For Borrowers in Trouble: Partial PaymentsSkip to issue
§1. What happens with partial payments
Full mortgage payments usually must be credited to the borrower’s account on the day they’re received. But borrowers in trouble often try to make a partial payment, and there haven’t been rules for what happens then. Some lenders won’t accept partial payments at all. Some hold onto them in special accounts (“suspense accounts,” sometimes called “unapplied funds accounts”) rather than crediting them immediately to the borrower’s loan. Some lenders don’t credit partial payments in the way that helps borrowers the most. This has been very confusing to borrowers, and sometimes makes the situation of a borrower in trouble worse. CFPB is proposing to change part of this: what happens with suspense accounts. It’s also proposing that partial payment information be highlighted on the periodic statement borrowers must get every payment cycle. (See the Periodic Statements post.)
What this means for consumers and servicers. Under CFPB’s proposal, lenders could still refuse to accept partial payments. But, if the lender accepts partial payments and puts them in a suspense account, it must:
- credit this money as a payment as soon as there’s enough money in the suspense account to make up a full payment; and
- apply this credit to the oldest missed payment so that overdue charges don’t continue to pile up for that payment
Is this a good approach to the partial payment issue?
Also lenders must make special disclosures about suspense accounts on the periodic statement they have to send in each billing cycle (look in the Past Payments Breakdown box):
Will this be clear to borrowers? CFPB is not planning to require that a servicer who refuses to accept partial payments and returns them to the borrower must include this information on the periodic statement. Should this information be included? The Message section must include information on what the borrower must do to get the funds out of the suspense account.
An important question is what “full payment” means. CFPB proposes that a full payment covers (1) interest, (2) principal, and (3) escrow but not any late fees that are due. However, it specifically wants comments on whether it should let lenders include late fees in determining whether the borrower has made a full payment for purposes of accepting, or crediting, the payment.
Read what CFPB says in the NPRM about partial payments.
See the text of the proposed rule: § 1026.36(c)(1)(iii)