Jan 25, 2025
When you take out a mortgage, lenders want to make sure you have enough money to pay your homeowners insurance and property taxes. One way to do that is to set up an escrow account with just enough money in it to cover these expenses.
But what if your mortgage lender doesn’t use the money as intended? What if, 20 years after opening your mortgage, you find out that it took out $5,100 from your escrow account and paid another homeowner’s property taxes by accident.
Advertisement
Hypothetically, what could you do to rectify the situation and hopefully get your money back?
Understand your rights
You have rights as a borrower, and a lender isn't allowed to use the money in your escrow account for anything other than what was agreed upon.
According to the Federal Reserve, the Real Estate Settlement Procedures Act (RESPA) requires lenders to provide an itemized list of what will be paid with the funds and where the money goes once it’s paid out by the servicer.
If you find out that your mortgage company used the funds in your escrow account incorrectly, it’s a good idea to contact your local tax authority and see what its records show. Getting your paperwork in order is your first priority, as you’ll need documentation to prove your situation.
Then, contact your mortgage lender to find out what happened on its end. The New York State Department of Financial Services says to first file a formal complaint in writing.
In most cases, the lender will respond within 20 business days and resolve the issue within 60 business days. By this time, it’ll either correct the issue — in this case, return the $5,100 back to your account — or provide a statement that covers why it denied your complaint or request.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
When to escalate
If you don’t get the response you hoped for, you can escalate the issue and submit a complaint online with the Consumer Financial Protection Bureau (CFPB).
Like the complaint you submitted to your lender, you’ll need to provide as many details as possible. The CFPB asks that you be clear and concise and include any important dates and amounts the mortgage lender took from you. Don’t forget to provide your contact details and the name of your mortgage lender.
Advertisement
To help the CFPB assess your case, you can also submit additional information like documents showing where the funds went (if you can obtain such proof), along with any communication you’ve received from the lender.
Once you do that, all you can do is sit back and wait. The CFPB will review your complaint and forward it to your mortgage company or another government agency. Complaints forwarded to your mortgage provider will mean you receive a response in 15 days, or at least that you'll receive a final response within 60 days.
Your complaint may also be published publicly on the CFPB’s website — but you will need to provide permission to publicize details like the results of your complaint.
Last resort
Depending on how your complaint pans out, you can consider hiring a consumer protection attorney to help you prove your case if your mortgage servicer doesn’t admit any wrongdoing and you’re not satisfied.
Keep in mind that hiring legal help can be expensive, so think carefully whether you feel it’s worth it to do so.
To prevent anything like this from happening again, consider switching mortgage providers to one you feel is more reputable. When doing your research, consider checking customer reviews on websites like the Better Business Bureau and Trustpilot to see what others have to say about the lender.
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Sarah Li-Cain, AFC is a finance and small business writer with over a decade of experience.
