Primary marketConfirming Your Mortgage Balance
Question: In March of 1973 I settled on a residential property. My 30-year mortgage was for $55,000, at an interest rate of 7.5 percent. The first payment was due on April 9, 1973. I have made the exact amount of payments over these many years, and thought that my mortgage would be paid off in April of this year. However, my lender -- which is not the original lender -- has advised me that the mortgage would not be paid off until August of this year.
When I questioned the lender, they asked me to send them a copy (front and back) of all of my cancelled checks for the months of April, May, June and July, 1973. I did this, but now the lender states that they have only had my loan for a couple of years and do not have any earlier history.
What should I do?
Answer: First, I have to congratulate you. Not too many people keep copies of cancelled checks going back to the inception of their mortgage. And now, with modern banking technology, many banks will not even send you the cancelled checks with the monthly bank statement
This is a very common problem. When a mortgage lender makes a loan to a homebuyer, that lender typically will sell the loan to a third party, which will service the loan for a period of time and then resell it to some other lender or institution.
From the lender"s point of view, selling a loan makes sense. The lender will have more money to make more mortgage loans, and in reality the homeowner/borrower should not care where the monthly payment has to be made.
But, we have all encountered situations where the second (or third or fourth) lender did not make the real estate tax payment from escrow, or did not keep the hazard insurance current by paying the annual premium -- despite the fact that the lender had the money in escrow for these payments.
And, too many homeowners, when seeking payout statements, have encountered similar situations as yours. The new lender says "I don"t have your old history, go back to your original lender."
That just won"t work. In many cases the original lender is out of business. In other cases, the lender legitimately says "when I sold your loan, I transferred all of the payment history to that new lender."
What should you do?
First, make sure that you have a copy of the promissory note and deed of trust which you signed. When a homeowner obtains a mortgage loan, there are two important documents which are signed:
The promissory note. This is the equivalent of an "IOU". You sign a statement agreeing that you are borrowing X amount of dollars, at a specified (or adjustable) rate of interest, and will make your payments promptly each and every month. If you do not make those payments on time, the lender can hit you with a late fee. And if you get too far behind, the lender can declare you in default. The
note gives the lender the right to accelerate the entire outstanding balance of the note and file a lawsuit against you for collection of the debt.
Deed of trust. This is the mortgage document. You are the owner of the property and sign a deed -- in trust -- to a trustee selected by the lender. The trust document spells out the right of the Trustees to institute foreclosure proceedings, should you be in default. Different states have different foreclosure procedures, but oversimplified, a deed of trust gives the trustee the power to sell your property if you are delinquent in your monthly mortgage payments. The deed of trust is recorded among the official land records where your property is located.
The promissory note will state when the first payment was to have been made and when the last payment is due.
Next, obtain an amortization table, based on the specific terms of your loan. Your lender should be able to furnish this, or you can find one on the web merely by asking your search engine for "amortization tables".
Incidentally, I confirmed that to fully amortize (pay off) a 30-year $55,000 loan at an interest rate of 7.5 percent, the monthly payment is $384.57, which is close to what you have been paying over these many years.
Armed with this information, you should contact the current lender and demand that they send you a copy of the complete history of your loan. It is absolutely no excuse that the new lender has only been servicing your loan for just a few years. Whether they are involved with your loan as the new holder of the note or just the servicer of your mortgage payments, they have the obligation to provide you with a complete and accurate loan history.
What are your rights should the lender insist that you could not pay off your mortgage until four months after the actual due date? There are several avenues on which you can proceed:
Write a letter of complaint to your State Attorney General, and to your State"s Banking commission;
File a complaint with the Federal Trade Commission, the Federal Reserve Board and the Comptroller of the Currency;
Send a letter to your elected representatives in Congress (both the House and the Senate), and
File a suit in the local Small Claims court in your jurisdiction.
Please note that I used the word "and". These options are not exclusive, and you have the right to go down all of these avenues should you so desire.
There is absolutely no reason why a legitimate lender should not have your complete payment history. If they do not have it, then they should honor your documentation.