Heads up for homeowners who are trying to obtain a loan modification: You better be careful out there.
Ditto for anyone whose loan has been sold or transferred from one lender to another.
These are the most complained-about issues that consumers have with their mortgages, according to the latest tabulation of consumer complaints by the Consumer Financial Protection Bureau (CFPB).
These types of issues pop up again and again, according to the CFPB. In fact, since the agency started accepting complaints in 2011, it has received more mortgage-related gripes than any other kind of financial products -- close to 200,000 of them. Here are some of the most common issues, and tips on how to handle them.
THE PROBLEM: Payment confusion. More than a third of the beefs have to do with just trying to make a payment, which should be a rudimentary task: Stick a check in the envelope the lender sent you, put a stamp on it and put it in the mail. Or, make the payment online. What can be so hard about that?
But the problem isn't on the sender's end; it's on the recipient's. And that's especially true if your lender -- or company that services your loan on behalf of your lender -- transfers your account to another entity. That's when it gets complicated, as many borrowers have found.
According to the CFPB, consumers report "confusion and frustration" about where to make their payments when their loans change hands. They maintain that they do not feel properly informed about the switch. And they complain that their payments often increase unexpectedly.
WHAT TO DO: You should receive a "goodbye" letter from your original lender and a "hello" letter from the new one. If you have any questions whatsoever, get on the horn with the first lender to make sure your loan has indeed been sold.
When you write your first check to the new lender/servicer, make sure you put both account numbers -- the old and new ones -- on the check, and make sure you put down which number belongs to which lender.
About the amount changing without notice: Frequently when a loan changes hands, the new servicer will re-calculate your escrow accounts, and your payment will float up or down according to the new calculation. But again, if you have any questions, call.
THE PROBLEM: Misapplied payments. According to the CFPB, many homeowners say that despite their explicit instructions, their payments are not properly applied. And they grouse that partial payments were sent back to them.
WHAT TO DO: Lenders won't accept partial payments; they say their software programs are not set up that way. So if you can only send part of what you owe in a particular month, call the company and tell them what's up.
The same goes if you feel the need to send the lender special instructions, say, to apply an additional amount to your principal. Call and ask how you should go about this, then call again a week or two after you send the payment to make sure your wishes were carried out.
THE PROBLEM: Loan-mod gridlock. According to the CFPB, financially strapped consumers continue to have big problems when they try to work with their lenders to prevent going into foreclosure. They complain of long delays and a lack of information when applying for a loan modification. And they say that servicers move forward with foreclosure proceedings while their application for a loan mod is under review -- a tactic known as dual-tracking.
WHAT TO DO: This is a tough one, but probably the best advice is to work through an independent housing counselor who knows the ropes better than you. You can find a list of government-approved counselors at www.hud.gov.
As far as dual-tracking is concerned, realize that the servicer is concerned with one thing and one thing only: collecting your money. The lender, on the other hand, would very much like to save the loan. Unfortunately, the two entities, or perhaps the two departments, don't talk to each other.
But under the rules put in place by the CFPB nearly three years ago, servicers are not supposed to start a foreclosure proceeding if a borrower has already submitted a complete application for a loan modification or other alternative to foreclosure, and that application is still pending review. So make sure your application is complete.
Also, to give borrowers reasonable time to submit such applications, servicers cannot make the first notice or filing required for the foreclosure process until you are more than 120 days late. And remember, foreclosure is not just an event; it's a process. How long a process depends on the rules in your state.