
A mortgage abuse attorney can challenge wrongful foreclosure actions, seek injunctions to stop sales, and help victims pursue damages. Knowing that wrongful foreclosure is often the end result of many abusive practices highlights why early intervention is so important.
Now that we’ve gone over many specific examples of predatory mortgage servicing, let’s discuss how a mortgage abuse attorney can protect your rights moving forward.
Protecting Your Rights Against Predatory Servicers
Standing up to a mortgage servicer can feel overwhelming, especially when facing complicated contracts, misleading statements, and aggressive foreclosure tactics. However, you don't have to do it alone. A mortgage abuse attorney can take a detailed look at your payment history, escrow management, communications, and more to spot any signs of illegal conduct.
Some helpful steps to take if you suspect abuse include:
Keep detailed records: Save all statements, letters, and payment receipts.
Request account histories: Ask for a complete breakdown of charges and payments.
Act quickly: Delays can limit your legal options and increase the risk of foreclosure.
Having an experienced advocate in your corner makes all the difference. By working with a mortgage abuse attorney, you can push back against unfair treatment and protect your home.
Contact Liggio Law
If you believe you're the victim of predatory mortgage servicing, it's critical to act quickly to defend your rights and your home. At Liggio Law, we’re committed to helping homeowners fight back against abusive servicers and find real solutions. We serve clients in West Palm Beach and throughout the state of Florida. Contact Liggio Law today to schedule a consultation with an experienced mortgage abuse attorney who will stand by your side.