Every month, my bank sends me a checking account statement.
Every month, I receive statements in the mail from my cell phone provider, utilities and even credit card companies.
Why, then, is it so darned difficult to get a monthly statement from mortgage servicing companies -those who we send our mortgage payments to for years -if not decades? They say it's "too costly" to keep us informed -I say it's too costly not to
I have been pushing for years to try to enact legislation that would require mortgage servicing companies to provide monthly statements to their customers. How can we, the consumers, hope to deter fraud or errors from seeping into our loan accounting, if we can't verify that our payments are being credited accurately, on time -or at all?
Truth is it was my error riddled, mismanaged mortgage that originally turned me into a consumer advocate. Looking back on it, the only thing I did wrong was trust my mortgage company to properly apply my monthly payments. It was that simple. I found out later, it was a wrong that wasn't so simple to make right. And I wasn't alone
I never received a bill or statement for my mortgage. Instead, I paid my mortgage using payment coupons supplied by the bank. Good customer that I am, many months I chose to pay extra principal on my mortgage. I was never late, and I just assumed that my additional money, along with my monthly P & I payments, were applied timely, accurately and as intended.
Without a monthly statement to monitor, I didn't catch nor did I suspect that my on-time payments had been misapplied as late and that my additional principal payments had not been credited to my principal balance. In fact, much of my additional principal payments were eaten up in faulty late charges and fees tacked on by the bank and in some instances the "extra" payments were applied as an advance payment -rather than used to reduce the principal. All the while, without my knowledge.
As you can imagine, this caused a series of chain-reactive events that included inaccurate credit reporting and years to correct the debacle. What's frustrating is that all of this could have been avoided if I had received monthly statements, a tool that would have not only have afforded me the ability to verify my payments but would have made me aware of the multitude of fuzzy accounting practices long before they grew out of control.
Banks and mortgage servicing companies can and do still mishandle and misapply mortgage payments. Yet no one requires them to account for their mistakes with our money.
Monthly statements could even save some homeowners. Take Robert J. Wright, the founder of msfraud.org, who says "many foreclosures could have been avoided had borrowers been aware of accounting errors and/or fraud going on with their loan servicing."
Considering the number of lawsuits, fraud, and robo-signed documents that have filled courtrooms and news for far too long, the use of "payment coupon booklets" should no longer be an acceptable method. This non-accounting process when used to repay loans only serves to exacerbate fraud, negligence and errors. These serious misdeeds have the effect of extending the life of the loan and the amount of interest accrued without the borrower's knowledge.
Monthly statements that include a breakdown of principal, interest, escrow payments and any additional principal payments--could alert the borrower to any fraud or misapplied payments long before borrowers are put out of their homes!
Isn't it time to stop insisting borrowers be responsible for their mortgage payments ---and start demanding that lenders be accountable for their customer's money!
The CFPB is proposing new mortgage servicing rules.
The rules are divided into two proposals - one to amend the regulations in the Truth in Lending Act and the other to amend the regulations in the Real Estate Settlement Procedures Act.
The first set of CFPB's proposed rules would provide consumers with clear and timely information about their mortgages so they can avoid costly surprises. They would bring greater transparency to the market. The proposed rules would do this with:
Clear Monthly Mortgage Statements: Servicers would be required to provide regular statements which would include: a breakdown of payments by principal, interest, fees, and escrow; the amount of and due date of the next payment; recent transaction activity; and warnings about fees.
Warning Before Interest Rate Adjusts: Servicers would have to provide earlier disclosures before the interest rate adjusts for most adjustable-rate mortgages. This disclosure would include information about alternatives and counseling resources if the new payment is unaffordable. This requirement would provide greater clarity to borrowers about the impact of interest rate changes. Existing disclosures for interest rate adjustments that cause a change in mortgage payments would be amended to include improved information and arrive earlier so that borrowers can anticipate consequences of payment changes.
Options for Avoiding Costly "Force-Placed" Insurance: Servicers have the responsibility to ensure that borrowers maintain property insurance. If the borrower does not maintain this insurance, however, the servicer has the right to purchase insurance to protect the lender's interest in the property. This is called "force-placed" insurance and is typically more expensive than insurance the borrower could privately purchase. The CFPB is proposing a rule that would provide more transparency in this process, including requiring servicers to give advance notice and pricing information before charging consumers for this insurance. The servicer would also be required to terminate the insurance within 15 days if it receives evidence that the borrower has the necessary insurance and the insurer would refund the force-placed insurance premiums.
Early Information and Options for Avoiding Foreclosure: Servicers would be required to make good faith efforts to contact delinquent borrowers and inform them of their options to avoid foreclosure.
The second set of proposed rules would impose common-sense requirements for handling consumer accounts, correcting errors, and evaluating borrowers for options to avoid foreclosure. These "no-runaround" rules would include:
Payments Promptly Credited: Servicers generally would have to credit a consumer's account as of the date a payment is received.
Maintain Accurate and Accessible Documents and Information: Servicers would be required to establish reasonable policies and procedures to provide accurate and current information to borrowers and minimize errors. They would have to submit accurate legal documents that comply with applicable law, help borrowers on options to avoid foreclosure, and provide oversight of their contractors and foreclosure attorneys.
Errors Corrected Quickly: If a consumer notifies the servicer that she thinks there has been an error, the servicer would be required to acknowledge receiving the notification, conduct a reasonable investigation, and, in a timely manner, inform the consumer about the resolution.
Direct and Ongoing Access to Servicer Personnel To Assist Delinquent Borrowers: Servicers would be required to provide delinquent borrowers with direct, easy, ongoing access to employees who are dedicated and empowered to help delinquent borrowers.
Evaluate Borrowers For Options To Avoid Foreclosure: Servicers that offer options to borrowers to avoid foreclosure, such as loan modifications or other payment plans, would be required to promptly review applications for those options. Servicers would be prohibited from proceeding with a foreclosure sale until the review of the borrower's application is complete. Servicers would also be required to let borrowers know when applications are incomplete and to allow borrowers to appeal certain servicer decisions
The proposal is open for public comment until Oct. 9, 2012. The agency will finalize the rules in January 2013. If you are one of the growing list of consumers who believe that banks must account for their customers' mortgage payments, find out how you can get involved receiving a monthly mortgage statement find out how you can get involved by visiting the CFPB
If credit card companies, utility companies, credit unions and other responsible banking institutions can afford to keep their customers informed -mortgage servicing companies can too.