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Home >> Lending >> Home Mortgage
Mortgage Provider Declares Bankruptcy: What Now?
My mortgage provider has declared bankruptcy, and they have been absorbed by another mortgage provider. I have just over $2,700 that was debited from my checking account which is currently "frozen until the court issues their ruling." Can the bankrupt mortgage provider legally hold this money? I need this cash, so that it can be applied to the mortgage provider who has now taken over the defunct company. I've talked to two separate individuals of the defunct provider who give differing and inept justifications. They tell me all accounts are frozen until the court's ruling, but they have no idea when that will occur. What can I say or do to get access to my money so I may pay my mortgage?
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 The new owner of the mortgage has to know that the funds are being held by the court. They bought your loan voluntarily and should expect these things. There is also a law, the Real Estate Settlement Procedures Act (RESPA) that protects you against errors like this. You should mention this to the new servicer/owner of your mortgage, and in fact they should have sent you a transfer notice that indicated this:
3500.21(d)(5) Consumer protection during transfer of servicing. During the 60-day period beginning on the effective date of transfer of the servicing of any mortgage servicing loan, if the transferor servicer (rather than the transferee servicer that should properly receive payment on the loan) receives payment on or before the applicable due date (including any grace period allowed under the loan documents), a late fee may not be imposed on the borrower with respect to that payment and the payment may not be treated as late for any other purposes.
What this says is, when the loan was sold, you could have made two of your monthly payments to the old company and the new company can't treat you as past due. They are supposed to get the payments from the other company. Usually bankruptcy isn't in the way, but that isn't your fault.
Published on BankingQuestions.com 10/22/09
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