My mortgage payment history has a fee charged called “corporate advance” – what does that mean?

18 Aug My mortgage payment history has a fee charged called “corporate advance” – what does that mean?

Every homeowner should get a life of loan history or transaction history for his or her home mortgage at least once year and review it to see how your payments are posted and what charges have been assessed against your loan. Many times a mortgage servicer will post your payment to a suspense account (especially if the payment is different than the amount that was due). Later, the mortgage servicer may take money from the suspense account to pay an item called “corporate advance”. Whenever you see a corporate advance, you should always question it. Typically, corporate advances are disbursements for servicing related expenses (not taxes and insurance) that the servicer has paid with servicer funds – these fees may include foreclosure expenses, attorney fees, bankruptcy fees, and force placed insurance.

As a bankruptcy practitioner when reviewing loan histories and mortgage documents, I more times than not find that the servicer has paid a “corporate advance” from the suspense account when the monies should have been applied elsewhere to the loan. This can cost the consumer a lot of money in the long run.

In bankruptcy cases, often times the servicer does not get approval from the court before taking the money from the suspense account which leads to the debtor owing more money on the mortgage than what he should owe. Many bankruptcy judges are starting to disallow fees that have been paid without court approval.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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