What is a "Notice of Error" in mortgage servicing?

A "Notice of Error" in mortgage servicing is a formal communication from a borrower indicating a written dispute about an error that they believe has occurred in the servicing of their mortgage. This notice is an essential consumer protection mechanism established under the Real Estate Settlement Procedures Act (RESPA). It allows borrowers to bring attention to inaccuracies or issues such as incorrect payment processing, failure to apply payments correctly, or disputes regarding fees charged.

The process surrounding a Notice of Error is crucial for ensuring that borrowers have the right to challenge and seek resolution for any discrepancies they encounter in their mortgage statements or processes. Once a lender receives this notice, they are obligated to investigate and respond to the borrower within a specific time frame, which is an important part of safeguarding consumer rights in mortgage servicing.

Understanding what a Notice of Error entails is key for mortgage servicers, as it highlights their responsibilities in handling disputes and ensuring compliance with applicable laws.