The bottom line is that debt servicers — who are hired to collect payments on various kinds of debt, including mortgages — are totally unhelpful to borrowers with financial difficulties. The reason lies in the way they are paid. These servicers are paid as a percentage of the loan balance, not the amount they collect. In other words, the higher the balance, the higher the servicer’s compensation. Thus, it behooves the servicer to drive up the balance by refusing to allow a borrower to work his or her way out of payment difficulties.
THE NEED FOR THE RULE
Because of this, the federal government enacted a law requiring mortgage servicers to give homeowners in need of mortgage relief complete and accurate information. We call this the "Accurate Information Rule." Over the years, we have seen the rule violated hundreds of times. Quite often, the violation comes in the form of a letter telling the homeowner that he or she has no retention options when there has not been a fair analysis of the financial situation. Another common violation occurs when the servicer refuses to give the homeowner a straight answer as to whether he or she qualifies for a mortgage modification after sending in mounds of paperwork over months or even years.
The Accurate Information Rule provides the opportunity for sweet justice for victimized homeowners. When caught in the act of violating the rule, the servicer is open to a lawsuit by the homeowner. Recovery can include all damages suffered as well as attorney fees. The damages may consist of amounts added onto the loan balance during the period when inaccurate information was provided. Thus, when used properly, the rule can force the servicer to disgorge itself of its ill-gotten gain.
Daniel McGookey, author of Consumer Mortgage News, is a lawyer of 36 years. His firm, McGookey Law Offices, LLC, has offices in Columbus, Lorain and Sandusky, and represents homeowners with real estate and mortgage issues throughout Ohio.