What have they been doing with my mortgage payments?
The client has been making a mortgage payment according to the HAMP formula for almost 18 months of her Chapter 13.
Yet without a 1098 form, her very capable tax preparer told her she couldn’t deduct mortgage interest on her tax return.
We have a new tool to get an answer to her question, thanks to the Consumer Financial Protection Bureau and the Dodd-Frank Act: the Request For Information.
Your request has clout
The Request for Information is one of the new tools that sets my heart aflutter.
Unlike previous law where a Qualified Written Request presumed you knew what the problem is, with a RFI you don’t have to know that there’s a problem.
We will ask my client’s loan servicer how they have applied her payments during the last tax year. Dollars to doughnuts, the payments have been applied to interest, not principal.
Of course, we may find that the servicer is holding all of the payments in some kind of suspense account and hasn’t credited them to any element of her loan.
But whatever it is, we are entitled to a response within 30 business days of making the request.
The CFPB even has sample letters to your servicer you can use for the purpose.
Everything is on the table
Your request for information isn’t confined to the servicing of the loan. It extends to information “with respect to the borrower’s mortgage loan”.
That includes information about a loan modification application. And, you can get the identity and contact information on the entity that owns your loan.
Here’s the full text of CFR Reg. X 1024.36, the request for information provision.
Notice of Error
A “teammate” of the Request for Information is the Notice of Error. It also was added to RESPA with the Dodd-Frank Act.
If you spot an error with respect to the servicing of your loan, you can issue a Notice of Error to the servicer.
It must be in writing and contain enough information to identify you and the loan. Here’s some help from CFPB with your notice of error.
The regulation lists 10 kinds of errors covered by the NOE, plus a catchall category.
The servicer must acknowledge receipt of your notice in 5 business days and respond substantively in 30 business days.
Here’s the full version of CFR Reg. X 1024.35, the notice of error provision.
Annual mortgage checkup
Even if you think everything is OK with your home loan, every homeowner with a mortgage should make an annual Request for Information.
Ask for a life of loan history; any charges or fees added to the loan; disbursements made by the servicer; and any escrow balance or suspense balance.
Further, any time that the servicing of your loan changes, make the same request promptly.
The former servicer need only respond to your request for a year following the transfer. Historically, the old servicer doesn’t transfer much in the way of information to the incoming servicer. Mistakes become hard to find and hard to correct when not tackled immediately.
Homeowners deserve answers
I’m excited about these tools for uncovering problems with mortgage loan servicing before a crisis occurs.
If information is power, the balance of power in the mortgage loan arena will even up a bit.
My client will get some input soon about what they’ve done with her money.