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.
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Compare rates nowWhen 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.
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.
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The average homeowner sits on roughly $311,000 in equity as of the third quarter of 2024, according to CoreLogic. Having access to your home equity could help to cover unexpected expenses, fund a major purchase like a home renovation or supplement income from your retirement nest egg.
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