Using New Consumer Protection Rules to Keep Your Lender Honest

By Dona DeZube

Tired of getting the runaround from your mortgage lender or servicer? Starting Jan. 10, 2014, you'll get consumer protections aimed at taming the worst habits mortgage lenders picked up during the mortgage foreclosure crisis. But realize that you need to follow specific procedures to make the protections work for you.

Companies have to offer you good customer service and set up procedures to ensure employees do their jobs correctly.

The fact that federal legislators put this in the law tells you a lot about how frustrated consumers have gotten with mortgage lenders and servicers. Servicers (the companies that collect your mortgage payments on behalf of the lender or investor who owns your loan) are now officially required to set up their operations so that employees can actually find information about your loan, respond to your questions and help you if you have a problem paying your mortgage.

The servicer has to answer your questions and respond to your mortgage problems pretty quickly.

How fast?

- Within 5 days, it has to admit it got your letter.

- It has 30 to 45 business days to fix an error, send you the info you need, or explain why it can't do either of those things.

Tip: You have to report errors and ask for information in writing. Calling doesn't trigger the protections, nor does jotting a note on the payment coupon. You have to write a letter and send it to the right address for complaints. Check your lender's or servicer's website for directions about where to send correspondence and keep copies of your letters for your records.

Mortgage servicers have to give you a regular statement explaining:

- What they did with the money you sent (what went into escrow, what went toward paying off your loan, etc.).

- What you owe this month.

- Any fees you owe for things like paying late.

- Your options if you have one of those pick-a-payment mortgages, where you can choose how much to repay each month.

Tip: Get the most from this rule by checking your statement each month. Question any extra fees and demand your money back in writing if you're charged fees you didn't owe.

Lenders must give you credit for payments you make on the day your payment arrives. They can't hold it for a few days, potentially making your payment "late," so they can charge you a late fee.

Tip: What's important when making your mortgage payment is to follow directions. Send the payment to the right address and use whatever payment forms the lender gives you, like a coupon book or monthly tear-off coupon in your statement. If you don't follow these protocols, the lender can hold your payment for five days.

By the way, if you send in a partial payment, the lender can tuck that money into a separate account instead of using it to repay your mortgage. But, under the new rules, it has to tell you on your statement that it's doing that.

You can get a reasonably fast answer when you ask about paying off your mortgage.

Tip: When you want to know how much exactly it will cost to pay off your mortgage on a particular day (like the day you're refinancing), write to ask your lender. That way, it has to give you an answer within seven business days. If you call to ask for a payoff, the lender doesn't have to send you the payoff statement within seven days.

Read the rest of this story on HouseLogic.

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