As the harmful effects of mortgage servicing fraud and corporate errors continue to damage innocent families, there is finally some attention being focused on whether or not a small piece of legislation mandating mortgage servicing companies provide monthly statements to borrowers would be a valuable tool used to protect two of our biggest assets –our sanity and our homes.
I have been advocating a borrower’s right to gain access to a monthly mortgage statement in order to track how (and if) our payments are applied since discovering that my own mortgage was riddled with erroneous late fees and finding my additional payments earmarked for “extra principal payments” went unaccounted for -and undetected for years.
Even though I had every cancelled check to prove my innocence, it didn’t matter, it took a court room battle and a decade of my life to sort it all out and correct their errors. These events prompted me to testify before a Massachusetts Senate banking committee armed with the support of many consumer nightmare stories back in the 90’s. The support from the MA legislators and MA borrowers back then, resulted in the mega-banks voluntarily promising to supply consumers with monthly statements. Since then, I moved to Florida, bought a new home and took out a new mortgage.
A few months down the road, along with that new mortgage came the frightening realization that I was once again forced to deal with a coupon book that left me unable to make sure my payments were applied error free. As feared and predicted without the aid of a monthly statement, I soon found that my payments were yet again misapplied and/or unaccounted for.
If you think this can’t happen to you because you pay your payments on time and currently receive or have access to a monthly statement, you need to re-think the reality of problem. If you sell or refinance your home or if your lender sells your mortgage –you may suddenly find you no longer receive a monthly accounting for your payments.
We've all heard the warnings to be vigilant consumers when it comes to protecting our assets from predatory lenders and predatory servicers yet without having access to a monthly statement we are vulnerable and defenseless to detect and prevent costly erroneously applied payments.
It’s been a long uphill battle trying to shed light on the importance of monthly mortgage statements, but it’s also important to note, many student loans and auto loans are handled with the same outdated coupon payment books that leave consumers in a position where they are forced to blindly trust their loan payments are accounted for accurately.
Payment coupon books should be outlawed and consumers should receive a monthly accounting statement for all loan payments –it’s just common sense if we really want to thwart fraudulent behavior.
Jack Guttentag, a respected Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania, published a recent article in the Seattle Times entitled
Predatory servicing deserves a cleanup!
In this article he supports mandating monthly statements and recites his opinion on what additional changes are called for.
"... Mandatory provision of complete and comprehensible monthly statement: The law should require servicers to provide easy-to-understand monthly statements showing every transaction during the month, including balance changes and their sources, payments, disbursements, rate adjustments and fees. Without this, predatory practices can go unnoticed by the borrower."
Professor Guttentag also has his own informative site. Here he responds to a consumer's question regarding the need for monthly statements.
Should all borrowers receive monthly statements?
"I noticed an on-line petition to require all mortgage lenders to provide borrowers with monthly statements of their account. Is this a good cause?"
Professor Guttentag's response..."Yes, because borrowers don’t choose the firm that services their mortgage, they can’t fire the firm for cause, and their existing legal protections are weak.
A law requiring servicers to provide monthly statements that update the account and explain all changes in it, will not eliminate servicing abuses, but it will help borrowers who are alert protect themselves...”
See his top six reasons why you need to know how your payments are applied.
If you support the simple premise that consumers should have access to monthly statements, please contact your legislators and ask for their support or take a moment and sign the petition and include your comments at petition in support of monthly statements.