Your first step to solving this issue is to establish a paper trail that verifies the extra payment that you made on your mortgage. A cancelled check or bank statement that shows proof of the payment should be sufficient.
Your next step should be to request a mortgage payment history from your lender that shows a monthly breakdown of your mortgage payments including principal, interest and escrow payments (if applicable) over the life of your loan. Reviewing your mortgage history enables you to track your principal balance on a monthly basis and identify any changes in your loan payment, property taxes, homeowners insurance and any other applicable charges.
This document should also reflect any extra principal payments you have made and show your monthly escrow account balance including when property tax, homeowners insurance and mortgage insurance (if applicable) payments are made from the account. The mortgage history also shows if and when the escrow account becomes deficient.
With your mortgage payment history you should be able to determine when the extra payment was made and understand if the payment was applied to reduce your principal balance or to address an escrow account shortage. Please note that if your escrow account is deficient, the lender can require that any extra payments you make be applied to eliminate the deficiency. You can review your mortgage note and any addendums to the note to understand the terms for your escrow account.
For example, if your property tax bill or homeowners insurance premium increases over the course of the year, there may not be sufficient funds in your escrow account to pay those expenses when due. In this case, the lender still pays those expenses on your behalf, which creates a shortage in your escrow account. The lender can increase your monthly payment, at least temporarily, to replenish the account and any extra payment you make can also be used to address the shortage.
If after reviewing your payment history and personal records you believe the lender has made a mistake with your account or has not correctly applied a payment you have made then contact your lender and attempt to resolve the issue. If that approach does not work and you believe your lender is acting in bad faith you should file a complaint with the Consumer Financial Protection Bureau (CFPB) and your state attorney general.
Additionally, you may want to contact a real estate attorney to review the situation and represent your interests with the lender. In some cases, letting the lender know that you are contacting the CFPB or an attorney goes a long way to solving the problem.
"Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z)" CFPB. Consumer Financial Protection Bureau, February 14 2013. Web.« Return to Q&A Home About the author