How to Dispute a Mortgage Servicing Error With a Written Notice of Error

What mortgage problems can a Notice of Error address?

A Notice of Error is a written way to tell your mortgage servicer that you believe it made an error in servicing your mortgage loan. Your servicer is the company that receives and manages your mortgage payments; it may be different from the company that originally made the loan.

Regulation X identifies covered servicing errors that include:

• failing to accept a payment that meets the servicer's written payment requirements;
• failing to apply an accepted payment correctly to principal, interest, escrow or other charges;
• failing to credit a payment to the mortgage account as required;
• failing to pay property taxes, insurance premiums or other covered escrow charges on time;
• failing to refund an escrow balance as required after the mortgage is paid off;
• charging a fee without a reasonable basis;
• failing to provide an accurate payoff balance when required;
• failing to transfer servicing information accurately and on time;
• certain errors involving required foreclosure procedures; and
• other errors relating to the servicing of the mortgage loan.

For example, if you made a payment on time but the servicer applied it incorrectly and charged a late fee, a Notice of Error can identify the payment date, amount and disputed fee. If money is collected through escrow but the servicer fails to pay your property taxes or insurance as required, that can also be a covered servicing error.

Do these rules apply to every type of mortgage?

No. CFPB guidance explains that the federal error-dispute rules apply to closed-end mortgages, where the loan amount is advanced and cannot be redrawn after repayment.

The CFPB specifically states that a mortgage servicer is not required to follow these Notice of Error rules for a home equity line of credit. The federal procedure also concerns mortgage servicing errors; Regulation X identifies loan-origination, underwriting and the decision to sell or securitize a loan as examples of matters that are not servicing errors covered by this procedure.

What should you put in the letter?

Regulation X requires the written notice to include the borrower's name, information that enables the servicer to identify the mortgage loan account, and the error the borrower believes occurred.

The CFPB recommends including your name as it appears on the mortgage, your home address and mortgage account number. Describe the problem precisely. For a payment dispute, for example, identify the payment date, amount and what the servicer did with the payment. For an escrow dispute, identify the tax, insurance or escrow transaction involved.

Supporting records can make the problem easier to investigate, but Regulation X does not allow a servicer to make submission of requested supporting documentation a condition of investigating an otherwise valid Notice of Error. The servicer also cannot decide that no error occurred solely because you did not provide requested supporting information without conducting the required reasonable investigation.

Where should you send the Notice of Error?

This is one of the most important parts of the process. A mortgage servicer may establish a specific address that borrowers must use for Notices of Error. When a servicer has designated such an address, you must send your notice there for the Regulation X error-resolution process.

Look for the address on your periodic mortgage statement or coupon book, in a written notice from the servicer, or on the servicer's website. The address may be different from the address where you send monthly mortgage payments.

If a servicer designates a Notice of Error address and lists contact addresses on its website, Regulation X requires the designated address to be posted there. If the servicer has not designated a specific address, the CFPB's official interpretation states that the servicer must respond to a qualifying Notice of Error received by any of its offices.

Do not write the dispute on a payment coupon or another payment form supplied by the servicer. Regulation X states that a notice submitted that way does not have to be treated as a Notice of Error.

Can you send a Notice of Error online?

There is no single federal online filing portal for sending a Notice of Error to your mortgage servicer. The required submission route depends on your servicer.

Under the CFPB's official interpretation of Regulation X, a servicer may choose to accept Notices of Error by email, a website form or another online intake method, but it is not required to provide an online method. Any online process it establishes is in addition to the process for receiving notices by mail. Follow the instructions your own servicer provides.

How quickly must the servicer acknowledge your notice?

The servicer generally must send a written acknowledgment within 5 days after receiving your Notice of Error, excluding Saturdays, Sundays and legal public holidays.

There is an early-correction exception. If the servicer corrects the asserted error and notifies you in writing of the correction within that same 5-day period, Regulation X does not require the separate acknowledgment and investigation response that would otherwise apply.

How long does the servicer have to investigate?

For most covered servicing errors, the servicer must respond no later than 30 days after receiving the Notice of Error, excluding Saturdays, Sundays and legal public holidays. The servicer must either correct the error and notify you in writing, or conduct a reasonable investigation and send a written explanation of why it determined that no error occurred.

For most errors subject to that 30-day period, the servicer may extend the deadline by an additional 15 days, again excluding Saturdays, Sundays and legal public holidays. It must notify you in writing before the original period expires and explain the reason for the extension.

Not every error uses the general timetable. A Notice of Error asserting failure to provide an accurate payoff balance must generally be addressed within 7 days, excluding Saturdays, Sundays and legal public holidays. Certain errors involving foreclosure initiation, judgment, an order of sale or a foreclosure sale must generally be addressed before the foreclosure sale or within 30 days after receipt, whichever is earlier. The 15-day extension is not available for the payoff-balance and specified foreclosure-error categories.

If a notice asserting certain foreclosure errors arrives 7 or fewer days before a foreclosure sale, a special rule applies: the servicer must make a good-faith attempt to respond, orally or in writing, and either correct the error or state why it determined no error occurred.

What must the servicer tell you after investigating?

If the servicer finds an error, it must correct the identified error and provide written notice of the correction, the effective date and contact information for further assistance. If its investigation identifies additional servicing errors, Regulation X requires it to correct those errors as well and notify you.

If the servicer determines that no error occurred, its written response must explain the reason for that determination, tell you that you may request the documents relied upon in making the decision, explain how to request those documents and provide contact information for further assistance.

If you request the documents relied upon, the servicer generally must provide them without charge within 15 days after receiving your request, excluding Saturdays, Sundays and legal public holidays. The regulation contains exceptions for confidential, proprietary or privileged information.

Can the mortgage servicer charge you for the dispute?

No. Regulation X provides that a servicer may not charge a fee or require a borrower to make a payment as a condition of responding to a Notice of Error.

This protection does not suspend your normal mortgage payment obligations. The CFPB advises borrowers to continue making scheduled mortgage payments while waiting for a response. For example, disputing how one month's payment was handled does not by itself eliminate the obligation to make the next payment that is due under the mortgage.

What happens to credit reporting while a payment error is disputed?

After receiving a Notice of Error, Regulation X prohibits the servicer for 60 days from furnishing adverse information to a consumer reporting agency regarding a payment that is the subject of the Notice of Error.

This protection is specific to the payment covered by the error notice. It does not eliminate other obligations under the mortgage or automatically stop every servicing or foreclosure action.

What if the problem involves your escrow account?

Escrow problems are a common reason to use the Notice of Error procedure. Covered errors include failures to make required timely payments of property taxes, insurance premiums or other covered charges, and failures to refund an escrow account balance as required after payoff.

If your servicer failed to pay property taxes from an escrow account, the CFPB recommends contacting the servicer immediately and sending a Notice of Error with a copy of the tax bill. You should also contact the taxing authority promptly because unpaid property taxes can have consequences separate from your dispute with the mortgage servicer.

Can a servicer reject some Notices of Error?

Regulation X provides limited circumstances in which a servicer does not have to follow the ordinary acknowledgment and investigation requirements. These include a substantially duplicative notice without new and material information, an overbroad notice from which the servicer cannot reasonably determine the asserted error, and certain untimely notices.

A notice can be treated as untimely when it is delivered more than 1 year after the loan's servicing was transferred away from that servicer or more than 1 year after the mortgage loan was discharged. If the servicer determines that one of these exceptions applies, it generally must notify the borrower in writing within 5 days after making that determination, excluding Saturdays, Sundays and legal public holidays, and explain the basis.

Be specific rather than alleging that everything about the account is wrong. Identify each concrete payment, fee, escrow transaction or other servicing action you dispute.

What if the servicer does not respond?

If more than 5 days have passed after receipt without the required acknowledgment, or the applicable response period has passed without a substantive response, the CFPB identifies those situations as possible red flags. Remember that Saturdays, Sundays and legal public holidays are excluded from these federal time calculations.

You can submit a complaint to the Consumer Financial Protection Bureau if you continue to have a problem with your mortgage servicer. If you are struggling to make payments or are at risk of foreclosure, a different form of help may also be appropriate. Helpydo has a separate guide to getting HUD-approved foreclosure counseling.

If the problem involves housing discrimination rather than how your mortgage account is being serviced, use the separate process for filing a housing discrimination complaint with HUD.

Common mistakes to avoid

• Do not send the notice to the regular payment address when your servicer has designated a different Notice of Error address.
• Do not write the dispute on your mortgage payment coupon or another payment form.
• Do not describe the problem only as an unexplained general account error; identify the specific servicing action you believe was wrong.
• Do not stop making otherwise required mortgage payments merely because you sent a Notice of Error.
• Do not assume every mortgage dispute is a servicing error. Origination and underwriting disputes are examples the Regulation X interpretation identifies as outside this error-resolution procedure.
• Do not assume the general 30-day response period applies to every error; payoff-balance and certain foreclosure errors have different federal deadlines.