What happens if your mortgage servicer can’t find your loan? These homeowners couldn’t figure out how to make payments and now they’re in hot water.

Q; We have lived in our house for 15 years. About four years ago our mortgage was sold to a different loan servicing company. We called the new company several times over the course of a year and they said they have no record of our loan. We had no way to make our loan payments and now the real estate taxes have not been paid. We recently got notice that our real estate taxes were sold. If I pay the taxes, who owns the home?

What Happens If Your Mortgage Servicer Can’t Find Your Loan?

A: It’s hard to believe that it’s been a full four years since you made a mortgage payment on your home, and you’ve been unable to figure out how to at least pay the real estate taxes. But, let’s take your email as it is and start to unpack it. 

We suspect you may have more serious issues to contend with than just the lack of payments for your mortgage and real estate taxes. How this ends could be catastrophic: you could lose your home due to the tax sale or you could lose your home due to the failure to make your mortgage payments.

Let’s start with the assumption that you initially had a 30-year loan on your home and that the loan servicing issue came about 11 years into the loan term. We mention this because you may have put down 10 or 20 percent when you purchased your home and now, 11 years later, you have paid down a good chunk of the balance on the loan. This means that you should have quite a bit of equity in your home.

How to Confirm Your Loan Was Sold

For years, we have told our readers that they must be careful when they receive notices that their loan servicing has been transferred by a lender or that the loan has been sold to another loan buyer. That’s because it may not be true. Identity theft these days is so much more than just simply buying your Social Security information online and opening up a fake credit card in your name. It now includes medical identity theft (where someone gets ahold of your insurance information and gets medical treatment in your name), bank fraud (where someone can empty a bank or brokerage account) and a growing amount of real estate identity theft, where property can be bought, sold, financed and refinanced in your name – and you’ll never know that your equity has been stripped.

If you get a notification that your loan was sold and are informed that you must make payments to another company, it is incumbent on you, the borrower, to confirm that the loan has indeed been sold. You have to pick up the phone and call your current lender and ask them to confirm whether your loan was sold or not. You also ask them to confirm who the new loan servicer is for your loan. If you take this simple step, you can avoid quite a bit of pain down the road and ensure that you pay the right loan servicer.

Did you ever call your lender to confirm the transfer? Your current lender (the lender you had four or more years ago) would have the information to confirm that they sold the loan and could give you the information on who is the new loan servicer. 

What we don’t know is whether someone was trying to scam you. There are plenty of bad actors out there that try to get homeowners to send their mortgage payments to scam companies. The homeowner only finds out about the scam when the rightful lender calls to find out why the borrower has failed to make loan payments on the loan. 

How to Proceed If the New Loan Servicer Can’t Find Your Mortgage Loan 

Let’s imagine that your loan was sold and the new lender lost all traces of your loan. Even if that’s the case, you can still and you still should make the tax payments on your loan. Most governmental agencies that bill homeowners for real estate taxes send their tax bills to the homeowners. They also send an electronic copy of the tax bill to the loan servicing company. When things are working correctly, the loan servicer gets the notice that taxes are due and they pay the taxes out of funds the homeowner has deposited with the lender in the tax escrow.

There are times that loan servicers mess up and fail to make real estate tax payments, pay the wrong tax bill, or pay the wrong amount. But you, as the homeowner, have the obligation to keep tabs on your lender and make sure they are making your real estate tax payments on time and in full. These days, you can check your property’s tax bills online (in most jurisdictions) to see whether they have been paid and if they are current.

Paying Your Real Estate Taxes

Now let’s assume that your loan file actually got lost somehow. And, your taxes are in danger of not getting paid. So, if your lender doesn’t make your real estate tax payments, you better make sure you do. Otherwise, if those taxes are sold off and you never redeem the tax sale, you will lose your home to the tax buyer. We’d suggest you run to the tax collector’s office and pay whatever is owed on your property’s real estate tax account to redeem the taxes and save your home. 

We can’t tell you what office to go to in your town (you didn’t provide that information in your email) to redeem the tax sale, but we suspect you’ve received notices of the tax sale and that notice should give you more information. Please make sure that you deal directly with the government office that handles real estate tax payments and not some company that’s trying to make money off of you due to your particular circumstances (it’s public information that your taxes have been sold and who bought them). You must get your taxes paid in full and you must know that time is of the essence here or you might easily end up without a home.

Keep Records of Payments, Save Unmade Payments and Monitor Your Credit

We can’t delve too deeply into your other issue of a loan servicer that lost your file. Suffice to say that you should have all the cash you should have paid your lender over the past four years. It’s quite possible that the loan servicer will audit their files, find the mistake and come after you for the money you owe them. If that’s the case, you better have the cash handy or you could wind up in foreclosure. Save the money and don’t spend it. You’ll have fines and penalties on your real estate taxes to pay but you should have that money as you have not made any mortgage payments. 

Please understand that just because the loan servicer “lost” your file for now does not mean that this situation can’t come back to bite you when they figure out their mistake. Yes, we know that the lender caused the problem, but it’s hard and costly to fight loan servicers even when they make the mistake. Keep good records of everything you do and every payment you make just in case you need those records down the line. 

You should also immediately pull a copy of your credit report and score from each of the major credit reporting bureaus, Equifax, Experian and Transunion. All of them offer a free report and score these days, so head over to their websites to get that information. You should be able to see who is the lender of record for your loan and if they have been reporting you as late paying for the past four years. You’ll also see the record of your missed tax payments, which should also be reported. If someone has stolen your identity, you may see other credit accounts in your name that you don’t recognize. If that’s the case, you better get on it because it could take years to unravel that mess.

Good luck.

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