Banking/Legal Question

[hippiegranny]

Our mortgage was recently sold to a new company. We have always paid additional principal and could direct with the payment how the extra funds were to be applied. Well this new company has taken it upon themselves to take our additional payment and apply it to the daily accrued interest before it applies the remainder to principal. Is this legal? We have NEVER been late, so that cannot be used as an excuse.

[napi21]

1. I think it depends on what was written into YOUR mtg, and also

into the sales agreement when it was sold.

I suggest you contact the new mtg. holder and explain how you have always done your extra pmt. amt. and ASK how you can continue that with them. At least initially, be polite and businesslike. Lots of mtg. holders just do things their own way unless the customer asks for something different.

[Sherman A1]

2. I think I would call them

and get a real person on the line. Just be nice and try to straighten it out. It might just be a hiccup in the transition. If they work with you, most likely you can get the previous funds applied to the principle.

[mcscajun]

3. In the absence of written directions and policy, applying extra funds

to accrued interest is normal, and depending on your policy, more than legal.

It's a transition problem. Contact the new company and find out what their procedures are for paying additional principal payments. They may also be able to redirect your previous extra payments to principal.

[Freedom_Aflaim]

4. Its the same thing

Assuming you pay the full payment amount plus some extra.

Regardless, the procedure for applying payments in defined in the note.

Read your note and make them comply.

The reason for applying interest first, then principle is to accomodate their accounting methods and comes into play when you start making partial payments. Also if you end up filing bankrupcty/foreclosure, it makes a difference in their collection as to which is principle and which is interest.

However, pay the whole thing plus add'l principle, and it doesnt matter.

[Kota]

5. If you don't specify they automatically apply it to the interest.

You can mark it on your coupon with some companies, like the one you were with. If you could do it with them it should be okay with this new one but you need to make sure they know where to apply it.

[hippiegranny]

6. Big thanks to all who replied

To address some of the comments:

1. There is no contract, per se, with this company, we were sold to them.
2. We always are VERY specific on how the funds are to be applied.
3. We have spoken to live people, all rather indifferent. We are waiting for a supervisor to call us back.

We are ready to refi if they cannot comply with our wishes.