Q: is it legal for a lender to collect money for taxes and insurance in a mortgage and then apply it to the principal balan
I was being considered for a post pandemic loan modification. I was approved and made seven trial payments. The bank suspended the modification because they say that I did not send in a form that was needed to complete the modification. I mailed the form to them on two occasions in the envelope that was provided. Finally I got permission from my account rep to fax it to them. I did and the fax showed that it was successfully transmitted. They are saying that they never received the form thus suspending the modification. I am currently starting the process over. The challenged that I have is my taxes and insurance are now due and the bank is telling me that they will not pay them. I am told that the six months of payment that I made would be applied to principal and interest even though the payment was broken down the include the payment for my impounds. Can the bank legally apply the funds that I agreed would be for impounds to principal/interest. Do I have any legal recourse?
A: The way I see things, it doesn't matter. The taxes and insurance are payable now, and so is the principal plus interest. Unless you pay enough to cover everything, you still have a deficiency.
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