Mortgage  Question?
Can Lender Require Add Money Impound Account For Error?

My lender is requiring me to add money to my impound account and increasing my monthly payment due to an error in my loan documents. Is the lender allowed to do this?

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

Your mortgage note contains a provision that addresses any adjustments to your monthly impounds and what lenders can do if there is an impound account shortage. In many cases lenders can demand that borrowers correct the shortage by paying into the impound account.  Additionally, most mortgage documents contain a provision that permits lenders to correct any mistakes in the loan documents. This provision typically applies to documentation errors but may also enable the lender to increase your monthly payment to correct any errors they identify.

Your first step should be to make sure that the expense items being paid for from the impound account are accurate. You should contact your county recorder office to determine the property tax owed from the time the property purchase closed until now as well as your current property tax rate and bill.  You should also verify the cost of any other expenses paid from the impound account such as homeowners insurance.

You can compare the actual costs for these items to the amount you have contributed to the impound account to verify if the shortage claimed by the lender is accurate. If the lender's figure is accurate, you will likely be required to remedy the impound account shortage and your monthly payment may increase to correct the error going forward. If the lender's figure is not accurate then you can use the correct property tax and insurance costs figures to resolve the issue.

If the lender is not cooperative and you cannot come to an agreement or if you believe that the lender intentionally misled you, I recommend that you contact a real estate attorney to review your legal rights. You can also contact your state attorney general or the Consumer Finance Protection Bureau (CFPB) to review your situation more closely.

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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