WASHINGTON -- Millions of U.S. homeowners would get a new standard for determining whether their monthly mortgage payment was made on time -- or late -- under a bill that's attracting strong bipartisan support on Capitol Hill.
Known as the "Postmark Prompt Payment Act of 1995" (H.R. 1963), the legislation would establish a simple test for timeliness in payments to creditors: You're on time if the postmark on the envelope containing your check is no later than the due date for your loan payment. If the postmark is after your due date, you're late. The date the Postal Service actually delivers your check to the lender or loan servicer -- now the crucial determinant -- would become irrelevant to you as a borrower.
For example, say you mailed your mortgage check three days before the monthly due date, but your loan servicer 2,000 miles away doesn't receive it for another two weeks. Currently you could be whacked with a late fee, but not under the new legislation. If your due date was Nov. 1, on the other hand, and your postmark was Nov. 5, you'd be legally late. Reacting to the new postmark legislation, your lender could eliminate its current grace period for late payments and hit you with penalties you don't face now.
The new bill was written by the chairman of the House subcommittee that oversees the Postal Service -- Rep. John M. McHugh of New York -- and has attracted support from 35 bipartisan co-sponsors, including the chairman of the Government Reform and Oversight committee. Either alone or as an amendment to a larger bill, it's considered to have a shot at House floor action.
Syndicated radio talk show host Bruce Williams, who first proposed the concept to the Republican McHugh after hearing extensive complaints about lenders' late fee practices from listeners, calls the bill "a grass-roots initiative that had its genesis where so much good legislation does -- from the public at large," rather than high-paid lobbyists for special-interest groups.
Tom Boone, the head of loan servicing for the nation's largest independent mortgage firm, Countrywide Funding of Pasadena, Calif., says that about 3 percent of the company's 1.15 million mortgages are 30 days delinquent. Mr. Boone would not disclose the percentage of borrowers whose checks arrive after the 14-day grace period but confirmed that it was higher than 3 percent.
Assuming for the sake of discussion that 5 percent of Countrywide's mortgage borrowers are delinquent at the end of their grace period, about 57,500 customers would be eligible for imposition of late fees per month. Countrywide's late fees amount to 4 percent to 5 percent of the borrower's monthly installment, according to Mr. Boone -- a $60 to $75 extra charge on a $1,500 payment.
Asked what a postmark-based late-fee system as proposed in Congress would mean to the mortgage business, Mr. Boone was emphatic: "It's going to increase the cost of doing business," he said, "and that cost would have to be passed on to the consumer."