Q: We purchased our home in May of 2001, and our mortgage was sold approximately three months after closing to a company located in Texas. Here is the scenario each month. We mail our mortgage payment on time. On or after the 16th day of each month, we receive a call advising us that the payment has not yet been received. We are advised to put a stop payment on our check, which costs us approximately $25 each month. Then the Texas lender asks us for permission to debit our account for the amount of the mortgage payment plus a late fee of $60. They then mail me a copy of my stopped check, which clearly indicates that they have had it for at least a week before the 15th of the month.

To complicate matters, before the Texas lender returns the check to us, they try to cash it, at another cost of $25. Then, to add insult to injury, we are also charged a check-handling fee for the check. Each month, we are bilked out of approximately $125.

We made inquiry with the Better Business Bureau, and have been advised that there are a "huge" number of complaints against this lender. What can we do?

A: Wow! Your situation sounds like a scene from a science-fiction movie.

You are clearly being bilked by this lender, and there are a number of steps you can take. However, under no circumstances should you stop making the mortgage payment; you do not want to be in default, and have a possible foreclosure listed on your credit report.

First, I recommend that you start sending in your monthly mortgage payment by Certified Mail, Return Receipt requested. This will give you clear proof as to when the Texas lender received your payment. You need proof that the lender is playing games with you – and your money – and the green card which you will receive back from the Post Office will assist you in gathering your facts – and your evidence.

Second, you or your attorney should write a strong letter to the lender, advising them that you are aware of the scam they are pulling on you, and this unless you receive a check to reimburse you for all the additional expenses you have incurred, you will immediately file suit against them. This may not result in your getting a refund, but you will have laid the foundation for your next steps. It is my strong belief that before a consumer takes any legal action against any creditor, the creditor must first be given the opportunity to cure the problem.

Third, you should file a well-documented complaint with at least the following federal and state government agencies:

• Federal Trade Commission;
• Federal Reserve Board;
• Department of Justice, c/o the Attorney General;
• Maryland State Attorney General’s office, Department of Consumer Affairs, and
• Texas Attorney General;

You have indicated that you did complain to the State of Maryland Department of Labor, Licensing and Regulation, but have been advised that the Texas lender did not respond to that agency’s inquiry. I suspect that the Texas lender was not concerned about receiving a letter from the State of Maryland. However, since your property is located in Maryland, and I suspect that your legal documents specifically state that the applicable law is where the property is located, the Texas lender is clearly subject to the jurisdiction of Maryland agencies – and courts.

There is in the law a concept called "long arm jurisdiction". Oversimplified, this means that even though your current lender is not in the State of Maryland, since it is the holder of a promissory note and Deed of Trust which requires enforcement by Maryland law – and since you are making monthly payments from Maryland – there are sufficient contacts in Maryland to give the local courts jurisdiction over that out-of-state lender.

Thus, in the final analysis, you can file a lawsuit against the Texas lender in a Maryland Court, and I strongly suspect that the Court will entertain jurisdiction over that lender.

You may also want to contact your original lender, and advise them of this situation. They may be completely unaware of the situation, and clearly if they want your business again in the future, they may be willing to go to bat for you to resolve this problem.

The great majority of mortgage lenders are honest, hard-working and cooperative. However, a few "bad apples" can tarnish the reputation of all lenders. Thus, you may also consider seeking assistance from the Mortgage Bankers Association of America, as well as Freddie Mac and Fannie Mae – organizations which purchase loans from individual mortgage bankers and have significant influence over the mortgage banking industry.

Finally, if your current mortgage interest rate is high, you may want to consider refinancing, so as to separate yourself from the Texas lender.