My mortgage lender told me it was exempt from mortgage servicing rules. Is this true?
Maybe. Your lender could be exempt from certain mortgage servicing rules if it is a “small servicer.”
Definition of small servicer
Your lender is considered a small servicer if it:
- Services 5,000 mortgages or less each year together with any related companies and made or owns all of the loans it services.
- Is a Housing Finance Agency, which is a government agency that offers a certain amount of mortgages with low rates for low- and middle-income homes.
Small servicers are exempt from certain rules that larger servicers must follow, such as about how they provide billing statements and contact you about your loan. Also, the rule about whether or not a servicer can charge you for home insurance you didn’t choose applies differently to small servicers.
Small servicer requirements
Though small servicers are exempt from certain requirements there are new rules that they must follow. For example, small servicers must:
- Tell you each time a change in your interest rate causes your payment to change.
- Credit your mortgage payment to your account on the day they receive it.
- Provide a payoff balance to you within 7 business days if you request it in writing.
- Follow guidelines to make sure that you are not charged for force-placed insurance unless it is necessary. A mortgage servicer may make you pay for force-placed insurance if you are not paying for hazard insurance on your home. However, the insurance your lender makes you pay for must cost less than the hazard insurance the servicer would pay for from your escrow account.
- Respond to your requests to fix errors the servicer made or send you information about your loan in a certain amount of time:
- Acknowledge the request within five business days.
- Correct the error or investigate and provide you with a reason why there is no error, generally within 30 to 45 business days.
- Provide the information that you requested or explain why they can’t provide the information, generally within 30 to 45 business days.
- Not file for foreclosure unless:
- Your mortgage loan is more than 120 calendar days delinquent;
- The foreclosure is based on a violation of the due-on-sale clause in your contract (which says that you must pay off your mortgage when you sell your home to someone else); or
- The servicer is joining a foreclosure action made by a subordinate lienholder (subordinate lienholders are also sometimes called second or junior lienholders).