Paycheck Chronicles

New Law Requires Monthly Mortgage Statements


A new law means that homeowners will be seeing more paper in their mailboxes.  Just what we all needed, right?

As part of the huge changes to mortgage banking laws, lenders are now required to provide a monthly statement showing exactly where each penny goes, and explaining it clearly.  It seems that the default is paper statements, though I have heard that I can choose to receive them electronically.

Maybe I'm super-savvy, or maybe Navy Federal Credit Union (NFCU) has particularly good online account access, because this has never been a problem for me.  And I am the type of person who will randomly decide that she wants to see what the amortization of her loan looks like in year 15 or wakes up in the middle of the night wondering what day the mortgage company is planning to pay the property tax bill.  It seems to me that normal most folks probably haven't had a lot of un-met information needs.

But we're talking about the government, and of, course, the solution to every problem is more rules.  And so, most of us received paper mortgage statements in January, and will continue to receive them either by paper or electronically.

If you've never been whacko interested in your mortgage information, you might find some fun stuff on these statements.  Each month, the bank receives your payment and divides it into different pots:  one part goes to principal, one part pays the interest since your last payment, and one part goes into an escrow account to pay your bills such as insurance and taxes.  You might also have a part that goes to pay your Private Mortgage Insurance (PMI) premium, or you might have other payments such as Condo Fees being taken care of by your escrow account.  Any extra payments will be applied as you've directed, usually to principal, but sometimes to your escrow account.

Your account statement show all of this information, for each payment that you make.  You can watch your principal balance go down (slowly) and see the dramatic impact if you make extra principal payments.  You can keep an eye on your escrow account, and see how the money builds up each month, and then balance falls when those large bills come around a few times a year.  And if you see anything you don't understand, call your mortgage servicers and ask!  Sometimes, crazy stuff shows up.  Perhaps you didn't realize that one of the 200 documents that you signed at closing was authorizing life insurance specifically for your mortgage, or maybe your condo association has been billing your mortgage company AND you've been paying directly each month.  Anything questionable should be questioned.

While I hate the fact that this is more government intervention in something that is basically a private arrangement between a lender and a borrower, I will try to focus on the silver lining.  If just one of you really looks at your mortgage statement, and learns something new, it will make me happy.  So tell me what you discover, and make me smile!

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