Legal Question in Real Estate Law in Texas

Mortgage company incorrectly applying payments

I started making a full payment towards the mortgage every 2 weeks a little over a month ago. Instead of crediting the extra payment towards principal only they are taking out the interest for the following months and crediting them as usual monthly payments. For example the statements now say that I don't have a payment due until near the end of 2008. This doesn't seem like the correct procedure for handling the extra payments.

Can someone help me understand Texas/Federal law for handling such situations?

If they aren't handling the extra payments correctly, then I'm also concerned about all the extra payments I've made in the past.

I'd also like to add that since buying my home about 3 years ago I have been making partial payments every 2 weeks. About 1 year ago the mortgage company quit crediting these payments and held them in some sort of escrow account. They told me partial payments could not be credited until a full paymen was received for a particular billing cylce. For about 3 months I had to call each month to fix this. I haven't had a problem until I started the full payment every 2 weeks. I'm getting frustrated with what appear to be unethical accounting practices. Any help would be appreciated.


Asked on 6/12/08, 11:09 pm

1 Answer from Attorneys
Cheryl Rivera Smith The Smith Law Firm

Re: Mortgage company incorrectly applying payments

If this is a legitimate mortgage company, I think that they are probably not benefitting from the additional interest and you will realize a refund of excess escrow next year. They are not allowed to collect interest they don't earn. If it is a mom & pop doing this, you may need to ask for reimbursement. You will be able to calculate this amount. If they refuse, file in small claims court if the amount is under $10,000. Mortgage companies make money by having people re-fi into bi-weekly payments. If you go off schedule, it blows the formula - that is why you are having problems.

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Answered on 6/13/08, 4:15 am


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