Clearing up Mortgage Statement Mysteries

Do you understand your mortgage statement?  Do you actually READ your mortgage statement?  Many don’t and figure “why bother, because I don’t really understand it anyway”… “I’d rather play with my kids or keep up with the Kardashians”… totally understandable.

 Well, change is a-foot.  Many of you may recall that something called the “Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010” (Dodd-Frank Act) was enacted in response to the financial collapse. The Dodd-Frank Act created a new federal agency called the “Consumer Financial Protection Bureau” (CPFB).  The mission of this agency as stated on its website (www.consumerfinance.gov) “is to make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.” It is also a place to turn and lodge complaints when you believe that you have been a victim of abusive consumer financial practices.

On August 10, 2012 the CPFB, after having studied current mortgage servicing policies, practices and consumer experiences, proposed new rules for mortgage servicing companies to make your mortgage statement more clear.  The CPFB has outlined the objective of these changes as follows:

• Monthly mortgage statements
  Servicers would be required to provide clear billing statements including information on the loan, amount due, and application of past payments.
• Warnings before interest rate adjustments
  Servicers would be required to provide consumers with a new notice 6 to 7 months before the first rate adjustment, as well as earlier and improved notices before rate adjustments causing an increase in a consumer’s mortgage payments.
• Force-placed insurance
  Servicers can only charge borrowers for buying insurance on the property when they have a reasonable basis to believe that the borrowers have let their own insurance lapse and have given borrowers two notices estimating the cost of the “force-placed insurance.”
• Early outreach for delinquent borrowers
  Getting a delinquent borrower back on track requires early intervention and information about options available.
• Prompt crediting of payments
  Payments must be applied as of the day they are received, and the handling of partial payments is clarified.
• Accurate information management
  Servicers must have reasonable policies to ensure that when borrowers provide documents and information the servicers can find and use them.
• Error resolution and information requests
  Mistakes happen, but they need to get fixed. Servicers must address borrower concerns about possible errors within certain timeframes and provide the information they request.
• Direct and ongoing access to servicer personnel
  Delinquent borrowers will be able to contact the right people at their servicer to get information and take steps to avoid foreclosure.
• Evaluation for alternatives to foreclosure
  Servicers would be required to appropriately review borrower applications for loan modifications or other options to avoid foreclosure.

Before these rules take affect they are open to public comment until October 9, 2012.  For more information on these proposed changes or to learn more about the CPFB go to their website:  www.consumerfinance.gov. 

The foregoing is offered for informational purposes only and is not legal advice nor does it create an attorney-client relationship.

Pamela S. Humphreys is an associate with the Law Firm of Jackson O’Neill, LLC in Newport and Providence practicing in the areas of Domestic Relations and Bankruptcy. (www.jacksononeill.com)  She is admitted to practice in Rhode Island as well as in the United States District Court for the District of Rhode Island and is a member of the Rhode Island Women’s Bar Association.