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REALTOR®: Information for Homeowners Whose Lenders Have Closed or Gone Bankrupt

Monday, December 31, 2007

The Federal Trade Commission, which oversees consumer affairs, has produced a new Facts for Consumers publication created to assist homeowners whose mortgage lenders may have closed or gone bankrupt in the wake of the mortgage lending crisis.

When a mortgage company closes or files for bankruptcy, its customers may be left wondering about the impact on their own loans. “How to Manage Your Mortgage If Your Lender Closes or Files for Bankruptcy,” provides answers to important questions pertaining to loan servicing transfers, changes to escrow accounts, payment disputes, and more.

The publication provides several situation-based tips for consumers who need to know what to expect in today’s mortgage market. Explanations on what it means and what to do if their lender files for bankruptcy before or after your loan closes, if your mortgage service provider files for bankruptcy or goes out of business, what to expect if your loan gets transferred to another service provider, or if you have an escrow account.

The FTC advises all mortgage holders to read their monthly statements. If your statement is late, even by just a few days, call the mortgage company to track it down. Keep records of your payments, including billing statements, cancelled checks, bank account statements, or online account histories if appropriate. If you think you have been charged a penalty or a late fee that you don’t owe, or if you have other problems with the servicing of your loan, the FTC stresses consumers should continue to make their monthly mortgage payments as usual and contact your service provider in writing in a separate communication. Send your letter by certified mail. Include your account number and an explanation of why you think your account is incorrect to the customer service address. Request a return receipt, or send it via fax, and keep the transmittal confirmation.
Don’t write your note on your payment coupon. Keep a copy of your letter and any enclosures for your records.

Under the Real Estate Settlement Procedures Act (RESPA), your mortgage service provider must respond promptly to your written inquiries and must acknowledge your inquiry in writing within 20 business days of receiving it, and take action within 60 business days. Do not subtract the disputed amount from your mortgage payment. Some mortgage servicers may refuse to accept what they consider a “partial” payment; they could return your check and charge you a late fee, or claim that your mortgage is in default and start foreclosure proceedings.

The Department of Housing and Urban Development (HUD) enforces the Real Estate Settlement Procedures Act. Contact HUD with questions or comments about RESPA by e-mail (hsg-respa@hud.gov) or by phone (202-708-0502).

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382- 4357); TTY: 1-866-653-4261.

Here are some tips from the FTC to help you be a savvy consumer:
1. Know who you’re dealing with. Do business only with companies that clearly provide their name, street address, and phone number.

2. Protect your personal information. Share credit card or other personal information only when buying from a company you know and trust.

3. Take your time. Resist the urge to “act now.” Most any offer that’s good today will be good tomorrow, too.

4. Rate the risks. Every potentially high-profit investment is a high-risk investment. That means you could lose your investment — all of it.

5. Read the small print. Get all promises in writing and read all paperwork before making any payments or signing any contracts. Pay special attention to the small print.

6. “Free” means free. Throw out any offer that says you have to pay to get a gift or a “free” gift. If something is free or a gift, you don’t have to pay for it.

7. Report fraud. If you think you’ve been a victim of fraud, report it. It’s one way to get even with a scam artist who cheated you. By reporting your complaint to 1-877-FTCHELP or ftc.gov, you are providing important information to help law enforcement officials track down scam artists and stop them!

To download a copy of the pamphlet, go directly to http://www.ftc.gov/opa/2007/12/bankrupt.shtm. To order a hard copy, write to the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Ave., N.W., Washington, DC, 20580.

The San Mateo County Association of REALTORS® also advises homeowners who anticipate they are going to miss a mortgage payment, to contact their mortgage company immediately. The homeowner and mortgage company may be able to work out a solution. If you don’t trust your mortgage company to help you, or don’t know if they can help you, call 888-995-HOPE (or visit 995HOPE.org). This toll-free, confidential hotline is sponsored and funded by the Homeownership Preservation Foundation, a non-profit dedicated to preventing foreclosures. Through the hotline, the foundation offers free advice and counseling to homeowners.

The San Mateo County Association of REALTORS® (SAMCAR) is a professional trade organization representing over 3,800 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula. SAMCAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in San Mateo County.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Julie Ziemelis, Director of Public Affairs, e-mail , or phone (650) 696-8214.

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