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Deceptive mortgage loan practices have prompted changes to the law to protect consumers.
Date published: 12/23/2012
"Most reputable servicers will date-stamp payments when received," Cipollone said.
Borrowers who are paying property taxes and homeowners' insurance themselves can run into trouble if their servicer asks for proof of payment or a copy of their policy and they fail to respond or say they didn't pay their tax bill or let their insurance lapse.
The service provider has the right to charge the borrower for what is known as "forced-placed hazard insurance" or "lender-placed insurance." Not only is this type of insurance extremely expensive, but it just protects the lender, Cipollone said.
"It could be double what the client would have paid on a monthly basis," she said. "Then the monthly mortgage payment is increased. This could be several hundred dollars a month. If the client can't pay, they have to default."
Some abusive servicers would refuse to remove the insurance and continue to charge for it after the borrower finally sends in proof of payment. There were so many instances of this type of abuse that it had to be addressed by law, Cipollone said.
Servicers are now required to correct their records within 15 days of receipt of confirmation of borrower's existing policy. They also must terminate the lender-placed policy and refund insurance fees paid by the borrower while the borrower's insurance in effect.
If borrowers or their advocates think that they've been charged a penalty, late fee or some other fee by mistake, or if they have other problems with the servicing of their loan, they should fire off a letter to the Qualified Written Request, or QWR, address on the back of their monthly mortgage statement, Cipollone said.
It should be dated and include the loan number and property address, a brief statement of issue and the borrower's signature. Cipollone recommended that the letter be sent by registered mail, although that isn't required by law.
Under federal law, mortgage servicers must send a written acknowledgment within 20 business days of receiving the inquiry. Then, within 60 business days, the servicer must correct the borrower's account or determine that it is accurate. The servicer also must send a written notice of the action it took and why, as well as the name and phone number of someone to contact.
"The QWR is a vehicle to correct errors on servicing, but not on the origination, of a loan," Cipollone said. "It has a very narrow purpose, but it's a very important purpose because it requires the servicer to respond."
Cathy Jett: 540/374-5407