Federal laws protect homeowners who have new and existing mortgages. Under these federal laws, loan servicers have to:
Also, various other federal laws direct servicers to provide borrowers with assistance if they are having difficulty making mortgage payments.
Read on to learn more about the federal laws that protect homeowners with mortgages and learn how the laws might be able to help you if you have a home loan.
Mortgage servicers must give borrowers certain information about their loan so they're not caught off guard when an interest rate adjusts or they are charged certain fees. The law requires servicers to:
A servicer must provide a written statement to the borrower each billing cycle, which is usually monthly. (12 C.F.R. § 1026.41). The statement must show:
Though, if you have a fixed-rate mortgage and your servicer sends you a book of coupons to send in with your payments, then a monthly statement isn't required.
If a mortgage loan has an adjustable interest rate, the servicer must provide the borrower with a notice containing the new rate and new payment (or an estimate):
In most cases, servicers must promptly credit a borrower for the full payment the day it is received. (12 C.F.R. § 1026.36).
If the borrower only makes a partial payment, that amount may be held in a special account—called a suspense account—but the servicer must inform the borrower about this on the monthly statement. Once the suspense account has sufficient funds to make a full payment of principal, interest, and any escrow, the servicer must credit that payment to the account. (12 C.F.R. § 1026.41).
The servicer generally must provide an accurate payoff balance to a borrower no later than seven business days after receiving a written request asking how much it will cost to pay off the mortgage. (12 C.F.R. § 1026.36). (In some instances, the servicer must provide the statement withing a "reasonable time.")
Mortgages require homeowners to have adequate insurance on the property so that the lender’s interest is protected in case of fire or other casualty. If a borrower lets this hazard insurance coverage lapse, the servicer can get insurance coverage and add the cost to the loan payment. (12 C.F.R. § 1024.37). This type of coverage is called force-placed insurance.
Under the law, the servicer:
If a borrower gives the servicer proof of hazard insurance coverage, the servicer must within 15 days:
A servicer must, in most cases, acknowledge receiving a written information request or complaint of errors—like if a borrower complains that the servicer misapplied a payment or charged improper fees—within five days (excluding legal public holidays, Saturdays, and Sundays) and respond within 30 days.
The servicer may generally extend the 30-day period for an additional 15 days if the servicer notifies the borrower within the 30-day period of the extension and provides the reasons for delay in responding. (12 C.F.R. § 1024.35, 12 C.F.R. § 1024.36). (Learn more about sending a notice of error or request for information to a mortgage servicer.)
If you think your mortgage servicer has violated any of the laws discussed in this article—especially if you’re facing imminent foreclosure—consider talking to an attorney who can give advice on what to do in your particular situation.