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MortgageA mortgage is a legal document you sign to show that you have granted the lender a lien on your property as security for repayment of a loan, giving the lender the right to take your property if you do not repay the loan. Some states call it a deed of trust instead of a mortgage. Mortgage Loan A mortgage loan is money you borrow from a lender to finance the purchase of real estate, the land, house, and all other buildings. You the borrower, (mortgagor) in this mortgage loan agreement, gives the lender (mortgagee) a lien on the property as collateral for the loan. This mortgage loan will have specified payment periods and interest rates. Your lien on the property expires when the mortgage is paid off in full.
Shop around. Mortgages and rates vary. Keep in mind that interest rates change frequently, even daily, so contact several mortgage lenders on the same day to comparison shop. The lowest mortgage rate may not always be the best choice for you. Rates are important, but also consider the overall cost of the loan. Fixed Rate Mortgage A mortgage whose interest rate and monthly payment does not change during the entire term of the loan. Adjustable Rate Mortgage (ARM) Also known as a variable rate loan, usually offers a lower initial rate than fixed rate loans. The interest rate can change at specified time periods based on changes in an interest rate index that reflects current finance market conditions, such as the LIBOR index or the Treasury index. The ARM promissory note states maximum and minimum rates. When the interest rate on an ARM increases, the monthly payments will increase and when the interest rate on an ARM decreases, the monthly payments will be lower. Balloon - Reset Mortgage A mortgage with monthly payments based on a 30 year amortization schedule and the unpaid principal balance due in a lump sum payment at the end of a specific period (usually 5 or 7 years) earlier than 30 years. The mortgage contains an option to reset the interest rate to the current market rate and to extend the maturity date provided certain conditions are satisfied. Prepayment Penalty Mortgage (PPM) Prepayment Penalty means a lender will charge a fee to the borrower for paying off the entire loan or a large portion of the principal (generally an amount that exceeds 20% of the original principal balance) before the end of the term of the loan, and with the "prepayment penalty mortgage" (PPM), the penalty in effect range is usually between 2 to 5 years from the start of the loan. Always check with the lender if you can pay extra payments or pay the entire loan off early (if you choose) without a penalty. More about Prepayment Penalty Mortgage Servicing: Making Sure Your Payments Count When you apply for a home mortgage, you may think that the lender will hold and service your loan until you pay it off or you sell your house. That's often not the case. In today's market, loans and the rights to service them often are bought and sold. A home may be one of the most expensive purchases you ever make, so it's important to know who is handling your payments and that your mortgage account is properly credited. The Federal Trade Commission (FTC) wants you to know what a mortgage servicer does and what your rights are. Mortgage Servicers: Their Responsibilities to You A mortgage servicer is responsible for collecting your monthly loan payments and crediting your account. A servicer also handles your escrow account, if you have one.
"Sample Complaint Letter to Lender" Fair Debt Collection By law, a debt collector is a person who regularly collects debts owed to others. Your mortgage servicer is considered a debt collector only if your loan was in default when the servicer acquired it. If that's true, you have additional rights that you can read about in the Fair Debt Collection Practices Act. Your Credit Report Many mortgage companies provide information about your payment history to credit bureaus, companies that maintain and sell consumer credit reports - which contain information about your credit payment history - to other creditors, employers, insurers, and businesses. Both the credit bureaus and the information provider have responsibilities for correcting inaccurate or incomplete information. If you believe that your mortgage servicer has provided inaccurate information to a credit bureau, contact the credit bureau and the servicer. Tell the credit bureau in writing (see below "Sample Dispute Letter to Credit Bureau") what information you believe is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts, and explain why you dispute the information, and request deletion or correction. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, return receipt requested, so you can document what the credit bureau received. Keep copies of your dispute letter and enclosures. Credit bureaus must re-investigate the items in question - usually within 30 days - unless they consider your dispute frivolous (not serious). They also must forward all relevant information you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the credit bureau, it must investigate, review all relevant information provided by the credit bureau, and report the results to the credit bureau. If the information provider finds the disputed information to be inaccurate, it must notify all national credit bureaus so they can correct this information in your file. Disputed information that cannot be verified must be deleted from your file.
When the re-investigation is complete, the credit bureau must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the credit bureau cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the credit bureau gives you a written notice that includes the name, address, and phone number of the provider. Also, if you request it, the credit bureau must send notices of corrections to anyone who received your report in the past six months. If a re-investigation does not resolve your dispute, ask the credit bureau to include your statement of the dispute in your file and in future reports. In addition to writing to the credit bureau, tell the servicer in writing that you dispute an item. Include copies (NOT originals) of the documents that support your position. If a servicer specifies an address for disputes, it is important to send your dispute to that address. If the provider then reports the item to any credit bureau, it must include a notice of your dispute. If you are correct - that is, if the disputed information is inaccurate - the information provider may not report it again.
"Sample Dispute Letter to Credit Bureau"
If You Have a Complaint If you believe your mortgage servicer has not responded appropriately to your written inquiry, contact your local or state consumer protection office. You also should contact the Department of Housing and Urban Development (HUD) to file a complaint under the Real Estate Settlement Procedures Act (RESPA) regulations. Write to:
Office of RESPA and Interstate Land Sales In addition, you may want to contact an attorney to advise you of your legal rights. Under certain sections of the Real Estate Settlement Procedures Act (RESPA), consumers can initiate lawsuits and obtain actual damages, plus additional damages, for a pattern or practice of noncompliance. In successful actions, consumers also may obtain court costs and attorney's fees. You may want to contact a housing counselor to discuss your situation. You can call HUD's hotline at 1-800-569-4287 for a referral to a local HUD-approved housing counselor. You also may wish to contact the Federal Trade Commission (FTC). To file a complaint or to get free information on consumer issues, go to the Federal Trade Commission (FTC) website at www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261.
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