New York -- Memo to the 12 million homeowners who carry an adjustable-rate mortgage (ARM): Depending on which study you believe, and which lender you use, there's a 20 percent to 80 percent chance that you're paying the wrong amount each month.
Over the past couple of years, a lot of publicity has been given to the high rate of error in adjusting monthly ARM payments. Still, many lenders haven't bothered to fix the problem. Last year, Consumer Loan Advocates in Lake Bluff, Ill., checked the payment history of 9,000 ARMs and found mistakes in almost half of them. Of those, 77 percent overcharged consumers, by a total of $1,588, on average.
Similarly, if you refinanced the ARM, the closing balance you paid might have been too high. Once you catch the mistake, you generally have three years or more to return to the lender and straighten things out.
What if you were undercharged? In the cases that have gone to court, borrowers have not been required to make up the difference, according toConsumer Loan Advocates' Lawrence Powers. Federal regulators also have told lenders not to pursue consumers. Some lenders are trying it anyway, but a lawyer ought to be able to stop them.
Mistakes in adjusting your monthly ARM payments are generally not deliberate. They're merely careless and sloppy -- the sign of a lender indifferent to quality control. The only reason consumers haven't risen up is that they cannot easily tell whether they're paying too much.
Several services will audit your ARM for accuracy. Consider using them under these circumstances:
* Your mortgage has been sold to a different lender for servicing. The new company's computers may not pick up your loan's terms correctly.
* You had a question about a particular mortgage payment that (( your lender couldn't (or wouldn't) answer satisfactorily. Federal law requires loan servicers to respond to your written query within 20 business days and to correct the record or explain why they're right within 60 business days.
* Your loan was issued before 1986. Computers may use terms common to new mortgages to update, incorrectly, the payments on old ones.
* The calculation that generates your interest rate is complex. A "simple" calculation would be "2 percentage points over the one-year Treasury index [on a specific date, rounded to the nearest one-eighth of a percent [that's 0.125 percent]." The more steps the lender has to go through, the more likely an error.
* You don't suspect an error but want to check. One such casual inquiry is bringing a Colorado customer a refund in excess of $35,000 on a $125,000 loan, said David Ginsburg of Loantech in Gaithersburg, Md. The lender had been picking up the borrower's semiannual adjustment rate from the wrong index.
What are other common errors?
* Picking up the index on the wrong day. For example, your mortgage contract may peg your rate to the index 45 days prior to the day your monthly payments change. Your mortgage servicer's computers, however, may be programmed for 30 or 60 days. This could work for you or against you, depending on which way rates are moving.
* Always rounding your rate up by one-eighth of a point rather than to the nearest one-eighth (which may be down).
* Working from an incorrect mortgage balance, or adjusting your payment on the wrong day of the month.
Among the services that will check your loan:
* Consumer Loan Advocates at (800) 767-2768. $105 for an audit of your payments plus an explanatory book called "ARM Aid," which helps you do your own audit in the future. Consumer Loan Advocates also states any overcharge as a dollar amount, not just as a corrected interest rate or loan balance.
* Loantech, Inc., (800) 888-6781 (in Maryland,  330-0777). $69 for the ARM check; $29 for past customers who want an update. Loantech is also working on a do-it-yourself book.
* Mortgage Monitor in Norwalk, Conn. (800) AUDIT-USA. Your choice of $99 or 35 percent of any overcharges that are recovered, plus $49 if Mortgage Monitor has to get documents from your bank.
* LoanChek in San Diego, (800) 477-6166. Basic audit: $74.
3' 1992, Washington Post Writers Group