You’ve got a lot to keep an eye on.
You probably regularly check
- Your blood pressure.
- Your credit report.
- Your stock portfolio.
- Your bank balance.
- Your team’s standings.
Yet chances are, your home is your biggest investment and perhaps even the cornerstone of your retirement plan.
But you have no idea what you really owe on your home loan. You may be surprised at what lurks in the file of your mortgage lender or its servicer.
Why you need to know what you owe
The loan documents you signed when you took the loan allow the lender to add additional charges to your loan balance if your payment is late; you fail to maintain insurance; they suspect the property is abandoned, etc., etc. etc.
The loan documents also mandate the order in which your payment is applied to the various categories of charges you may owe.
And least obvious from the loan documents, the lender may put your payment in a special holding account called suspense for any number of reasons, or often, for no reason you can figure out.
With the current practice of note holders changing who they hire as the servicer on your loan, there’s a real danger that information will be lost .
You need to know what the servicer is doing with your payments soon enough to fix it.
- While you still have records, and recollection.
- While the loan is still serviced by the current folks.
- While you have time to fix errors.
Questions to ask the servicer
Where is the lender applying your payments? To principal and interest? To fees? Or is the money held in suspense?
Does the monthly mortgage statement you get each month match the records on the servicer’s computer? You would assume so, but assume at your peril.
Got a mortgage modification? Who knows what the lender’s records look like. A client recently asked for a loan payoff and the response was off by $127,000! The full story.
How lenders get away with theft
Nasty questions about your mortgage balance usually come up when time is short: sale or refinance.
The payoff demand isn’t requested from the mortgage lender til the deal is about to close. The rate lock on the enabling loan is set to expire. The lender’s payoff demand comes in laden with unexplained fees and charges.
And you have no time to find out what’s in the demand without imperiling the deal.
While you can always pay the demand and dispute it later, that seldom seems to happen. Borrowers roll over and assume either the lender is right or it’s too difficult to get the real analysis of the payoff demand.
CFPB to the rescue
As part of the Dodd-Frank financial reforms, the Consumer Financial Protection Bureau has given homeowners a spanking new tool to keep track of their mortgage: the Request for Information.
The Request for Information improves on the long-standing Qualified Written Request. The QWR took too long, could only be sent to a single, designated address, and often required the borrower to know what was wrong with the accounting before writing.
A RFI allows you to simply ask questions:
- what is the payoff balance of my loan
- what is the principal balance of my loan
- what fees, expenses or charges have been added to the loan
- is any money held in suspense
- how have you applied my payments
The servicer can set up a special address for such requests. You can get that address from your mortgage statement; the servicer’s website; or by calling the servicer. But you can’t make a Request for Information over the phone.
Your request has to be on paper separate from your payment coupon or mortgage statement. Your letter should provide
- address of your property
- names of the borrowers on the loan
- account number
The servicer must acknowledge receipt of your request within 5 business days, and provide responses within 30 business days.
The CFPB has a RFI fact sheet including a sample letter.
Make a mortgage checkup a yearly thing. Pick a holiday or an event that you can associate with making a request for information. Perhaps every year on the summer solstice, you make a request for information about your home mortgage.
Save the responses you get so you can compare this year to last year. Are they consistent? Any unexpected change?
After all, information is power.
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