New Hampshire Homeowners Decry Fee Skimming by Some Mortgage Servicers

Some of the 39 state-licensed mortgage servicing companies in New Hampshire have become the focus of homeowner complaints within the last year.

According to NH Banking Commissioner Peter Hildreth, 35 homeowners officially filed a complaint with NH Banking Department against their mortgage servicers in 2007, an increase of 100% over 2006.

Eleven of the cases were resolved in favor of the mortgage companies; 5 in favor of the consumers; and 12 are still in review at this writing.

The scenario is a typical one. The homeowner receives a mortgage from company A. But soon after, the mortgage is sold to company B, and then even perhaps to company C, which continues the servicing of the mortgage. The consumer is now obliged to send the monthly payments to company C.

However, things sometimes go wrong in the transition since the consumer, who has full control over selecting company A, has absolutely zero control over the company that A may sell the mortgage to without the consumer's knowledge or consent.

So "misunderstandings" and "glitches" follow... Consumer claims she is sending in her monthly payment checks without fail.

Company C claims they did not receive it; did not receive it on time; or received the wrong amount, etc.

What follows is consumer getting charged with all kinds of "late fees" and "penalties" even if they are just a day behind or a dollar short.

In the meanwhile company C feels free to change the fees and penalties anyway they like it. In worst cases the consumer loses her home to foreclosure – the ultimate financial disaster for anyone.

The consumers are lashing back at the mortgage service companies, accusing them with willful overcharging and "fee skimming."

There is some scientific data behind the claim, produced by Katherine Porter, an Associate Professor of law at the University of Iowa.

In her study "Misbehavior and Mistake in Bankruptcy Mortgage Claims", Porter reviewed 1,700 Chapter 13 bankruptcy cases, including some from New Hampshire.

She found that mortgage servicing companies often failed to support their fee decisions with any written documentation. Her data "raise the specter of poor record-keeping, failure to comply with consumer-protection laws, and massive, consistent overcharging," Porter is quoted saying.

Some others believe these are just "honest mistakes" brought on by the rapid expansion of the sub-prime mortgage sector. All of a sudden small mortgage servicers were sent more cases than they could handle; thus followed the poor documentation record.

What makes things worse in New Hampshire is an important fact not known by most consumers in the Granite State:

The state's Consumer Protection Law does not and cannot provide any protection against national banks servicing any mortgages.

Thus the State of New Hampshire cannot regulate these national banks and their local subsidiaries, since such regulation is banned by federal law.

"Predatory lending" is protected by NH Consumer Protection Law. But the servicing of the same loan is not if it is serviced by a national bank or its local branch.

This simmering issue may come to a full boil as more NH consumers decry these fees and press for a change in legislation to give them much needed protection. But until then, the arbitration of the state Banking Department seems to be the main recourse the consumers have at their disposal.

>>> Here is a list of consumer resources published by the Union Leader (http://www.unionleader.com/):

Homeowner hotline: Residents with concerns or questions about their mortgages can call the N.H. Banking Department's Homeowner Hotline at 1-800-437-5991. For information about free consumer outreach sessions, visit: nh.gov/banking/outreach.html.

Avoiding foreclosure: For free foreclosure prevention counseling, call the Homeownership Preservation Foundation at 888-995-HOPE. For information, visit hopenow.com or 995hope.org.

Mortgage servicing issues: For information about mortgage servicing, including how to file a federal complaint, visit: ftc.gov/bcp/edu/pubs/consumer/homes/rea10.shtm.

Visit Your Home Buying Assistance Program for access to valuable home buying assistance programs designed for home buyers in New Hampshire and North-East Massachusetts.