What is distressing about your story is the willingness of the builder and broker to take advantage of your inexperience and naiveté. They rid themselves of what to them is a minor business problem by leading you into financial disaster. Don't fall for it.

Your Mortgage Records Can Save Your Home Equity

"I have accumulated monthly mortgage statements for eight years, so when is it safe to begin throwing them out?"

I would retain them all until the loan has been paid off.

Why keep them, you ask? Marie McDonnell, a Massachusetts-based finance analyst who audits home loans when predatory behavior by servicers is suspected, related the following experience to me. Three years after her client's mortgage had been originated, the servicing was sold to another firm, but the records of his account covering the first three years were not transferred to the new servicer. When the client with Marie's help realized that he had been systematically gouged, the only available records for the first three years were those of the client. Had the client not kept the records, the skullduggery could not have been proved.

Mortgage servicers make mistakes, some of them deliberate, designed to increase the servicer's income at the borrower's expense. You don't select the firm who services your mortgage, but even if you did, servicing can be sold without your permission. Under the law, you must be informed about such a sale but you can't prevent it. The law should but does not require that when servicing is sold, the entire historical file be transferred to the new servicer. So keep your records, they just might save the equity in your home.

What is a 30-Day Delinquency?

Anyone who has read a credit report has noticed that payment delinquencies are shown as 30, 60 and 90 days. This confused the borrower who sent me the following note.

"I had a mortgage payment due Feb. 1 that I paid March 1. The lender reported me to the credit bureaus as being 30 days late, but in fact, I was only 28 days late -- there are only 28 days in February. They refuse to fix it, how can I get them to recognize their mistake?"

You can't. They are following industry practice, which is indeed needlessly confusing. The 30, 60 and 90 days really mean one, two and three months. The practice of expressing them in days probably reflects the attempt to minimize the number of digits used in credit reports. "60 days" uses seven digits whereas "2 months" uses eight.

Your March 1 payment was one month late, and the fact there were only 28 days in that month doesn't matter.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

Copyright 2006 Jack Guttentag