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March 19, 2001
When a mortgage loan is closed,
the origination file is closed and a servicing file is opened. It remains
open for the life of the loan. Whether the process goes smoothly or badly
depends on both the borrower and the servicing agent.
The servicing agent is the entity
that receives the mortgage payment, keeps the payment records, provides
borrowers with account statements, imposes late charges when the payment
is late, and pursues delinquent borrowers. In many transactions, servicing
agents also pay property taxes and insurance with money placed in escrow
by the borrower.
Borrowers can choose from whom
they borrow, but they can�t choose the servicing agent. The agent may or
may not be the lender who originated the loan. Servicing is frequently
sold. Borrowers must be notified of transfers, but cannot prevent them.
My mail box is stuffed with
letters from borrowers who complain about bad servicing. The following is
a sample.
"My lender sold the loan
and the new lender shortened the grace period and tripled the late fee�"
�My lender hit me with a late
charge when my loan was paid on the 16th instead of the 15th,
and for 7 months after that I have been hit with a late charge, even
though all payments were made on time."
"My lender did not pay the
taxes on time or for the correct amount�"
"My lender bought insurance
on my house and added the premium to the loan balance, even though I
already have insurance that I pay for�"
"My lender sends me
statements that only show the payments, not the balance�I have no idea
how they are applying the payment."
Chuck Cross is a regulator for the
state of Washington who has investigated numerous cases of this type.
According to Cross, "about 50% of the time the consumer is wrong and
has misread or misunderstood the process�and in about 50% the lender has
erred."
In cases where the servicing agent
is at fault, Cross does not know the extent to which the problems reflect
deliberate attempts to generate more revenue, or innocent operating
accidents. In either case, it is troubling that some of the names that pop
up in my mail are among the largest and best known financial institutions
in the country.
Since borrowers can�t fire their
servicing agents, what can they do to protect themselves? If you have been
mistreated, you should file a written complaint with the lender addressed
to Customer Service. Do not include it with your mortgage payment, which
you should continue to make separately. State:
Your
loan number
Names on loan documents
Property and/or mailing address
This
is a "qualified written request" under Section 6 of the Real
Estate Settlement Procedures Act (RESPA).
I am
writing because:
[Describe
the problem and the action you believe the lender should take.]
[Describe
any previous attempts to resolve the issue, including conversations with
customer service.]
[If
it is relevant to the dispute, request a copy of your payment history.]
[List
a day time telephone number.]
I
understand that under Section 6 of RESPA you are required to acknowledge
my request within 20 business days and must try to resolve the issue
within 60 business days
If
this doesn�t do the trick, you can file a complaint with HUD.
You can also sue. According to HUD, "A borrower may bring a
private law suit, or a group of borrowers may bring a class action suit,
within three years, against a servicer who fails to comply with Section
6's provisions."
You can
also file a complaint with the government agency that regulates the
servicing agent. Here are web sites you can use to contact these agencies:
For national banks, http://www.occ.treas.gov/customer.htm.
For Federally chartered savings and loan associations, http://www.ots.treas.gov/contact.html.
For state-chartered banks and savings and loans, http://www.lendingprofessional.com/licensing.html.
For mortgage banking firms, http://www.aarmr.org/lists/members-IE.html.
If
you don�t know the proper agency, you can send the complaint to the
Consumer Protection Division of the state Attorney General. It will
forward it to the relevant state or Federal agency.
Borrowers
who are aware that they have a servicing problem might be the tip of an
iceberg. All borrowers should periodically check their transaction history
to make certain that a) payments are always applied to the balance at the
end of the preceding month; b) tax and insurance payments from escrow are
correct and there have been no double payments; c) rate adjustments on
ARMs are in accordance with the method stipulated in the note; and d)
there isn�t anything in the history that looks "funny".
Any
borrower who does not receive a complete transaction statement at least
annually should periodically submit a "qualified written
request" for one using the form described above.
Copyright
Jack Guttentag 2002
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