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Mortgage Loans - General Questions
- What is a home equity loan?
- The bank notified me that there was a shortage in my escrow account and increased my payments. Is this legal?
- The bank sold my mortgage loan to another financial institution without my permission.
- I have a construction mortgage loan. The bank states I need to pledge a $50,000 certificate of deposit to provide extra collateral. Can it do that?
- My bank went out of business, but I need a release of my mortgage from them. What do I do?
What is a home equity loan?
A home equity loan allows you to tap into your home's built-up equity, which is the difference between the amount that your home could be sold for and the amount that you still owe.
Homeowners often use a home-equity loan for home improvements, to pay for a new car, or to finance their child's college education. The interest paid is usually tax-deductible.
Because the loan is secured by your home's equity, if you default, the bank may foreclose on your house and take ownership of it.
This type of loan is sometimes referred to as a second mortgage or borrowing against your home.
The bank notified me that there was a shortage in my escrow account and increased my payments. Is this legal?
Yes. Under the Real Estate Settlement Procedures Act (RESPA), if your bank determines that there will be a deficiency (shortage) in your escrow account balance, they can obtain repayment for the deficiency amount. Usually, you may choose to repay the deficiency amount in one lump sum or spread the payments over a 12-month period.
The bank sold my mortgage loan to another financial institution without my permission. Can it do this?
Yes. Federal banking laws and regulations permit financial institutions to sell mortgages or transfer the servicing rights to other institutions.
Consumer consent is not required.
I have a construction mortgage loan. The bank states I need to pledge a $50,000 CD to provide extra collateral. Can it do that?
You need to refer to your loan agreement. Any requirement for assigning or pledging additional collateral during the construction term would have been disclosed in the agreement.
Typically, this happens when there is a loan-to-collateral value shortfall. The bank requires the borrower to pledge another asset to remedy the shortfall.
You should contact your lender for an explanation.
My bank went out of business, but I need a release of my mortgage from them. What do I do?
The entity that took over your mortgage should have notified you. If you can't find out which company took over, call the FDIC's lien release phone number at 1-888-206-4662 (toll free) or visit Closed Banks and Asset Sales on the FDIC Contact Us page.