DEAR BOB: What recourse do I have against my new mortgage loan servicer who failed to pay my homeowner’s insurance on time from my escrow account funds? When my loan servicing was transferred, I contacted the new loan servicer to be certain my insurance would be paid on time out of my escrow account. To make a long story short, after numerous requests by my insurance agent and myself, the new loan servicer eventually paid but only after my insurance was cancelled and had to be reinstated. I am furious. As a homeowner, what recourse do I have against my new loan servicer? – Roseanne S.
DEAR ROSEANNE: I don’t blame you for being very upset. There is no valid excuse for a mortgage loan servicer ever failing to pay property taxes or insurance premiums on time from the borrower’s escrow account.
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Unfortunately, there is no practical recourse against your defaulting loan servicer. You didn’t suffer any monetary damages so taking the loan servicer to local Small Claims Court isn’t an option.
However, keep a sharp eye on your wayward loan servicer. Some loan servicers fail to pay the property taxes on time and then have the nerve to charge the borrower’s escrow account for the late fee imposed by the local tax collector.
HOME SELLER IS UPSET OVER HIGH COST OF SELLING HOME
DEAR BOB: Why don’t you tell the truth about the high costs of selling one’s property? As I see it, here are some of the costs I will encounter: 6 percent realty agent sales commission, 15 percent federal capital gains tax, 9 percent state income tax, county transfer fee, fire inspection fee, structural inspection fee, and title insurance costs. I figure it will cost me about 40 percent to sell my property. No wonder there is so little affordable housing – Paul R.
DEAR PAUL: I think you protest too much. If the property you are selling is your principal residence, and if you owned and lived in it an aggregate two of the five years before its sale, you are entitled to a capital gains tax exemption up to $250,000. If you’re married filing jointly, you can qualify for up to $500,000 tax-free home-sale profits by using Internal Revenue Code 121.
The other costs you list are usually quite minimal and some of the costs you listed can be shifted to the buyer. For cost of selling details, please consult a local real estate agent who will calculate an exact “net funds to seller” statement for you.
IS IT TOO LATE TO BACK OUT OF BI-WEEKLY MORTGAGE SCAM?
DEAR BOB: I read your item about bi-weekly mortgage payments. You said a $300 bi-weekly mortgage set-up fee is a scam. My husband and I set up our bi-weekly mortgage through our lender. We have been paying for about two years now. Is it too late to back out of this? Or should we continue? – Sheila C.
DEAR SHEILA: I’m sorry you paid your mortgage lender $300 to set up a bi-weekly mortgage when you could have achieved the same result yourself at zero cost. Worse, I’ll bet you are wasting $5 or $6 per month service fees for the privilege of having bi-weekly mortgage payments electronically deducted from your checking or savings account.
A bi-weekly mortgage, with half of your regular monthly mortgage payment taken electronically from your checking or savings account every two weeks, should pay off your home loan in about 22 years. The result will be saving thousands of interest dollars.
But any homeowner can achieve the same result without any extra cost. A bi-weekly mortgage is the equivalent of 13 monthly mortgage payments every 12 months.
To accomplish the same result, just divide your monthly mortgage principal and interest payment by 12. Then add that amount to each monthly payment, clearly marked as extra principal payment.
At this point, if you want to save the $5 or $6 monthly service fee, you can cancel your bi-weekly mortgage plan and accomplish the same result yourself at no cost as explained above.
The new Robert Bruss special report, “Pros and Cons of Earning Big Profits from Foreclosures and Bargain Distress Properties,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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