Tired of getting the run-around from your mortgage lender or servicer? Starting Jan. 10, 2014, you’ll get consumer protections aimed at taming the worst habits mortgage lenders picked up during the mortgage foreclosure crisis.
But realize that you need to follow specific procedures to make the protections work for you.
Companies have to offer you good customer service and set up procedures to ensure employees do their jobs correctly.
The fact that federal legislators put this in the law tells you a lot about how frustrated consumers have gotten with mortgage lenders and servicers.
Servicers (the companies that collect your mortgage payments on behalf of the lender or investor who owns your loan) are now officially required to set up their operations so that employees can actually find information about your loan, respond to your questions, and help you if you have a problem paying your mortgage.
The servicer has to answer your questions and respond to your mortgage problems and questions pretty quickly.
- Within 5 days, it has to admit it got your letter.
- It has 30 to 45 business days to fix an error, send you the info you need, or explain why it can’t do either of those things.
Tip: You have to report errors and ask for information in writing. Calling doesn’t trigger the protections, nor does jotting a note on the payment coupon. You have to write a letter and send it to the right address for complaints. Check your lender’s or servicer’s website for directions about where to send correspondence and keep copies of your letters for your records.
Mortgage servicers have to give you a regular statement explaining:
- What they did with the money you sent (what went into escrow, what went toward paying off your loan, etc.).
- What you owe this month.
- Any fees you owe for things like paying late.
- Your options if you have one of those pick-a-payment mortgages, where you can choose how much to repay each month.
Tip: Get the most from this rule by checking your statement each month. Question any extra fees and demand your money back in writing if you’re charged fees you didn’t owe.
Lenders must give you credit for payments you make on the day your payment arrives. They can’t hold it for a few days, potentially making your payment “late,” so they can charge you a late fee.
Tip: What’s important when making your mortgage payment is to follow directions. Send the payment to the right address and use whatever payment forms the lender gives you, like a coupon book or monthly tear-off coupon in your statement. If you don’t follow these protocols, the lender can hold your payment for five days.
By the way, if you send in a partial payment, the lender can tuck that money into a separate account instead of using it to repay your mortgage. But, under the new rules, it has to tell you on your statement it’s doing that.
You can get a reasonably fast answer when you ask about paying off your mortgage.
Tip: When you want to know how exactly much it will cost to pay off your mortgage on a particular day (like the day you’re refinancing), write to ask your lender. That way, it has to give you an answer within seven business days. If you call to ask for a payoff, the lender doesn’t have to send you the payoff statement within seven days.
You can’t be charged for insurance you don’t need.
If you have a mortgage, you have to get a home owner’s insurance policy (and possibly flood or other insurance coverage, too). When you don’t get — or can’t get — a home owner’s policy, the lender has the right to buy a policy and charge you for it. That so-called force-placed insurance is a rip-off because it costs more and covers less.
Under the rules, before the lender can force-place a policy, it has to warn you at least twice to send proof that you got your own policy. And if it buys a policy for you, the lender can’t add an extra fee for itself.
So if your lender sends a letter saying your home owner’s insurance policy has lapsed,
- Send the proof of insurance your lender asks for by certified mail.
- Keep copies of all your correspondence.
Tip: If you get charged for a force-placed policy after sending the lender evidence you have a home owner’s policy, ask in writing to have the force-placed insurance fee removed and your money refunded.
When you have an adjustable-rate mortgage, you’ll get at least two months’ warning — much more if it’s your first adjustment — before your mortgage payment changes.
Tip: If your payment is going up, evaluate your ARM and investigate fixed-rate loan options.
Servicers have to try to talk to you when you don’t make your payments.
There’s no rule that says loan servicers have to help you avoid foreclosure, but they must have an actual, live person talk to you about your situation once you’re 36 days late in making your monthly payment.
Tip: Be willing to discuss your finances with your lender. You’d be surprised how many troubled borrowers just won’t answer the phone. Make sure you ask if there are any loan workout programs.
Here are some workout options when you’re facing foreclosure.
Get help from a home ownership counselor who knows the ins and outs of loan workouts, because the paperwork load is intense and the process is complicated.
If you send in an application for a loan workout, the lender can’t start foreclosure while it’s considering your application. Servicers have to wait until you’re 120 days behind on your payments.
To get help avoiding foreclosure, you must ask for it and send in a complete loan workout application. If the lender tells you something is missing from your application, you’ll have only five days to respond.
Don’t delay seeking help. The closer you are to the foreclosure sale date, the less time you’ll get to respond to any workout options the lender offers you like a short sale, loan modification, deed-in-lieu, or loan recast.
Tip: If you don’t like the lender’s workout offer or your application for help is denied, you can appeal it, but if your appeal is denied, there’s nothing more the new protections will force your servicer to do.
If you think your servicer isn’t treating your fairly, you can file a complaint with the Consumer Finance Protection Bureau. The Bureau will follow up on your complaint. If you’re still not happy, you can sue the servicer to make it follow the rules.