1. Chapter 10
What you need to know about your mortgage: Even if you are not delinquent

2. Topics Understanding Your Mortgage
Who is Your Mortgage Servicer and Why is it Important to Know?
Changes in the Ownership of Your Mortgage Loan
Changes to Your Mortgage Servicer and Getting Credit for Your Payments When Servicing is Transferred
Surprising Facts About What Happens to Your Partial Mortgage Payments
How to Find Out the Amount You Owe and dispute Errors
Straightening Out Your Escrow Account
Cancel Unnecessary and Expensive Insurance
Acting Sooner Rather Than Later

3. Understanding your mortgage loan
A mortgage loan is typically made up of two parts:
A promissory note and a mortgage.
The promissory note shows that the lender gave you money and that you have made a promise to pay that money back, usually with interest.
The mortgage, in some states called a deed of trust or security deed, is a separate document that gives the lender a security interest in your home. A security interest, also called a lien, is a legal interest in your property taken by the lender to secure repayment of the debt.
Beware of dangerous terms hiding in the fine print. Like many industries, the mortgage lending business has its share of greedy players who are willing to take advantage of you.

4. Your mortgage servicer: Why is it important to know?
Your mortgage servicer is responsible for preparing and sending mortgage and escrow statements, collecting payments and making sure they applied correctly, handling escrow accounts, and dealing with other day-to-day activities on your mortgage accounts.
Servicers also make decisions about loan modifications and foreclosures.

5. Your mortgage servicer: Why is it important to know?
Many mortgage servicers are large companies that handle thousands of mortgages. You may speak to a different person each time you call, and you may get conflicting or confusing information from one person to the next.
If you are trying to resolve a problem with your mortgage, get a notebook and make a note each time you talk to someone at the servicer; include the date, time, name of the person you spoke with, and what you talked about.

6. Your mortgage servicer: Why is it important to know?
It is important to know two other facts about your servicer.
First, your servicer may or may not be the original lender for your loan.
Second, although you make your payments to the servicer, it is typically not the company to which you really owe your mortgage payments. Instead, the servicer is a company hired by the owner of your mortgage to service your loan.
Your original lender, the company that owns your loan today, and the servicer may be two or even three different companies. Over the life of your mortgage loan, your servicer may change.

7. Changes in the ownership of your mortgage loan
A law that went into effect in 2009 requires that you should be notified whenever there is a new owner of your mortgage loan. The new owner must send you a notice within 30 days after your loan is sold stating the name, address, and telephone number of the new owner.
The notice must also tell you how to reach someone having authority to act on behalf of the new owner for various matters, such as for resolving payment issues.
You also have the right to request in writing that the servicer tell you the name, address, and telephone number of the owner of your mortgage loan.

8. Changes to your mortgage servicer and getting credit for your payments when servicing is transferred
Consumer complaints about mortgage servicing show that many problems occur when servicing is transferred.
The most common problem relates to payments sent to old servicers that do not get forwarded and properly credited by the new servicer.
A federal law, the Real Estate Settlement Procedures Act, commonly known as RESPA, provides certain protections to you when your servicer changes. It is important that you know your rights.

9. When servicing is transferred, your mortgage servicer should send you a notice…
Before a new mortgage servicer takes over servicing your loan, your current servicer is required under RESPA to send you a notice at least 15 days before the transfer takes effect.
In addition, the new servicer must send you a similar notice not more than 15 days after the transfer.
These notices from the old and new servicers can be combined into one notice as long as it is sent at least 15 days before the transfer.

10. Changes to your mortgage servicer and getting credit for your payments when servicing is transferred
The transfer notice must include the following information:
The effective date of transfer;
The name, address, and toll-free telephone number of the new servicer;
A toll-free telephone number the consumer can call for answers to questions;
The date when the old servicer will stop accepting payments and the date when the new servicer will begin accepting payments;
Additional information about insurance coverage.

11. Changes to your mortgage servicer and getting credit for your payments when servicing is transferred
The law (RESPA) also creates a 60-day “safe harbor” period after the transfer date.
If you send an on-time payment (that is, one made before the normal due date) to the old servicer during this 60-day period, the new servicer must treat it as a timely payment.
This means the new servicer cannot charge a late fee, and cannot report the payment as late on your credit report. This protection applies even if the old servicer does not forward the payment in a timely way to the new servicer.

12. Getting credit for you payments when servicing is transferred
When you make a mortgage payment for less than the total amount due, one of two things often happens— neither of them being that the payment is applied toward your mortgage.
1. The one thing servicers commonly do with your partial payment is send your check back to you un-cashed.
In any event, if the partial payment is returned to you, you should set the money aside and not use it to pay other bills. The money that is set aside will help you get caught up on your mortgage payments later.

13. Surprising facts about what happens to your partial mortgage payments
2. Other servicers do not return partial payments, but also do not apply that payment to the amount due. Instead, they keep the amount in a “suspense account” to be held until you pay the remaining amount due for that one monthly payment. So, the next month, if you send in a full payment, part of that payment is being used to complete the payment for the prior month and the balance goes into the suspense account.
The safest course is to make full payments on time. If you must make a partial payment, try to catch up as soon as possible and realize that you also may owe some late fees.

14. How to find out the amount you owe and dispute errors
Sometimes servicers claim that you owe more than you believe. Federal law provides you the right to accurately determine the balance due. Some common disputes about the amount claimed as due include: 1. Failure to credit all payments you made; 2. Crediting payments you made in a way which is inconsistent with the accounting principles required by the contract or your state law; 3. Failing to credit payments according to a loan modification agreement;

15. How to find out the amount you owe and dispute errors
4. Failing to properly reduce interest rates as required in a variable rate mortgage; 5. Charging the mortgage account for things not permitted by the loan contract or for amounts which are not reasonable under the circumstances (e.g., excessive property inspection fees); 6. Charging excessive attorney fees or costs related to a default on the loan or foreclosure action; 7. Double counting foreclosure fees and costs by including them in the escrow balance and then also separately breaking them out as individual charges;

16. How to find out the amount you owe and dispute errors
8. Charging late fees in amounts which are not permitted by the contract (e.g., applying a late charge to a missed payment more than once);
9. Charging for force-paced insurance when the servicer is suppose to pay for hazard insurance from your escrow account or has proof that you obtained your own insurance;
10. Refusing to accept payments without a valid reason (e.g., when a payment is short by a few dollars or does not include an amount to cover a late fee).
* Although the foreclosure process has begun, you can still dispute the amount owed.

17. How to find out the amount you owe and dispute errors
Sending a Qualified Written Request to Obtain Information and Dispute Errors on Your Account.
Under RESPA, your servicer must respond to written requests for information or investigate any claim of error concerning your account, including your escrow account, so long as you provide information regarding your account.
This is called a “qualified written request.” It must be in writing and specific as possible. The servicer must acknowledge that it received this within 20 business days and has 60 business days after acknowledgement to conduct and investigation (if you claim an error on your account) or send you the information you requested.
During this time the servicer must correct the errors and inform you of its actions. Also, during this 60 day period, the servicer cannot report you to a credit reporting agency that you are late on a payment that is related to your inquiry.

18. How to find out the amount you owe and dispute errors
Request Validation of the Debt.
When an attorney for the lender sends you a letter threatening foreclosure, announcing that you are in default, or for any other reason, the letter should describe your right to dispute the mortgage debt.
If you then dispute the debt in writing in the next 30 days after being contacted by an attorney for the servicer, the attorney must then stop collection efforts while your dispute is being investigated.

19. How to find out the amount you owe and dispute errors
Setting Up a “Tender” Defense.
If you have a real dispute about the amount you are delinquent on your mortgage loan, you may want to set up the defense of “tender.” To “tender” means to offer the undisputed amount that is delinquent, while not paying the amount you dispute. Most often, your tender will be returned. If it is returned, you have the defense that the money was offered and refused. In some states, if your tender is accepted, you can then claim that acceptance by the lender settles the dispute in your favor. This defense is usually called “accord and satisfaction.”
The money should be sent with a letter explaining that you dispute the balance. The letter should state that the amount you tendered is offered in “full satisfaction of the dispute.”

20. Straightening out your escrow account
Escrow Account Statements. The amount your servicer can require to pay into an escrow account each month is set by a federal law called the Real Estate Settlement Procedures Act (RESPA).
Escrow Payment Limits. Your servicer cannot require you to pay a monthly escrow amount greater than 8.3% of the total estimated escrow bills that will need to be paid during the upcoming year. In the case that your servicer requires a “cushion” to be added to your monthly payments, it should not increase your payment more than 16.67%.

21. Straightening out your escrow account
Servicer Must Pay Your Taxes and Insurance Promptly. RESPA requires your service to pay your taxes, property insurance, and other escrow bills on time, before the deadline for avoiding penalties such as interest or late fees.
RESPA requires your servicer to pay your taxes, property insurance, and other escrow bills on time, before the deadline for avoiding penalties such as interest or late fees.

22. Cancel unnecessary and expensive Insurance
Force Placed Insurance. If you allow your mortgage insurance to be cancelled or do not make sure your lender has proof of your coverage, your lender will get a new insurance policy that usually protects only their interests. This is called forced placed insurance.
Private Mortgage Insurance. If the down payment you made when buying your home was less than 20% of the purchase price, you are probably paying for Private Mortgage Insurance (PMI). This insurance protects the lender if there is a default on the mortgage by allowing it to get paid some of the money not recovered from the foreclosure process.

23. Cancel unnecessary and expensive Insurance
Credit Life and Disability Insurance. If you did not look closely at your loan documents when you bought or refinanced your home, you should check them now to see if you signed up for credit insurance. This money pays off your mortgage if one or both of the owners of the home die.
It can cost three to four times as much as a term life insurance policy.

24. Acting sooner rather than later
Contact a HUD approved agency for help… For example, The Family Life Center.
Find HUD approved counseling agency by calling HUD at or by checking its website at