The new periodic statement rule requires mortgage lenders and servicers to provide homeowners with prompt, regular, and accurate information about their mortgage loans. Under the new federal rule, which went into effect on January 10, 2014, mortgage servicers must send monthly statements (there are some exceptions) that contain detailed information about your payment, delinquency, and who to contact for questions.
Read on to learn more about what information must now be included in your monthly mortgage statement and how that information can help you avoid problems with your payments and your servicer.
New Mortgage Servicing Rules Designed to Protect Homeowners
First, a little history. In response to the recent mortgage crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which imposed new obligations on mortgage creditors and servicers and gave the Consumer Financial Protection Bureau (CFPB) the ability to both implement the new requirements, as well as adopt new rules. (Learn more in Nolo’s article New Federal Rules Protecting Homeowners With Mortgages.)
The Periodic Statement Rule
Among other things, the new CFPB policies and procedures include a rule that the mortgage creditor or servicer must send periodic billing statements to the borrower. This is called the periodic statement rule.
Under the periodic statement rule, your mortgage creditor or servicer must provide you with a mortgage statement each billing cycle (usually monthly) that meets certain timing and content requirements.
When the Servicer Must Send the Statement
In most cases, the statement must be sent within four days after the end of the courtesy period of the previous billing cycle. A “courtesy period” is the time period between the date the payment is due and the date the late charge kicks in. (Learn more about late charges and other fees that servicers can charge if you don’t make your payment on time.)
If there is no courtesy period, the servicer must send the periodic statement no later than four days after the payment due date.
Exceptions to the Periodic Statement Rule
Some types of loans are exempt from the requirements of the periodic statement rule including:
- open-end lines of credit or home equity lines of credit
- reverse mortgages
- timeshare loans
- loans serviced by small servicers (servicers with no more than 5,000 loans and the servicer is the creditor for all of them) or a Housing Finance Agency (a government agency that provides loans with low rates for low- and middle-income borrowers), and
- fixed-rate loans that have coupon books containing certain information such as the payment due date, interest rate, etc.
Information That Must Be Included in the Periodic Statement
The periodic statement rule requires that all of the following information be included in the billing statement.
The statement must show how much you owe, the payment due date, and the amount of the late fee if you submit payment after the courtesy period expires.
How the new rule helps. This requirement is designed to provide you clear information about how much you owe, when you owe it, how much you will be charged if the payment is late, and keep track of when the late charge is actually due. (In the past, some mortgage statements were not clear about the total amount due if the payment is on time vs. the total amount due if the payment is late. As a result, certain borrowers often inadvertently included late charges in their payment even though they were not due.)
Explanation of the Amount Due
A breakdown of how much money per payment will be applied to principal, interest, and escrow, as well as the total of any fees imposed since the last statement and any past-due amounts must also be contained in the statement.
What you should do. This information will help you keep track of how your payments are distributed among the different categories. Also, you should be on the lookout to make sure the servicer does not make an error such as charging improper fees.
Past Payment Breakdown and Transaction Activity
The statement must include a list of all transaction activity and a breakdown of payments you made since the last statement (and since the beginning of the calendar year) and show how those payments were applied to principal, interest, escrow, fees, and suspense. The statement must include the date of the transaction, a brief description of the transaction, and the amount of the transaction.
What you should do. Each month check your statement to ensure the servicer hasn’t made a mistake like applying funds to the wrong category or failing to credit you for the payments you’ve made.
Partial Payment Information
The statement will also show you what happened to any partial payments (payments that were less than the total amount owed) you sent in.
Past problems with partial payments. Partial payments are often placed into a suspense account, which is used to temporarily hold funds until they are allocated. The nature of this type of account, what it is used for, and when it is used has often been confusing for borrowers. (To learn more about mortgage suspense accounts and what happens to funds after they are placed in suspense, see Nolo’s article What is a Mortgage Suspense Account?)
How the new rule helps. Now, statements must clearly indicate which funds were placed into suspense (if any) and explain what must be done for the funds to be applied to your account.
The statement must provide you with:
- a toll-free number and email address (if applicable) so that you can obtain information about your account, and
- the special mailing address (if there is one) for making a qualified written request about your loan or to report a servicing error. (Learn more about qualified written requests.)
How the new rule helps. The purpose of this requirement is to ensure that you have access to someone who can answer questions about your account and so that any qualified written request is received and addressed by a specially trained employee.
In addition, the billing statement must provide you with certain information relating to your account including:
- the outstanding principal balance you owe on the loan
- the current interest rate and the date that the interest rate may chance (if applicable)
- the penalty for prepaying the loan, and
- information about how to find a housing counselor who can help you if you are in danger of falling behind in your mortgage payments or have already fallen behind. (Go to the CFPB’s Mortgage Help website for more information about housing counseling.)
How the new rule helps. This requirement is designed to provide borrowers with improved information about their loan so they are not caught off guard when an interest rate adjusts, for example.
If you are 45 days or more behind in payments, the statement must provide particular information related to the delinquency including:
- the date you became delinquent
- the amount needed to bring the account current
- information about possible risks and expenses (such as foreclosure or legal fees) you face if you don’t catch up on payments
- your account history for the past six months or the period since the last time you were current (whichever is shorter)
- information about any loss mitigation program you’ve agreed to
- information about whether the foreclosure process has started, and
- information about housing counseling.
How the new rule helps. If you’re behind in payments, this information will give you a good idea of what you need to do to get caught up.
It will also assist you in making sure that the servicer does not make an error such as starting a foreclosure in violation of the law. For example, the servicer may not dual track your loan (that is, foreclose on your home while considering your loan modification application). (Learn more about dual tracking in Nolo’s article New Laws Prohibiting Dual Tracking in the Foreclosure Context.)
For More Information
The bottom line is that the periodic statement rule is designed to ensure that you receive prompt, regular, and accurate information about your mortgage loan. To learn more about this rule (and the other mortgage servicing rules that went into effect January 10, 2014), go to the Consumer Financial Protection Bureau’s website.