Regulators Push For Monthly Mortgage Statements

(In today’s mortgage world, where a growing majority of borrowers do not understand what they are getting into, it is important to take steps to educate the public on the mortgage process. )

The increasing amount of foreclosures and defaults show us that many people do not understand the nuances associated with taking out a mortgage.

This is probably one of the biggest financial responsibilities that a person will take on in their life time, so it is important that borrowers understand their loan inside and out before signing any final papers.

In an effort to make the mortgage process more understandable for borrowers, a new petition is going around that if approved, will require lenders to provide their borrowers with a detailed mortgage statement every month; outlining the payments and details of the loan every month.

A November 20, 2006 article by Jack Guttentag of Inman News, and posted on signonsandiego.com, “Push for monthly mortgage statements escalates,” discusses how these statements could really help borrowers tremendously by alerting them of any problems with their account before things get out of hand.

The reason why these statements may be helpful is because although borrowers choose which company they take out a loan with; they do not choose who actually services their loan. So if you are a borrower stuck with a shoddy servicer, there really is little you can do for yourself legally.

“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 alert borrowers protect themselves. It won't help borrowers who sleep at the switch; they need other legal protections.”

There are many problems that a monthly statement would alert a borrower to in advance:

“The servicer doesn't pay taxes or insurance on time, which results in a lien being placed on the property or insurance being cancelled. Because the borrower does not make the full escrow payment, the servicer places the entire payment in a suspense account, reports the borrower as delinquent, and charges a late fee. The servicer deliberately delays the posting of the payment, resulting in a late fee, which is then deducted from the following month's payment, which makes that payment late.”

These problems could all be discovered in advance if companies were required to provide borrowers with monthly statements. If not, the scenarios listed above can go on for an extended period of time without the borrower finding out.

These are just a few of the possible scenarios a borrower could encounter that could be prevented, the list goes on.

“Monthly statements must include everything the borrower needs to know. This includes notice that taxes and insurance premiums were paid, and when. If a borrower does not make the full escrow payment and the lender raids his mortgage payment, this should appear on the statement. If the borrower is charged for a late payment, the statement should show when the payment was credited (the borrower knows when it was paid).”

Some firms are already enacting the monthly mortgage statement, but it will probably be awhile before everyone is required to do so.

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