A little-known section in the Year 2000 Readiness and Responsibility Act (H.R. 775) ) protects home owners from foreclosure if a computer glitch results in unprocessed mortgage payments.

You should, however, consider making your January payment early in December -- just to be safe.

Section 4 (Application of the Act), Sub Section H (Consumer Protection From Y2K Failures), Paragraph 1 (General) of the Y2K Act says: "No person who transacts business on matters directly or indirectly affecting residential mortgages shall cause or permit a foreclosure on any such mortgage against a consumer as a result of an actual Y2K failure that results in an inability accurately or timely to process any mortgage payment transaction."

The Y2K Act was signed into law this summer primarily to limit lawsuits directed at the failure of any device or system relating to Y2K problems. However, legislators considered potential problems significant enough with computers used to service mortgages that they devoted more that two pages of the 49-page law to the issue.

"It's interesting that the one very explicit provision for consumer protection singles out mortgages," said Bruce F. Webster, an information technology consultant also author of 'The Y2K Survival Guide' (Prentice Hall, $19.99) with a Y2K-compliant price.", who advises not to be caught in escrow when the clock strikes midnight on Dec. 31, 1999, right at the Y2K.

"Y2K" stands for the Year 2000, when a computer design technique to save data space could make some computers fail to recognize the new year. That could create everything from Excedrin Headache No. 2000 for computers to a global recession, depending upon the forecaster.

The Y2K Act says protection under the law depends, in part, on the consumer being aware that something is amiss. Here's where all those warnings about keeping good records toward the end of this year come into play.

Y2K Act's Section 4, Sub Section H, Paragraph 2 says early in the year 2000 if you know you've made a mortgage payment on time, but the mortgage servicer says you haven't and you believe a computer glitch could be at fault, you have seven days to supply, in writing, proof that you made your payment on time.

The law doesn't identify who, you or the loan servicer, must bear the burden of proof, but a canceled check, a money order receipt or other documentation should suffice for compliance on your part. Send your proof by certified, return-receipt mail to obtain the best protection.

Also consider this: Both to receive an additional mortgage interest write off and to avoid Y2K problems, you might consider making your January mortgage payment as early as possible in December, in person or early enough to receive proof-of-payment before year's end, that the payment was received in 1999.

"I know last year there was talk in the mortgage bankers association about looking at trying to accelerate (financing year end) mortgages. The mortgage bankers wanted to get things cleared out as much as possible to minimize risks as much as possible," said Webster co-founder and co-chair of the Washington, D.C. Year 2000 Group.

Also learn now who to complain to should there be a problem. And don't try to use the law to gain a mortgage payment holiday. If, four weeks after 2000 or four weeks after you've informed the lender of what you believe is an error (whichever is later), the mortgage servicer hasn't granted you, in writing, an extension to clear up the matter, the servicer can begin foreclosure proceedings.

Loans in default, or facing default before Dec. 15, 1999 and loans involving Y2K-related complaints made after March 14, 2000 are not protected by the Y2K Act.

Published: September 9, 1999

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