SUMMARY OF FINDINGS:

Design and Testing of Mortgage 

Servicing Disclosures

August 2012

SUBMITTED TO: 

Consumer Financial Protection Bureau

ICF International

9300 Lee Highway

Fairfax, VA 22031

SUBMITTED BY:
SUMMARY OF FINDINGS:

Design and Testing of Mortgage 

Servicing Disclosures

August 2012

SUBMITTED TO: 

Consumer Financial Protection Bureau

ICF International

9300 Lee Highway

Fairfax, VA 22031

SUBMITTED BY:
Table of Contents

Executive Summary....................................................................................................................... i

Background................................................................................................................................ i

Development of Model Disclosure Forms................................................................................ ii

Methodology for Consumer Testing........................................................................................ iv

Findings from Testing of Periodic Mortgage Statements........................................................ iv

Findings from Testing of Adjustable Rate Mortgage (ARM) Rate Adjustment Notices....... vii

Findings from Testing of Force-Placed Insurance Notices...................................................... ix

Chapter I: Background ................................................................................................................ 1

Chapter II: Development of Model Disclosure Forms .............................................................. 3

Description of Forms ................................................................................................................ 3

General Design Principles......................................................................................................... 4

Chapter III: Methodology for Consumer Testing ..................................................................... 6

Chapter IV: Testing of Periodic Mortgage Statements............................................................. 7

Round 1: Towson, Maryland (February 1-2, 2012).................................................................. 7

Round 2: Memphis, Tennessee (February 29 – March 1, 2012) .............................................. 9

Round 3: Los Angeles, California (April 3-4, 2012).............................................................. 12

Chapter V: Testing of Adjustable Rate Mortgage (ARM) Rate Adjustment Notices.......... 16

Round 1: Towson, Maryland (February 1-2, 2012)................................................................ 16

Round 2: Memphis, Tennessee (February 29 – March 1, 2012) ............................................ 19

Round 3: Los Angeles, California (April 3-4, 2012).............................................................. 21

Chapter VI: Testing of Force-Placed Insurance Notices......................................................... 24

Round 1: Towson, Maryland (February 1-2, 2012)................................................................ 24

Round 2: Memphis, Tennessee (February 29 – March 1, 2012) ............................................ 26

Round 3: Los Angeles, California (April 3-4, 2012).............................................................. 27

Chapter VII: Conclusion............................................................................................................ 30

Appendices

Appendix A: Sample Recruitment Screener

Appendix B: Participant Demographic Information

Appendix C: Model Forms Used in Testing
i

Executive Summary

Background 

In July 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act 

(Pub. L. 111-203, approved July 21, 2010) (the “Dodd-Frank Act” or the “Act”) in the wake of 

the greatest financial crisis since the Great Depression. The mortgage meltdown was the 

epicenter of this crisis. The serious and widespread deficiencies in the mortgage market damaged 

American homeowners, financial institutions, and the wider economy.

In its investigation into the causes of the financial crisis, the U.S. House of Representatives

found that mortgage servicing in particular has been marked by pervasive and profound 

consumer protection problems.1 Consequently, the Dodd-Frank Act sets forth a number of new 

protections for consumers in the servicing of their mortgage loans. Among these new protections 

are new disclosures that will help provide consumers with comprehensive and comprehensible 

information so they can better manage their obligations and avoid unnecessary problems:

 Section 1418 of the Dodd-Frank Act amended the Truth in Lending Act (TILA) by 

adding a new requirement that a creditor or servicer provide a notice regarding the initial 

interest rate reset or adjustment of a hybrid adjustable rate mortgage (ARM) at the end of 

the introductory period either (a) between 6 and 7 months prior to such reset, or (b) at 

consummation of the mortgage if the first reset occurs during the first 6 months after 

consummation. Additional discretionary authority in the Dodd-Frank Act permits the 

extension of the Act’s hybrid ARM notice requirements to ARMs that are not hybrid 

ARMs.2The Consumer Financial Protection Bureau (CFPB) intends to propose that the 

notice be required of all ARMs. 

 Section 1420 of the Act amended TILA by adding a new requirement that a creditor, 

assignee, or servicer of any residential mortgage loan—a closed-end credit transaction 

secured by a dwelling—provide a periodic statement to the borrower for each billing 

cycle. It also required the Federal Reserve Board (the Board) to develop standard model 

form(s) for the required disclosure, taking into account that the statements may be 

transmitted in hard copy or electronically.3

 Section 1463 of the Act amended the Real Estate Settlement Procedures Act of 1974 

(RESPA) by adding a new requirement that a servicer for a federally related mortgage 

must send, via first class mail, two notices to the consumer before charging the consumer 

for force-placed insurance. 

 

1

See H. Rep. No. 111-94, at 54-56 (May 4, 2009), available at http://www.gpo.gov/fdsys/pkg/CRPT111hrpt94/pdf/CRPT-111hrpt94.pdf.

2

See Dodd-Frank Act, sec. 1418(a).

3 The Board’s authority to develop standard model forms and its responsibility of implementing TILA transferred to 

CFPB on July 21, 2011. See Dodd-Frank Act, secs. 1061(b)(1), 1401(b). 
ii

These new disclosure requirements will take effect automatically on January 21, 2013, as written 

in the statute, unless final rules are issued first. The Bureau plans on issuing final rules on or 

before that date. The statute authorizes the CFPB to adopt implementing regulations. 

In November 2011, CFPB contracted with ICF International (ICF) to assist it with the 

development and testing of these new disclosures. The work for this project consisted of two 

phases. First, ICF worked closely with CFPB to develop a set of model forms that (1) met the 

disclosure requirements as outlined in the Dodd-Frank Act and (2) provided the information in a 

manner that was understandable and useful to consumers. This was an ongoing, iterative process 

that took into account the current design of similar forms, as well as best practices in consumer 

communications. Second, these new draft forms were tested through three rounds of in-depth 

cognitive interviews with consumers. The forms were revised between rounds to address any 

usability or comprehension issues that became apparent.

The findings from this work informed CFPB’s proposed regulations for mortgage servicing 

disclosures, which are expected to be published for public comment during the summer of 2012. 

The revised forms that were developed and refined through the testing were used as a basis for 

the model forms included with that proposal.

Development of Model Disclosure Forms

For this study, ICF designed forms to both satisfy the requirements of the Dodd-Frank Act, and 

to present information to consumers in a clear and understandable way. The development of 

these forms was based on in-depth discussions between ICF and CFPB staff, as well as a review 

of sample documents currently used by creditors and mortgage servicers. ICF developed three 

types of forms:

 Periodic mortgage statements that servicers would provide to consumers each billing 

cycle to provide important information about their loan; 

 Adjustable-rate mortgage (ARM) rate adjustment notices, which would notify 

consumers six months before their interest rates were scheduled to adjust for the first 

time; and 

 Force-placed insurance disclosures, which would warn consumers that the servicer did 

not have evidence of hazard insurance coverage, and that if they did not have insurance 

coverage, the servicer had the right to purchase force-placed insurance and charge the 

consumer for the cost. 

Periodic Mortgage Statements

The periodic mortgage statements tested were designed to be given to consumers each billing 

cycle, providing important information about their loans. The statements were printed on a 

single, double-sided legal-sized page. Among other pieces of information, the front of the 

statements included: 

 A summary of the mortgage terms (e.g., interest rate and principal obligation); 

 The amount of and due date for the next payment; 
iii

 A breakdown of current and past payments by principal, interest, escrow and fees; 

 A description of recent transaction activity including the itemization of fees and charges; 

 An Important Messages box; and

 A payment coupon that consumers could return with a payment by mail. 

The information on the front of the statements was organized by grouping related concepts and 

information into boxes, each of which had a short but descriptive heading (e.g., “Account 

Information,” or “Current Payment Due”).

The back of the statements included contact information for the Department of Housing and 

Urban Development (HUD), the state housing agency, and three state- or federally-approved 

counseling programs in the consumer’s area. On all but one of the statements used in testing, this 

contact information was referenced in the Important Messages box on the front of the statement, 

which directed readers to the back of the statement. The back of the statements also contained 

other servicing-related information that was included to make the statements more realistic.4

Adjustable Rate Mortgage (ARM) Rate Adjustment Notices

The ARM rate adjustment notices tested were designed to be sent to consumers with ARMs six 

to seven months before their interest rate was due to adjust for the first time. Among other pieces 

of information, the notices that were tested included the following:

 An explanation of how the consumer’s new rate and payment would be determined and 

when they would take effect; 

 A good-faith estimate of the amount of the new monthly payment; 

 The date of the initial interest-rate adjustment; 

 A list of actions consumers could take if they sought alternatives to the upcoming 

monthly payment changes; 

 The amount of any prepayment penalty; and

 Contact information for federal and state housing agencies and housing counselors. 

The structure of the ARM rate adjustment notices developed for this project was based on a 

notice proposed by the Board in August 2009 on the same topic.

Force-Placed Insurance Notices

The force-placed insurance notices tested were designed as one-page letters from a servicer to a 

consumer. The notices explained to consumers that the mortgage company did not have evidence 

of hazard insurance coverage. The notices also explained that if the consumer did not have 

 

4 Other than the information about mortgage counseling, none of the information on the back of the statements was 

tested as part of the project.
iv

insurance coverage, the mortgage company had the right to purchase force-placed insurance and 

charge the consumer for the cost. The notices also included a good-faith estimate of what forceplaced insurance would cost and an explanation of the circumstances under which consumers 

would be charged for force-placed insurance. 

Per the Dodd-Frank Act, servicers must send two of these notices before charging a consumer for 

force-placed insurance—one at least 45 days before charging and another at least 15 days before 

charging.

Methodology for Consumer Testing

ICF conducted three rounds of in-depth interviews to test how effectively the disclosure forms 

communicated information to consumers. A total of 31 interviews were conducted in February 

through April 2012 in Towson, Maryland; Memphis, Tennessee; and Los Angeles, California. 

Participants were recruited by telephone using a screener that was developed collaboratively by 

ICF and CFPB staff. In order to qualify, participants were required to own their current residence 

and hold a mortgage. The screener also ensured balanced representation in terms of gender, age, 

education, and race. Recruiters also made efforts to recruit a significant number of participants

who had trouble making mortgage payments in the last two years or who currently or previously 

had an ARM.

Each interview lasted approximately 60 minutes. At the beginning of the interviews, the 

participants were told that they had a mortgage with a company called “Springside Mortgage.” 

The model forms were designed to show they came from Springside Mortgage.5 After a brief 

series of introductory questions about their current mortgage loan and prior experience with 

mortgages, participants were then given a mortgage statement and asked to review it just as they 

would had they received it in the mail. During this portion of the interview, the interviewer asked 

participants to “think aloud” as they reviewed the form, and to comment on any information that 

stood out to them or that they found confusing or unclear. After participants reviewed the 

statement, they were asked a series of questions to measure their understanding of its content. A 

similar process was then followed for the ARM rate adjustment notice and the force-placed 

insurance notices. At the end of each interview, the interviewer consulted with CFPB and ICF 

observers to identify any additional follow-up questions that might prove useful in clarifying the 

participant’s understanding of the forms.

Findings from Testing of Periodic Mortgage Statements

Participants’ Previous Experience with Mortgage Statements

 At the beginning of each interview, participants were asked whether they received 

periodic statements for their own mortgage loans and the extent to which they reviewed 

them. Across all rounds of testing, nearly all participants said they received periodic 

mortgage statements. Most said they did not review the statements closely but that they 

 

5

ICF did not explain the differences between creditors and mortgage servicers to participants. While the differences 

are important from a regulatory perspective, they are not important from the perspective of testing the 

comprehensibility and usability of the model forms.
v

did skim them for specific pieces of information, such as the amount due; the due date; 

confirmation that the previous payment was received; how their payments were applied 

(e.g., to principal, interest, or escrow); whether any fees were assessed; and their 

remaining loan balance.

Understanding of General Account Information 

 Across all rounds of testing, nearly all participants were able to correctly identify key 

pieces of information in the sample statements, including the amount and due date of the 

current payment, any fees included in that payment amount, the amount they owed on the 

loan, their current interest rate, and whether the payment for the previous month had been 

received.

 Although all participants in the first round of testing were able to locate their remaining 

loan balance on the statement, not all participants had a clear understanding of what this 

amount included. In fact, several participants in that round incorrectly believed that the 

“Outstanding Loan Balance” included both principal and interest. To clarify the 

relationship between their loan balance and the portion of their payment that is applied to 

principal, the statement in subsequent rounds used the term “Outstanding Principal.”

 In breakouts of monthly payments, the statements used in the first two rounds labeled 

“Escrow (for Taxes and Insurance).” In the third round of testing the parenthetical 

explanation was removed, so that the statement simply referred to “Escrow.” Only two of 

six participants on the first day understood the meaning of this term. On the second day 

of testing the word “escrow” was replaced with “impound,” to reflect the fact that 

“escrow” might have a different meaning in California, where the testing was taking 

place. However, this did not improve understanding; again, only two consumers 

understood.

Understanding of Current Payment Due

 Across all rounds of testing, all participants identified when their current payment was 

due, the amount of the current payment, and the fact that it included one or more fees.

Understanding of Past Payments

 Across all rounds of testing, nearly all participants understood that their payment for the 

previous month had been received.

 Participants in the first two rounds of testing were asked to identify the amount of interest 

they had paid in the previous year. All of these participants were able to do so.

 The statements tested in the first two rounds included a row labeled “Partial Payment 

(Unapplied).” This row was intended to show any partial payments that had not yet been 

applied to the mortgage account. In the first two rounds of testing, however, only about 

half of participants understood that funds in this row had not been applied to their 

accounts.
vi

 In an attempt to improve participant understanding of partial payments, the statements

used in the third round included an explanation that read, “Any partial payments that you 

make are not applied to your mortgage, but instead are held in a separate suspense 

account. If you pay the balance of a partial payment, the funds will then be applied to 

your mortgage.” Initially, this did not appear to have a significant effect on participant 

understanding, as only about half the participants understood what the row labeled

“Partial Payment (Unapplied)” meant. However, after being directed to read the text 

about partial payments in the Important Messages box, all participants understood that 

they would have to make additional payments in order to have their partial payment 

applied to their loan account. 

Understanding of Prepayment Penalties

 Participants in the first two rounds of testing were asked if they would be charged a 

penalty for paying off their loan in advance. Most participants saw the row labeled 

“Prepayment Penalty” and understood they would be charged that amount if they paid off 

their loan early. However, six participants in the first round of testing incorrectly 

assumed that they would not have to pay a prepayment penalty if they refinanced their 

loan, and four incorrectly thought they would not have to pay a penalty if they sold their 

house. 

Contact Information for the Mortgage Company

 Across all rounds of testing, all participants were able to identify the contact information 

for the mortgage company.

Information on Mortgage Counseling and Assistance

 The statements used in the first two rounds of testing included a reference indicating that 

information for mortgage counseling agencies could be found on the back of the 

statement. In both of these rounds, all participants saw the reference on the front of the 

statement. When asked whether the statement contained any contact information for 

mortgage counselors, more than half of participants turned to the back of the statement to 

locate the information.

 In order to test whether consumers would notice the contact information for counselors 

even if this reference was not included on the front of the statement, it was removed from 

one of the two versions used in the third round. Seven of the 11 participants in the third 

round turned to the back of this statement when asked to find contact information for 

mortgage counselors, which was a comparable proportion to the first two rounds of 

testing.

Delinquency Statement

 For the third round of testing, one of the statements depicted a scenario in which the 

consumer was two months delinquent on the mortgage. The statement included a 

Delinquency Notice box that informed consumers they were late on their mortgage 
vii

payments, that failure to bring their loan current could result in fees or the loss of their 

homes, and the precise number of days that their account was delinquent. The

Delinquency Notice box also included a recent history of their account that showed 

whether payments for recent months had been made on time. 

 When shown this statement, all participants understood that they were behind on their 

mortgage and that if they did not bring their account up-to-date, the mortgage company

would have the right to take their home. However, even though the Delinquency Notice 

box said “As of March 20, you are 49 days delinquent on your mortgage loan,” only 

about half of the participants correctly identified exactly how long overdue the mortgage 

company considered them to be.

Payment Option Statement

 In the third round of testing, CFPB also tested a statement for a “payment option” 

mortgage, which allowed the consumer to choose between three payments each month: 

“full,” “interest-only,” and “minimum.” Along with a breakdown of how each payment 

would be applied, it provided a short description of the impact that making that payment 

would have on the consumer’s principal balance.

 All participants understood after reviewing this form that if they made the full payment 

their loan balance would decrease, and that if they made the interest-only payment their 

loan balance would remain the same. All but one understood that if they made the 

minimum payment, the balance on their loan would increase.

Findings from Testing of Adjustable Rate Mortgage (ARM) Rate 

Adjustment Notices

Change in Rate and Payment

 Across all rounds of testing, all participants understood from the notices that their interest 

rate and payment were going to increase and when these changes would occur. However, 

several of the participants in the first round suggested that the notices could make it 

clearer why the rate and payment were changing. 

 In response to this feedback, the following text was added to the first paragraph of the 

notice: “Under the terms of your Adjustable Rate Mortgage (ARM), you had a three-year 

period during which your interest rate stayed the same. That period ends on August 20, 

2012, so on that date your interest rate may change.” This addition seemed to improve 

consumer understanding; all participants in the second round understood that under the 

terms of their mortgage, the interest rate was fixed for the first three years and could 

change after that time.

 In the third round of testing, the notice that was tested showed a scenario in which the 

payments had been interest-only for the first three years of the loan and would become 

amortizing when the first rate adjustment went into effect. However, only about half of 

participants understood that their payments would be changing from interest-only to 

amortizing. Participants generally understood the concept of allocation of payments but 
viii

were confused by a table in the notice that broke out principal and interest for the current 

payment, but combined the two for the new amount. As a result, this table was revised so 

that separate amounts for principal and interest were shown for all payments. 6

Calculation of New Interest Rate

 Across all rounds of testing, most participants understood that the new rate and payment 

shown on the notice were estimates that could change before the first new payment would 

be due.

 A few participants in the first round did not understand that their rate could change 

annually. To address this issue, in subsequent rounds of testing the sentence, “Your 

interest rate may change annually for the rest of your loan term,” was added to the first 

paragraph. All but one of the participants in subsequent rounds of testing understood that 

their interest rate could continue to change each year.

 In the first round, only three participants seemed to have any understanding of what an

“index” and “margin” were, and how these would be used to calculate the interest rate.

There was a wide range of misconceptions, including several participants who incorrectly 

believed the mortgage company could subjectively determine the new interest rate.

 To address this problem, the notice was revised before the second round to provide more 

description about how the rate would be determined. While it was still unclear to what 

extent participants understood what “index” and “margin” meant, after rereading the 

revised notices, most participants in the second and third rounds understood that the 

mortgage company could not arbitrarily determine the new interest rate.

Mortgage Counseling and Assistance

 Across all rounds of testing, most participants were able to locate contact information 

listed in the notices for federal and state government agencies and federally- or stateapproved mortgage counseling providers.

Possible Alternatives for Consumers

 Participants in the first and second rounds of testing were asked about their understanding 

of a list of alternatives consumers could pursue. All participants saw this list of 

alternatives on the notice.

 Only about half of the participants understood what was meant by the phrase, “transfer 

ownership of the property directly to [mortgage company] in order to avoid 

foreclosure.” Furthermore, many of these participants were unsure about why that would 

be a desirable alternative. Several participants were not sure how this option was different 

from foreclosure. A few understood that this option could be more beneficial to them in 

contrast to foreclosure.

 

6 This revision was made after the third round of testing, and therefore was not tested with consumers.
ix

Interest Rate Carryover

 In order to test participant understanding of interest rate carryover,7the notice in the third 

round described a scenario in which a limit on annual interest rate increases applied. The 

notice provided the following description: “If not for this rate limit, your estimated rate 

on September 29 would be 1.00% higher. This additional amount may be applied to your 

interest rate when it adjusts again next year.”

 Only two of the 11 participants in the third round understood the concept of interest rate 

carryover, even after being asked to reread this text. For several participants, in fact, these 

sentences created confusion about what was going to happen to their interest rate in the 

current year. As a result, this explanation was rephrased in the notice.

Findings from Testing of Force-Placed Insurance Notices

Understanding of the Mortgage Company’s Right to Obtain and Renew ForcePlaced Insurance

 All participants understood from the notices that the mortgage company did not have 

proof of insurance and that if the consumer did not have insurance, the mortgage 

company could purchase insurance on the consumer’s behalf. 

 Three participants in the second round were shown a notice that explained that the 

mortgage company had already purchased insurance on their behalf. All three of these 

participants understood that the insurance had already been purchased by the mortgage 

company.

 Three participants in the third round were shown a notice that included text in the subject 

line and first paragraph indicating that it was the “second and final notice.” All of these 

participants understood that this meant the mortgage company had already sent them a 

previous notice with the same information, and that they would not be sent another 

reminder.

 Eight participants in the third round were shown a notice that explained that their 

property had been covered by force-placed insurance over the past year, and that the 

mortgage company would renew the force-placed policy if the consumer did not provide 

proof of independent coverage. All eight participants understood that for the past year 

their homes had been covered by insurance purchased by the mortgage company on their 

behalf and that they were responsible for paying the premiums for that coverage. They 

also understood that if they did not get their own coverage, the mortgage company would 

renew their policy for the following year.

 

7 An ARM with an interest rate carryover feature means that the creditor has the right to carry over to a future period

interest rate increases that it is entitled to during the current period but has to forego due to other terms in the loan, 

such as interest rate caps. 
x

Potential Disadvantages of Force-Placed Insurance

 Across all rounds of testing, all participants understood that force-placed insurance would 

likely be more expensive than what they could purchase independently. Almost all 

participants also understood that it could provide less coverage.

Participants’ Reactions to the Force-Placed Insurance Notices

 Across all rounds of testing, all participants said that upon receipt of this letter, they 

would immediately contact their insurance provider. They also said that if they did not 

have insurance, they would immediately purchase it and send proof of that coverage to 

their mortgage company to avoid paying for insurance purchased on their behalf.

Participants’ Understanding of the Circumstances under Which They Would 

Be Charged

 While all participants said they would act immediately in response to receiving the 

notices they were shown, several participants in the first round did not understand exactly 

when the mortgage company could purchase insurance on their behalf. At least three of 

these participants assumed there would be a “grace period” after they received the letter 

during which they would not be responsible for the force-placed insurance premium. 

 To clarify that consumer would be responsible for the premium during any lapse in 

coverage, a sentence was added to the notice that read “If we purchase insurance on your 

behalf, you will have to pay us for any period during which you did not have insurance.” 

All but one of the participants in the second round understood that there would be no 

grace period.

 Participants in the second and third rounds of testing understood that they could not be 

charged by the mortgage company for any period during which they had their own 

coverage, even if the mortgage company had taken out force-placed insurance during that 

time.8

 

8

Participants in the first round of testing were not asked this question.
1

Chapter I: Background

In July 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act 

(Pub. L. 111-203, approved July 21, 2010) (the “Dodd-Frank Act” or the “Act”) in the wake of 

the greatest financial crisis since the Great Depression. The mortgage meltdown was the 

epicenter of this crisis. The serious and widespread deficiencies in the mortgage market damaged 

American homeowners, financial institutions, and the wider economy.

In its investigation into the causes of the financial crisis, the U.S. House of Representatives

found that mortgage servicing in particular has been marked by pervasive and profound 

consumer protection problems.9 Consequently, the Dodd-Frank Act sets forth a number of new 

protections for consumers in the servicing of their mortgage loans. Among these new protections 

are new disclosures that will help provide consumers with comprehensive and comprehensible 

information so they can better manage their obligations and avoid unnecessary problems:

 Section 1418 of the Dodd-Frank Act amended the Truth in Lending Act (TILA) by 

adding a new requirement that a creditor or servicer provide a notice regarding the initial 

interest rate reset or adjustment of a hybrid adjustable rate mortgage (ARM) at the end of 

the introductory period either (a) between 6 and 7 months prior to such reset, or (b) at 

consummation of the mortgage if the first reset occurs during the first 6 months after 

consummation. Additional discretionary authority in the Dodd-Frank Act permits the 

extension of the Act’s hybrid ARM notice requirements to ARMs that are not hybrid 

ARMs. The Consumer Financial Protection Bureau (CFPB) intends to propose that the 

notice be required of all ARMs. 

 Section 1420 of the Act amended TILA by adding a new requirement that a creditor, 

assignee, or servicer of any residential mortgage loan – a closed-end credit transaction 

secured by a dwelling – providing a periodic statement to the borrower for each billing 

cycle. It also required the Federal Reserve Board (the Board) to develop standard model 

form(s) for the required disclosure, taking into account that the statements may be 

transmitted in hard copy or electronically.

 Section 1463 of the Act amended the Real Estate Settlement Procedures Act of 1974 

(RESPA) by adding a new requirement that a servicer for a federally related mortgage 

must send, via first class mail, two notices to the consumer, before charging the consumer 

for force-placed insurance. 

These new disclosure requirements will take effect automatically on January 21, 2013, as written 

in the statute, unless final rules are issued first. The Bureau plans on issuing final rules on or 

before that date. The statute authorizes the CFPB to adopt implementing regulations. 

In November 2011, CFPB contracted with ICF International (ICF) to assist it with the 

development and testing of these new disclosures. The work for this project consisted of two 

phases. First, ICF worked closely with CFPB to develop a set of model forms that (1) met the 

disclosure requirements as outlined in the Dodd-Frank Act and (2) provided the information in a 

 

9

See supra note 1.
2

manner that was understandable and useful to consumers. This was an ongoing, iterative process 

that took into account the current design of similar forms, as well as best practices in consumer 

communications. Second, these new draft forms were tested through three rounds of in-depth 

cognitive interviews with consumers. The forms were revised between rounds to address any 

usability or comprehension issues that became apparent.

The findings from this work informed CFPB’s proposed regulations for mortgage servicing 

disclosures, which are expected to be published for public comment during the summer of 2012. 

The revised forms were used as a basis for the model forms included with that proposal.
3

Chapter II: Development of Model Disclosure Forms

During the development phase of the project, ICF designed three types of draft forms related to 

mortgage servicing: periodic mortgage loan statements, ARM rate adjustment notices, and forceplaced insurance notices. These forms were designed to satisfy the requirements of the DoddFrank Act, and to present information to consumers in a clear and understandable way. The 

development of these forms was based on in-depth discussions between ICF and CFPB staff, as 

well as a review of sample documents in use by creditors and mortgage servicers. 

Description of Forms

Periodic Mortgage Statements

The periodic mortgage statements tested were designed to be given to consumers each billing 

cycle, providing important information about their loans. The statements were printed on a 

single, double-sided legal-sized page. Among other pieces of information, the front of the 

statements included:

 A summary of the mortgage terms (e.g., interest rate and principal obligation); 

 The amount of and due date for the next payment; 

 A breakdown of current and past payments by principal, interest, escrow and fees; 

 A description of recent transaction activity including the itemization of fees and charges; 

 An Important Messages box; and

 A payment coupon that consumers could return with a payment by mail. 

The information on the front of the statements was organized by grouping related concepts and 

information together into boxes, each of which had a short but descriptive heading (e.g., 

“Account Information,” or “Current Payment Due”).

The back of the statements included contact information for the Department of Housing and 

Urban Development (HUD), the state housing agency, and three state- or federally-approved 

counseling programs in the consumer’s area. On all but one of the statements used in testing, this 

contact information was referenced in the Important Messages box, which directed readers to the 

back of the statement. The back of the statements also contained other servicing-related 

information that was included to make the statement more realistic.10

 

10 Other than the information about mortgage counseling, none of the information on the back of the statement was 

tested as part of the project.
4

Adjustable Rate Mortgage (ARM) Rate Adjustment Notices

The ARM rate adjustment notices tested were designed to be sent to consumers with ARMs six

to seven months before their interest rate was due to adjust. Among other pieces of information, 

the notices that were tested included the following:

 An explanation of how the consumer’s new rate and payment would be determined and 

when they would take effect; 

 A good-faith estimate of the amount of the new monthly payment; 

 The date of the initial interest rate adjustment; 

 A list of actions consumers could take if they sought alternatives to the upcoming 

monthly payment changes; 

 The amount of any prepayment penalty; and

 Contact information for federal and state housing agencies and housing counselors. 

The structure of the ARM rate adjustment notices developed for this project was based on a 

notice proposed by the Board in August 2009 on the same topic.

Force-Placed Insurance Notices

The force-placed insurance notices tested were designed as one-page letters from a servicer to a 

consumer. The notices explained to consumers that the mortgage company did not have evidence 

of hazard insurance coverage. The notices also explained that if the consumer did not have 

insurance coverage, the mortgage company had the right to purchase force-placed insurance and 

charge the consumer for the cost. The notices also included a good-faith estimate of what forceplaced insurance would cost, and an explanation of the circumstances under which consumers 

would be charged for force-placed insurance. 

Per the Dodd-Frank Act, servicers must send two of these notices before charging a consumer for 

force-placed insurance—one at least 45 days before charging and another at least 15 days before 

charging.

General Design Principles

ICF’s information designers use a set of general design principles when developing financial 

disclosures for consumers. Some principles that were especially relevant to the development of 

forms for this project include the following:

 Use plain language. Whenever possible, jargon and technical language should be 

avoided in favor of words that are more easily understood by consumers. Simple 

language is particularly important for financial disclosure forms because the consumers 

who most urgently need this information are often those with low literacy levels. When 

technical terms must be used, they should be explained for readers unfamiliar with them. 

For example, the ARM rate adjustment notice explained that payment forbearance 
5

“temporarily gives you more time to pay your monthly payment,” and that the 

consumer’s interest rate would be calculated by adding to the index “a certain number of 

percentage points, called the ‘margin.’”

 Prioritize information and structure forms so that the most important information 

for consumers is easiest for them to find. It should not be assumed that all consumers 

read all forms completely and carefully. Many may instead skim for a few key pieces of 

information. If consumers cannot find the information they want quickly, they may 

become frustrated and stop reading. Therefore, it is important to identify the most 

important information on the form before design work begins. This information should be 

located prominently to increase the likelihood that even consumers who skim the form 

quickly will find and understand it. For this reason, the periodic mortgage statements that 

were tested included a box prominently displayed at the top of the page that presented the 

account number, payment due date, and amount due, which are three pieces of 

information important to most consumers.

 Group related concepts and figures. Financial disclosure forms may attempt to 

communicate many disparate facts in a relatively small space. Consumers are likely to 

more easily absorb and make sense of the information if it is grouped in a logical way. 

On the periodic mortgage statements, this was accomplished by grouping information 

into boxes. The boxes each contained related information, and were presented in a logical 

order.

 Use headings and titles to make documents more navigable. When large amounts of 

text are included, plain language headings should be used to delineate sections on 

different topics. Tables, rows, and columns should have short, easy-to-read titles that 

accurately describe the information provided. This allows consumers to find specific 

information quickly and efficiently, and decreases the likelihood that they will become 

distracted by unrelated text.

 Build off prior research when possible. While each type of form is different, findings 

from cognitive testing of one form can often be incorporated into the design of another. 

The applicability of format/content in a new context should always be confirmed through 

cognitive testing, but prior research often provides a useful starting point. For example, as 

noted above, the basic framework of the ARM rate adjustment notice was based on a 

form originally designed and tested by ICF for the Board. While significant revisions 

were made to the form to reflect the parameters of this new CFPB project, having a 

starting point that had already been tested with consumers was helpful.
6

Chapter III: Methodology for Consumer Testing 

Once ICF had drafted model forms, the next phase of the project was to test how effectively they

communicated information to consumers. ICF conducted three rounds of in-depth cognitive 

interviews with 31 consumers in three U.S. cities. The dates and locations of the three rounds are 

shown in Table 1 below.

Table 1. Date, Location, and Number of Participants for Consumer Testing

Round Date Location Number of

Participants

1 Feb. 1-2, 2012 Towson, MD 10

2 Feb. 29-Mar. 1, 2012 Memphis, TN 10

3 Apr. 3-4, 2012 Los Angeles, CA 11

Interview participants were recruited by telephone using a screener that was developed 

collaboratively by ICF and CFPB staff. In order to qualify, participants were required to own 

their current residence and hold a mortgage. The screener also ensured balanced representation 

of participants in terms of gender, age, education, and race. Recruiters also made efforts to 

recruit a significant number of participants who had trouble making mortgage payments in the 

last two years or who currently or previously had an ARM. The recruitment screener used in the 

third round of testing is included as Appendix A; Appendix B provides detailed information 

about the demographic characteristics of participants in each round.

Each interview lasted approximately 60 minutes and was based on an interview guide developed 

collaboratively by ICF and CFPB staff. Each interview began with a brief series of introductory

questions about the participant’s current mortgage loan and prior experience with mortgages. 

Participants were then given a periodic mortgage statement and asked to review it just as they 

would had they had received it in the mail. During this portion of the interview, the interviewer 

asked participants to “think aloud” as they reviewed the form, and to comment on any 

information that stood out to them or that seemed confusing or unclear. 

After participants reviewed the statement, they were asked a series of questions to measure their 

understanding of its content. A similar process was then followed for the ARM rate adjustment

notice and the force-placed insurance notices. At the end of each interview, the interviewer 

consulted with CFPB and ICF observers to identify any useful follow-up questions.

The following three chapters of this report describe the findings from these interviews, as well as 

changes that were made to the forms in response to those findings. Each chapter describes results 

from one type of document across three rounds of testing, so that changes to model forms can be 

most easily followed over time.
7

Chapter IV: Testing of Periodic Mortgage Statements

This chapter of the report addresses findings and implications from the three rounds of testing 

related to periodic mortgage statements. The statements used in each round of testing are 

included in Appendix C.

11

Round 1: Towson, Maryland (February 1-2, 2012)

The statement tested in the first round presented a scenario in which the consumer was up-todate on mortgage payments. The consumer had been charged a late fee because the last payment 

was received two days after the end of the grace period. 

Key Interview Findings

Participants’ Experience with Periodic Statements

 At the beginning of each interview, participants were asked whether they received 

periodic statements for their own mortgage loans and the extent to which they reviewed

them. All interview participants said they received periodic mortgage statements either 

via mail, electronically, or both. Most participants said they did not review their

statements closely, but that they did review them for specific information, such as the 

amount due; the interest rate; confirmation that their previous payment had been 

received; how their payments were applied (e.g., to principal, interest, or escrow); and 

whether any fees were assessed.

Understanding of General Account Information

 All participants correctly identified their current interest rate. All also understood that 

their rate could change. Most participants understood from the statement that the rate 

could begin changing as early as October 2012, although two believed their rate would 

change in November.

 All participants were able to identify their remaining loan balance; however, it was not 

clear that all of them understood what this figure meant. For example, several participants 

incorrectly believed that the remaining loan balance shown on the statement included 

both the principal and the interest that would be paid over the life of the loan.

12

Understanding of Current Payment Due

 All participants correctly identified the current amount due and understood that it 

included the regular mortgage payment and a late fee. Participants understood that they 

had been charged a late fee based either on information in the Current Payment Due box 

 

11 The periodic statements presented to interview participants in all three rounds were printed on legal-sized paper 

(8.5”x14”). Those included in Appendix C were reformatted to fit on a standard letter-sized page (8.5”x11”).

12 It should be noted that some of this confusion might have been due to the fact that participants were reviewing a 

statement for a hypothetical loan. If participants had been looking at a statement for their own mortgage, this 

misunderstanding might have been mitigated by the fact that they knew the original amount of the loan.
8

or the explanation in the Transaction Activity box. A few participants, however, initially 

expressed some confusion over how the fee shown in the Current Payment Due box was 

connected with the fee in the Transaction Activity box.

 Participants were asked whether they felt it was necessary for the Current Payment Due 

box to break the payment down into portions for principal, interest, and escrow. Most

participants said this information was important to them because they wanted to see how 

their payment would be applied. However, two participants said it was not necessary

because the Past Payments Breakdown box provided similar information.

Understanding of Past Payments

 All participants understood from the statement that their payment for the previous month 

had been received.

 Participants were then asked whether their payment for the previous month had decreased 

their loan balance. About half understood that because the Past Payments Breakdown box

showed that a portion of their last payment was applied to principal, their loan balance

would have decreased by that amount. The other half of participants also understood that 

some of their payment had been applied to principal, but did not seem to understand the 

impact this would have on their loan balance.

 All participants correctly identified the total amount of interest that they had paid in 

2012. 

 The Past Payments Breakdown box of the statement included a row called “Partial 

Payment (Unapplied).” When asked what this meant, only two participants understood 

that any amount shown in this row would not have been applied to principal, interest, or 

escrow. Three participants incorrectly believed that if an amount were shown in the 

Partial Payment row, it would indicate that an overpayment had been made by the 

consumer. Others said they did not know what this row meant, or incorrectly thought that 

payments in this row would be applied to principal, interest, or escrow.

Understanding of Prepayment Penalties

 All participants understood that a prepayment penalty would apply if they paid off their 

mortgage early. However, six participants incorrectly believed they would not be charged 

the prepayment penalty if they refinanced, and one was unsure. Four participants did not 

think they would be charged the prepayment penalty if they sold their houses; four others 

were unsure. 

Contact Information for the Mortgage Company

 All participants saw the contact information for the mortgage company that was provided 

on the form.

Information on Mortgage Counseling and Assistance

 When asked whether the statement provided any information about what to do if they 

were having trouble paying their mortgage, all participants mentioned the information 
9

provided in the Important Messages box about mortgage counseling and assistance. 

When asked how they could reach organizations that offer this counseling and assistance, 

seven participants immediately turned to the back and found the contact information. The 

other three participants did not initially turn to the back on their own, but when instructed 

to do so were easily able to locate the information. 

Requests for Additional Information

 When asked whether additional information should be included on the statement, 

participants suggested showing the initial loan amount (two participants), the payoff 

amount (one participant), and more detailed information about the escrow account (one 

participant).

Subsequent Design Decisions

Following the first round of testing, several revisions were made to the statement. This section 

describes revisions that were most significant in terms of content, formatting, or tone.

 In the statement used in the first round, both the summary box in the top-right of the 

statement and the Amount Due box on the payment coupon referenced the payment that a 

consumer would have to make if his or her payment was late. For example, the summary 

box read, “If payment is received after 4/15/12, pay $1,989.71.” In the statement for the 

second round, these references were revised so that they identified the amount of the late 

fee, rather than the total payment including the late fee. For example, the revised 

summary box read, “If payment is received after 4/15/12, $160 late fee will be charged.”

This change was for the sake of simplicity and directness, and because the amount of the 

late fee was considered an important piece of information for consumers.

 To clarify the relationship between their loan balance and the portion of their payment 

that is applied to principal, the revised statement changed the term “Remaining Loan 

Balance” to “Outstanding Principal.”

 To clarify which transactions appear in the Transaction Activity box, a date range was 

added to the heading for that box.

 The heading of the Current Payment Due box was changed to “Explanation of Amount 

Due,” because it was more descriptive. 

Round 2: Memphis, Tennessee (February 29 – March 1, 2012)

The periodic statement tested in Round 2 was revised based on findings from the first round of 

testing (as described above). It was also changed to reflect a slightly more complex loan scenario

in which the consumer sent only a partial payment of $900 the previous month, and that payment 

had not been applied to his or her loan account. The fact that the payment was only partial was 

shown in the Transaction Activity box (which described the payment transaction as “Partial 

Payment Received”), and in the Past Payments Breakdown box, in which all $900 was shown in 

the Paid Last Month column in a row labeled “Partial Payment (Unapplied).” This change

allowed the interviewer to test participant understanding of unapplied funds more directly than in 

the first round.
10

Key Interview Findings

Participants’ Experience with Periodic Statements

 At the beginning of each interview, participants were asked whether they received 

periodic statements for their own mortgage loan, and the extent to which they reviewed

them. All but one of the interview participants said they did receive monthly mortgage 

statements, either through the mail, electronically, or both. Most participants said they did 

not review their statements closely, but that they did skim them for specific pieces of 

information, such as the amount due; payment due date; confirmation that the previous 

payment was received; how their payments were applied (e.g., to principal, interest, or 

escrow); and whether any fees were assessed.

Understanding of General Account Information

 All participants were able to identify the remaining loan balance.

 All participants correctly identified their current interest rate. All but one of the 

participants also understood that this rate might change, and that it might do so as early as 

October 2012. The remaining participant saw the text “Until October 2012” next to the 

interest rate, but did not seem to understand that the rate could change at that time.

Understanding of Current Payment Due

 All participants correctly identified the current amount due and understood that it 

included the regular mortgage payment, a late fee, and a property inspection fee. 

Understanding of Past Payments

 All participants correctly identified the total amount of interest that they had paid in 

2012. 

 All participants understood from the statement that their payment for the previous month 

had been received by the mortgage company. Most of the participants were told in 

advance to assume that they had made a partial payment the previous month. Three 

participants were not informed of this in advance; all three understood from the statement 

that the mortgage company had only received a partial payment.

 Participants were asked to explain what it meant that their previous payment was 

recorded in a row labeled “Partial Payments (Unapplied).” Six of the participants 

understood that this meant their payment had not been applied to principal, interest, or 

escrow, and that the funds were being held by the mortgage company. This was an 

improvement compared to the first round of testing.

 Among those who did not understand what “unapplied” funds were, one participant knew 

that the payment had not been used to pay off any principal, but was unsure of what had 

been done with the money. The three remaining participants indicated that they did not 

know what the mortgage company had done with the payment: one thought it “went to 
11

principal,” one assumed it had been used to pay down interest, and the third had “no 

idea” what happened to those funds.

Understanding of Prepayment Penalties

 All but three of the participants saw that the mortgage had a prepayment penalty. These 

participants also understood that they would have to pay this penalty if they paid off the 

mortgage early. 

Information on Mortgage Counseling and Assistance

 When asked if the statement included information about organizations that could provide 

advice about mortgages, all participants mentioned the information about counseling and 

assistance located in the Important Messages box.

 When asked how they could reach organizations that offered counseling or assistance, six 

participants immediately turned to the back of the statement and found the contact 

information for the counseling organizations. The other participants did not initially turn 

to the back of the statement on their own, but when instructed to do so, they were easily 

able to locate the information. These findings were comparable to those from the first 

round of testing.

 One participant commented that he was unsure whether the services provided by the 

counselors on the notice would be free, and that the notice did not provide that 

information. 

Requests for Additional Information

 When asked whether additional information should be included on the statement, half of 

the participants said that no additional information was necessary. Among the remaining 

participants, suggestions included adding: an explanation of what happened to the partial 

payment (three participants), an explanation of what was meant by “overdue payment” 

(one participant), and a list of possible alternatives for consumers having trouble paying 

their mortgages (one participant). 

Subsequent Design Decisions

Because results from the second round of testing showed that participant comprehension of the 

statement was generally high, only a few changes were made to the model statements for the 

next round.

 Many consumers did not understand what was meant by “Partial Payment (Unapplied),” 

so the following explanation was added to the Important Messages box: “Any partial 

payments that you make are not applied to your mortgage, but instead are held in a 

separate suspense account. If you pay the balance of a partial payment, the funds will 

then be applied to your mortgage.”

 In the breakdowns of current and past payments on the statements for the first two rounds

of testing, the category for escrow read “Escrow (for Taxes and Insurance).” To test 
12

whether consumers would understand the concept of escrow even without these 

parenthetical descriptions, the statements tested in the third round simply said “Escrow.” 

 Statements used in the first two rounds included a reference in the Important Messages 

box to information about mortgage counseling on the back of the statement. To test 

whether consumers would notice the contact information even without this reference, it 

was removed from one of the two versions tested in the third round.

Round 3: Los Angeles, California (April 3-4, 2012)

For the third round of testing, CFPB staff decided to test statements for two new scenarios: one 

in which a consumer was delinquent on their mortgage (referred to in this report as the 

“Delinquency Statement”), and another in which the consumer had a “payment option” mortgage

that allowed him or her to choose between different payment options each month. In order to test 

these scenarios, two different statements were developed and tested. The overall layout and 

content of the statements was largely the same as what had been tested in the previous rounds. 

However, there were some significant differences:

 The Delinquency Statement included a Delinquency Notice box that informed consumers 

they were late on their mortgage payments, that failure to bring their loan current could 

result in fees or the loss of their homes, and the precise number of days that their account 

was delinquent. The Delinquency Notice box also included a recent history of their 

account that showed whether payments for recent months had been made on time. 

 The Payment Option statement showed a breakdown for three payment options, labeled 

“full,” “interest-only,” and “minimum.” Along with the breakdown of each payment, it 

provided a short description of the impact making that payment would have on the 

principal balance.

For all participants, the delinquency statement was tested first, followed by the payment option 

statement.13

Key Interview Findings (Delinquency Statement)

Participants’ Experience with Periodic Statements

 At the beginning of each interview, participants were asked whether they received 

statements for their own mortgage loan, and the extent to which they reviewed them. All 

but one of the interview participants said they received monthly mortgage statements 

either through the mail, electronically, or both. The remaining participant was not sure if 

she received periodic statements. Most participants said they did not review their 

statements closely. However, a few said they did skim them for specific information, 

such as the interest rate, payment amount, payment due date, and remaining loan balance. 

 

13 One additional difference between the notices was that the payment option notice included a reference in the 

Important Messages box to information on the back about mortgage counseling or assistance, while the delinquency 

notice did not include this reference. 
13

Understanding of Current Payment Due

 All participants correctly identified when their current payment was due, and the amount 

due. All understood that the amount due included the regular mortgage payment, a late 

fee, and a property inspection fee. 

 On Day 1 of testing, participants were asked what the term “escrow” meant. Only two of 

six participants understood that “escrow” referred to a separate account that the mortgage 

company uses to pay taxes and insurance. Two participants said they were confused by 

the use of the term because in their minds “escrow” referred to an account set up to hold 

funds until a homebuyer had closed on his or her house. One of these two said that he 

was more familiar with an “impound account” to pay taxes and insurance. 

 Because of concerns about the word “escrow” being used differently in California, the 

statements tested on Day 2 used the word “impound” instead. However, only two of the 

five participants on Day 2 had heard of an “impound account.”

Understanding of Overdue Amount

 All participants understood from the statement that they were currently behind on their 

payments. Most participants said they knew this based on information provided in the 

Delinquency Notice box. Several knew that they were behind based on information in the 

Transaction Activity box (i.e., the fact that they had made only a partial payment) and the 

Explanation of Amount Due box (i.e., the fact that they were being asked to make an 

overdue payment).

 The Delinquency Notice box stated that the consumer was “49 days delinquent” on his or 

her loan. However, when asked how long overdue the mortgage company considered 

them to be, only about half of the participants referenced this text. Other participants said 

that they were one, two, or three months behind, based on other information on the 

statement. 

 All participants knew that if they did not bring their account up-to-date, the mortgage 

company would have the right to take their home.

Understanding of Past Payments

 All but one of the participants understood from the statement that the mortgage company

had received their payment for the previous month of $1,000. 

 When asked what the mortgage company did with their partial payment, about half of the 

participants understood from the statement that these funds had not been applied to their 

mortgage loan (similar to the findings from the second round of testing). Of this half, 

most saw the text in the Important Messages box indicating that these funds were being 
14

held in a separate suspense account; others knew that the payment had not been applied 

but did not know what had been done with it.14

o The other half of participants mistakenly thought that this payment had been 

applied. For example, one participant thought that because there was an amount 

for principal listed in the Paid Year to Date column of the Past Payments

Breakdown box, this meant that her partial payment had been applied to the 

principal. 

 After being directed to read the text about partial payments in the Important Messages 

box, all participants understood that they would have to make additional payments in 

order to have their partial payment applied to their loan account. In some cases 

participants did not fully understand how much they would have to pay to have these 

funds applied. For example, one participant mistakenly thought that she would have to 

bring her account fully up-to-date before her partial payments would be applied.

Information on Mortgage Counseling and Assistance

 Eight participants were asked what they would do if they were having trouble paying 

their mortgage. All eight said that the first thing they would do would be to call the 

mortgage company to inform them of the problem and ask for help.

 Ten participants were asked if the statement provided any information about other 

organizations they could contact for assistance. Seven of the 10 participants saw the 

contact information for mortgage counseling and assistance agencies that was on the back 

of the statement; the remaining three participants did not notice this information.15 These 

findings were comparable to the previous rounds of testing.

Requests for Additional Information

 When asked whether additional information should be included in the statement, three 

participants said that the statement should include information about what to do if faced 

with difficulty making payments (e.g., who to call, options for how to “get back on 

track,” and/or a message from the mortgage company saying it would work with the 

consumer to find a solution). 

 

14 On both days of testing, references to partial payments in the Transaction Activity and Past Payments Breakdown 

boxes had an asterisk. On the second day, an asterisk was also added to the text about partial payments in the 

Important Messages box, to link that information to the other references. There was no evidence from this round that 

adding this asterisk improved comprehension—in fact, fewer participants on the second day appeared to notice the 

text in the Important Messages box. 

15 As noted earlier, unlike statements used in the previous two rounds, this statement did not include any references 

on the front directing consumer to this information.
15

Key Interview Findings (Payment Option Statement)

Previous Experience with Payment Option Loans

 One of the 11 participants had a payment option mortgage; he indicated that he makes the 

full payment about half of the time. Only one of the other 10 participants had ever heard 

of payment option or “pick-a-pay” loans.

Understanding of General Account Information

 After reviewing this statement, all participants correctly identified the amount of money 

they still owed on the loan.

Understanding of Current Payment Due

 All participants understood from the statement when their current payment was due. All 

were also able to identify the three different payment amounts they could make. 

 All participants understood that if they made the full payment (Option 1), their loan 

balance would decrease. Seven were able to correctly identify the amount by which their 

balance would decrease (i.e., $386.46, the amount of the full payment that would be 

applied to principal). 

 All participants understood that if they made the interest-only payment (Option 2), their 

loan balance would remain the same. All but one of the participants also understood that 

if they made the minimum payment (Option 3) the balance of their loan would increase, 

meaning that they would owe more money to the bank. 

Subsequent Design Decisions

No significant changes in content, formatting, or tone were made to the notice based on findings 

from the interviews in this round. CFPB staff made the decision to require the reference on the 

front of the statement to contact information for mortgage counselors only in situations where the 

consumer was delinquent, and might have more need for these services. In other situations this 

reference would not be included on the front of the statement. 
16

Chapter V: Testing of Adjustable Rate Mortgage (ARM)

Rate Adjustment Notices

This chapter of the report addresses findings and implications from the three rounds of testing 

related to ARM rate adjustment notices. The notices used in each round of testing are included in 

Appendix C.

Round 1: Towson, Maryland (February 1-2, 2012)

The ARM rate adjustment notice used in the first round of interviews tested participant 

understanding of a scenario in which the consumer’s interest rate was estimated to increase from 

4.25% to 5.75%. This information, along with the current and estimated new monthly payments,

was located prominently near the top of the notice in a table. Other statutorily required elements 

were included in the notice as well, with short subject headings in bold.

Key Interview Findings

Change in Rate and Payment

 After reviewing the notice, all participants understood that their interest rate and payment 

were going to increase and when the change would take place (i.e., July 20).

 When asked what their reaction would be if they received this notice in the mail, most 

participants said they would be concerned about the sharp increase in their monthly 

payment. Several said they would call the mortgage company to see if there was any way 

to keep their payment from changing. 

 All participants understood that the phrase “adjustable rate mortgage” meant a mortgage 

on which the interest rate could change over time.

 All participants knew that their first new payment would be due on August 1, 2012; they 

also correctly identified the estimated new rate and payment provided in the notice.

Calculation of New Interest Rate

 All participants understood that the new rate and payment shown in the notice were 

estimated and not definite. However, they had several misconceptions about why the 

notice provided only estimated figures. For example, one participant thought the rate was 

estimated because it would still be possible to negotiate the rate with the mortgage 

company. Another participant incorrectly thought the rate was estimated because it could 

change between July 20 (when the new rate would be calculated) and August 1 (when the 

new payment was due).

 All participants understood that the rate could continue to change after the initial 

adjustment on July 20. All but three of the participants also understood that their rate 

could change annually; others did not see this information on the notice. 
17

 When asked how their new rate would be calculated, most of the participants referred to

the Interest Rate section of the notice, which stated that “The interest rate on your 

adjustable rate mortgage (ARM) will change based on an index, plus a margin of 2.25%. 

Your index is the 1-year LIBOR index, which is published daily in the Wall Street 

Journal.” However, several participants did not understand this text. Only three 

participants generally understood what “margin” and “index” meant, and that these would 

be used to calculate the interest rate. Other participants either said they did not know 

what these terms meant, or held a variety of misconceptions. For example, two 

participants incorrectly believed that the “margin” was the amount by which the new rate 

could be different from the estimated rate. Another participant thought “margin” referred 

to the amount the rate would increase when it adjusted. 

 Several participants thought that the mortgage company could determine on its own what 

the new interest rate would be, and did not understand that the adjustment would be based 

on the terms of their loan contract.

Mortgage Counseling and Assistance

 When asked what they would do if they thought they would not be able to make their 

mortgage payment, most participants said that they would first contact their mortgage 

company. Several said they would also contact HUD and/or the other agencies listed on 

the notice.

 Two participants mistakenly thought that the phone number provided on the notice was 

for a mortgage counseling agency, when in fact it was the phone number for the mortgage 

company. 

 When asked where they could find contact information for mortgage counseling or 

assistance, all but two of the participants pointed out information on the back of the 

notice about federal and state government agencies and federally- or state-approved 

mortgage counseling providers. The other two participants saw the reference to mortgage 

counseling and assistance on the front of the notice, but did not turn the notice over until 

prompted to do so by the interviewer.

Possible Alternatives for Consumers

 When asked what alternatives existed if they were concerned they would not be able to 

make their new payment, all participants located the list of alternatives provided on the 

notice.

 Most participants understood the phrase “renegotiate your loan” to mean working with 

the mortgage company to change the terms of the mortgage. 

 All but two participants understood that “forbearance” meant working with the mortgage 

company to extend the amount of time they would have to make a payment. However, 

participants were unsure how much additional time they would gain through forbearance.

Several participants thought it would provide them only a few extra days to make their 

payment. One participant speculated that “forbearance” might also mean that there would 

be an opportunity to make up a payment later or have it forgiven entirely.
18

 Only about half of the participants understood what was meant by “transfer ownership of 

the property directly to us in order to avoid foreclosure”. One participant incorrectly 

believed this option was the same as foreclosure; another said it was similar to 

foreclosure except that the consumer’s credit would not be affected if he or she 

transferred ownership directly to the mortgage company. One participant mistakenly 

thought that this option was similar to a reverse mortgage, in that the consumer would 

then rent the home from the mortgage company. Several participants seemed unsure as to 

why a consumer would elect to transfer ownership in this way.

Requests for Additional Information

 When asked whether any additional information should be included in the notice, most 

participants suggested providing more explanation about why the interest rate was 

increasing and how the new rate would be calculated. Other suggestions included 

explaining the consumer’s alternatives in more detail and including a breakdown of how 

the new payment would be applied to principal, interest, and escrow.

Subsequent Design Decisions

Following the first round of testing, a number of revisions were made to the notice. The 

following section describes revisions that were most significant in terms of content, formatting, 

or tone.

 Because a few participants in the first round suggested that the notice clarify why the rate 

and payment were changing, the following text was added to the first paragraph of the 

notice: “Under the terms of your Adjustable Rate Mortgage (ARM), you had a three-year 

period during which your interest rate stayed the same. That period ends on August 20, 

2012, so on that date your interest rate may change.”

 Because most participants expressed some confusion about how their new interest rate 

would be calculated, the Interest Rate section was rewritten to explain more clearly how 

an index and margin would be used to determine the new rate.

 Because a number of participants in the first round misunderstood why the notice 

provided only an estimate of their new rate and payment, the text in the New Monthly 

Payment section was revised to clarify that: “...if the LIBOR index has changed on 

August 20, your new interest rate and payment may be different from what is shown 

above.”

 Because three participants did not understand that their interest rate would adjust 

annually for the remainder of their loan term, this information was added to the first 

paragraph. For reasons of space, the sentence “For more detailed information, please 

refer to your loan agreement(s)” was deleted.

 Because at least two participants misunderstood whom they would reach at the phone 

number on the front of the form, in the revised forms the phrase “Contact us” was 

changed to “Contact Springside Mortgage.”
19

 Because of concerns that participants might misunderstand the reference to renegotiating 

loan terms, the word “renegotiate” was changed to “modify.”

 In order to clarify the sender and recipient of the notice, both the mortgage company’s 

and the consumer’s names and addresses were added to the top of the document used in 

the second round.

Round 2: Memphis, Tennessee (February 29 – March 1, 2012)

The notice tested in Round 2 was revised based on findings from the first round of testing (as

described above). The scenario presented in the notice in Round 2 was the same as in Round 1.

Key Interview Findings

Change in Rate and Payment

 After reviewing the notice, all participants understood that their interest rate and payment 

were going to increase, and when the change would take place (i.e., August 20).

 Based on the information provided in the notice, all participants understood that under the 

terms of their mortgage, the interest rate was fixed for the first three years and could 

change after that time. 

 All participants understood that their first new payment would be due September 1, 2012, 

and all correctly identified the estimated new rate and payment that were provided in the 

notice.

Calculation of New Interest Rate

 All but three participants understood that the new rate and payment shown in the notice 

were estimated and not definite. Three mistakenly thought that the exact rate and 

payment shown would definitely apply after the rate changed on August 20.

 All participants understood that after the rate changed on August 20, it could continue to 

change annually. This was an improvement compared to the first round, which did not 

include a sentence stating this fact in the first paragraph.

 When asked if the mortgage company determined on its own what their new rate would 

be, six participants understood that it did not have control over the rate. (This was similar 

to the first round of testing.) The remaining four participants believed the mortgage 

company had some direct role in determining the rate. However, after being instructed to 

reread the section that explained the calculation of the new interest rate, two of these 

participants came to understand that the mortgage company did not have control over the 

new rate. 

 Of the six participants who understood that the mortgage company did not control the 

rate, three understood that their rate would be determined using an index and margin. The 

other three participants were able to identify the section of the notice that explained how 

the rate was determined, but could not explain what it meant.
20

 The participants were also asked how they thought the index rate (i.e., the 1-year LIBOR) 

was determined.16 Half of the participants said they did not know. Others gave a variety 

of responses, including: that the index was an average of interest rates on mortgages 

nationwide, that it was “like the Prime Rate that everyone goes by,” that it was “like the 

stock market,” or that it had “something to do with the economy.”

Mortgage Counseling and Assistance

 When asked what they would do if they thought they would not be able to make their 

mortgage payment, most participants said that they would first contact the mortgage 

company. A few said they would also contact HUD and/or the other agencies listed on 

the notice.

 When asked if the notice included contact information for organizations offering 

mortgage counseling or assistance, all participants pointed out information on the back of 

the notice about federal and state government agencies and federally- or state-approved 

mortgage counseling providers. 

Possible Alternatives for Consumers

 When asked what they could do if they were concerned they would not be able to make 

their new payment, all participants located the list of alternatives provided on the notice.

 Most participants understood the phrase “modify your loan terms with us” to mean 

working with the mortgage company to change the terms of the mortgage (e.g., lower the 

interest rate, change the rate from variable to fixed, or increase the length of the loan 

term). 

 Participants generally understood “forbearance” to mean that they would have more time 

to make their payments or that they would be able to spread their payments over a longer 

period of time. Two participants said they would be concerned that this alternative would 

ultimately be costly, either because of “a big balloon payment” or because they would be 

charged many fees for partial payments. 

 About half of the participants understood what the last option on the list (i.e., to transfer 

ownership of the property directly to the mortgage company) meant. One participant 

incorrectly believed that this alternative was similar to a short sale, while another 

incorrectly thought this option meant they would transfer ownership to someone other 

than the mortgage company. Two participants were unsure how this option was different 

from foreclosure. These findings were similar to those from the first round of testing.

Requests for Additional Information

 When asked whether any additional information should be included in the notice, two 

participants suggested providing a better explanation of the possible alternatives. Other 

suggestions included providing a better explanation of how the rate is determined, 

 

16 This information was not included on the notice they were shown.
21

explaining more clearly why the rate was going to increase, and indicating whether the 

counseling and assistance organizations would charge consumers for their services.

Subsequent Design Decisions

No significant changes in content, formatting, or tone were made to the notice based on findings 

from the interviews this round. 

Round 3: Los Angeles, California (April 3-4, 2012)

As noted above, no significant changes were made to the ARM notice based on findings from 

Round 2. However, the notice was revised to reflect a different loan scenario. For the third 

round, the ARM rate adjustment notice indicated that the payments that the consumer had 

already made were interest-only, but that the new payments would be amortizing. This was noted 

in three places:

 In the first paragraph, the notice stated: “as of September 29, 2012 your mortgage 

payment will include principal as well as interest.”

 In the New Interest Rate and Monthly Payment section, the notice stated: “Your new 

payment will cover all of your interest and some of your loan’s principal, and therefore 

will reduce your loan balance.”

 Unlike in earlier versions of the ARM rate adjustment notice, the table showing the 

current and estimated new interest rates and payments broke the payments into portions 

for principal, interest, and escrow. The table showed that the portion of the current 

payment devoted to principal was “none,” to reflect the fact that this payment was 

interest-only. In the column for the estimated new payment, the principal and interest 

rows were combined into a single figure.17

The notice was also changed to reflect an “interest rate carryover” scenario. In this scenario the 

2.00% limit on annual rate increases prevented an increase of an additional 1.00%. This was 

disclosed in the Rate Limits section, which stated that if not for the rate limit “your estimated 

rate on September 29 would be 1.00% higher. This additional amount may be applied to your 

interest rate when it adjusts again next year.”

Key Interview Findings

Change in Rate and Payment

 After reviewing the notice, all participants understood that their interest rate and payment 

were going to increase and when the changes would take place (i.e., September 29). 

Compared to previous rounds, participants in Round 3 took a slightly longer time to 

answer these questions, perhaps because the ARM notice for this round contained more 

information than those in previous rounds.

 

17 The principal and interest portions for the estimated new payment were combined because once amortization 

began, the allocation of funds to principal and interest would change monthly.
22

 About half of the participants understood that their payments were changing from 

interest-only to amortizing (i.e., that their new payments would include principal). Of the 

other half, all but one understood this after they were directed by the interviewer to reread 

the relevant text.18

 Several participants were confused about why the table in the notice broke out principal 

and interest for the current payment, but combined the two into a single cell for the new 

payment. In some cases this created confusion. For example, at least one participant 

assumed that because the table said that no principal was included in the current 

payments and did not list a principal amount for the new payment, this meant that the 

new payment was also interest-only.

 One participant incorrectly thought that because the notice stated that “Your new payment 

will cover all of your interest and some of your loan's principal,” this meant that a 

consumer would have to make extra payments over time to fully pay down his or her loan 

balance (underlining added for emphasis; “some” was not underlined in the notice).

Calculation of New Interest Rate

 All but one of the participants understood that after September 29, the rate could continue 

to change annually. The remaining participant did not think that the rate could change 

again after September 29.

 When asked how the new interest rate would be determined, about half of the participants 

said they did not know, or gave incorrect answers (e.g., that their rate would increase by 

two percent each year). The other half referred to the LIBOR index and the margin. 

However, as in previous rounds, it was not clear that these participants truly understood 

how the index and margin would be used to calculate the new interest rate. 

Interest Rate Carryover

 The notice being tested showed an estimated interest rate increase of 2.00%. It also stated 

that if not for the annual 2.00% limit on rate increases, the interest rate on the loan would 

have increased by 1.00% more, and that this additional amount could be applied the 

following year. To test their understanding of “interest rate carryover,” participants were 

asked what their rate would be the following year if their loan terms and the LIBOR 

index remained the same. Only two of the 11 participants understood that under this 

scenario, their interest rate would increase the following year by 1.00%. 

 The other nine participants were specifically directed by the interviewer to read two 

sentences in the notice: one that read “If not for this rate limit, your estimated rate on 

September 29 would be 1.00% higher,” and another that read, “This additional amount 

may be applied to your interest rate when it adjusts again next year.” Even after re-

 

18 Two different approaches were used when asking about this portion of the notice. The final four participants were 

told before seeing the form that their current payments were interest-only, since real-world consumers who received 

this notice might know this already. The first seven participants were not told in advance that any payments were 

interest-only. This difference in approach did not significantly affect the results; about half of both groups realized 

on their own that their payments were changing from interest-only to amortizing. 
23

reading these sentences, these participants were confused and did not understand the 

meaning. For several participants, these sentences seemed only to cause confusion about 

what was going to happen to their interest rate in the current year. For example, one 

participant thought these sentences meant that her interest rate would increase by 3.00% 

on September 29, and another thought his rate would increase by 1.00%.

Subsequent Design Decisions

Based on the findings from the third round of testing, the following changes were made to the 

notice.

 Participants were consistently confused by the fact that the table on the notice broke out 

principal and interest for the current interest-only payment, but not for the estimated new 

payment. Therefore, the table was revised so that principal and interest would be listed 

for both the current and new payments in the proposed model forms.

19

 Because participants had a great deal of difficulty understanding the impact of rate limits 

on the change in their interest rate, the portion of the notice explaining interest rate 

carryover was revised for clarity and simplification following the third round.

 The date of the upcoming adjustment and the frequency of ensuing adjustments were

removed from the Interest Rate section, because they were redundant with information 

already provided in the first paragraph.

 

19 A note was also added to the notice that indicated the breakdown of principal and interest for the new payment 

was only accurate for the first payment that was due.
24

Chapter VI: Testing of Force-Placed Insurance Notices

This chapter addresses findings and implications from the three rounds of testing related to forceplaced insurance notices. The statements used in each round of testing are included in Appendix 

C.

Round 1: Towson, Maryland (February 1-2, 2012)

The notice used in the first round of testing was a model form of the first notice that would be 

sent by a mortgage company (i.e., no fewer than 45 days before it could begin charging the 

consumer for force-placed insurance).

Key Interview Findings

Understanding of the Mortgage Company’s Right to Obtain Force-Placed Insurance

 All participants understood from the notice that the mortgage company did not have 

proof of insurance on their property, and that their policy may have been canceled or 

expired.

 All of the participants understood that if they did nothing, the mortgage company could 

purchase insurance on their behalf. 

 All participants understood that if they did not want the mortgage company to purchase 

insurance, they needed provide proof that they had their own insurance coverage.

Potential Disadvantages of Force-Placed Insurance

 All participants understood from the notice that insurance purchased by the mortgage 

company may provide less coverage than what they could purchase independently. All 

but one of the participants also understood that the insurance purchased by the mortgage 

company would probably be more expensive than what they could purchase on their own.

 When asked if it would be good or bad if the mortgage company purchased insurance on 

their behalf, most participants understood that it would be bad and said they would prefer 

to purchase their own coverage. However, three participants thought it would be good for 

them because it was better to have some insurance coverage than none at all.

Nevertheless, these three participants also said they would try to obtain their own 

insurance because it would be better coverage than what the mortgage company would 

purchase on their behalf.

Participants’ Reactions to the Force-Placed Insurance Notice

 All participants said that if they received this notice, they would contact their insurance 

company to find out why their policy had lapsed. When asked what they would do if they 

did not have insurance coverage, they said they would obtain coverage and send proof of 

insurance to the mortgage company.
25

 When asked whether it would make a difference how quickly they responded to the 

information in the notice, all participants said they would act immediately, both because 

they would not want to pay for expensive insurance purchased by the mortgage company

and because they wanted to be sure they had insurance coverage on their property.

Participants’ Understanding of the Circumstances under Which They Would Be Charged

 While all participants indicated that they would act immediately if they received this 

notice, several did not understand exactly when the mortgage company could purchase 

insurance for them. In particular, at least three participants assumed that they would have 

a grace period after they received the letter during which the mortgage company would 

give them time to respond before purchasing insurance on their behalf. 

Requests for Additional Information

 When asked whether any additional information should be included in the notice, six 

participants suggested including a date or time frame for how long they had to resolve the 

issue before incurring charges for the force-placed insurance. Two participants suggested 

including contact information for insurance companies through which consumers could 

purchase their own insurance.

Subsequent Design Decisions

Based on findings from the first round of testing, several revisions were made to the notice. The 

following section describes revisions that were most significant in terms of content, formatting, 

or tone.

 As noted above, several participants were confused about when the mortgage company

would purchase insurance on the consumer’s behalf. To alleviate this confusion, two 

different versions of the force-placed insurance notice were created for the second round 

of testing. The first version indicated that the mortgage company had already purchased

insurance on the consumer’s behalf, while the second version indicated that the mortgage 

company “may purchase” insurance. The intent was that mortgage companies would 

provide each consumer with the version that applied to his or her specific situation. 

 The statement “You should immediately purchase or renew your own insurance policy,”

was added to the notices tested in the second round of interviews because it was more 

direct and might compel consumers to take action more quickly. 

 For the second round of testing, the following paragraph was removed from the form: 

“The total cost of the insurance we buy will include the premium and any applicable 

taxes or fees. If you have an escrow account, this cost may be charged to your escrow 

account. If you do not have an escrow account, we may establish an escrow account in 

accordance with the terms of your mortgage.” This information was removed to reduce 

the amount of text in the notice and because it was deemed less important to consumers 

than other information.

 The revised versions of the notice explicitly stated that if force-placed insurance was 

purchased, the consumer would have to pay the mortgage company for any period during 
26

which he or she did not have his or her own insurance. This text was intended to clarify 

the precise situation under which consumers would incur a charge for force-placed 

insurance.

Round 2: Memphis, Tennessee (February 29 – March 1, 2012)

Two versions of the force-placed insurance notice were tested this round. One version (Version 

WP) explained that the consumer’s insurance policy had lapsed and that the mortgage company

may purchase insurance on the consumer’s behalf at some point in the future. The other version 

(Version AP) indicated said that the mortgage company had already purchased insurance on the 

consumer’s behalf. 

Due to time constraints, participants reviewed only one of the two versions of the notice: seven 

participants were shown Version WP, and three were shown Version AP.

Key Interview Findings

Understanding of Mortgage Company’s Right to Obtain Force-Placed Insurance

 All participants understood from the notice that the mortgage company did not have 

proof of insurance on their property, and that their insurance policy had lapsed.

 All seven participants shown Version WP understood that if they did nothing, the 

mortgage company could purchase insurance on their behalf. The three participants who 

were shown Version AP understood that the mortgage company had already purchased 

insurance on their behalf.

 All participants understood that, if they did not want to pay for insurance purchased by 

the mortgage company, they needed to provide proof that they had their own insurance 

coverage.

Potential Disadvantages of Force-Placed Insurance

 All participants understood from the notice that insurance purchased by the mortgage 

company would probably be more expensive than what they purchased on their own. All 

but two of the participants also understood that the insurance purchased by the mortgage 

company may provide less coverage than what they could purchase independently.

 One participant noted that while she knew a policy she purchased herself would be less 

expensive than one purchased by the mortgage company, she would prefer for the 

mortgage company to purchase insurance for her if she was facing an annual insurance 

payment that she could not afford. She said in that situation it might be preferable to pay 

for insurance through her escrow account because that would allow her to make small 

payments over a longer period of time (rather than one large payment). 

Participants’ Reactions to the Force-Placed Insurance Notice

 All participants said that if they received this notice, they would immediately contact 

their insurance company to find out why their policy had lapsed. When asked what they 
27

would do if they found out they did not have insurance coverage, they said they would 

obtain coverage and send proof of insurance to the mortgage company. 

 All participants said they would respond immediately to this notice, both because they 

would not want to pay for insurance purchased by the mortgage company and because 

they wanted to be sure they had insurance coverage on their property.

Participants’ Understanding of the Circumstances under Which They Would Be Charged

 All participants understood from the letter that the mortgage company could charge them 

for the force-placed insurance for any time during which they did not have their own

coverage. One participant expressed doubt over whether the mortgage company would 

actually charge her if the lapse lasted less than one month, but these findings were still an 

improvement compared to the first round of testing.

 All participants understood that they would not be charged for any overlap of their own 

coverage and force-placed coverage purchased by the mortgage company.

Requests for Additional Information

 When asked whether any additional information should be included in the notice, only 

two participants had any suggestions. One suggested including the date after which the 

mortgage company would purchase force-placed insurance. The other participant wanted 

more information about the level of coverage force-placed insurance would provide.

Subsequent Design Decisions

Because results from the second round of testing showed that participants’ comprehension of the 

statement was generally high, only a few changes were made to the notice for the following 

round.

 Because of concern that consumers might not understand that they could obtain their own 

insurance even after force-placed insurance had been purchased by the mortgage 

company, text was added to the notice stating that, “if you give us proof of insurance at 

any time, we will not charge you for any period during which you can prove you had your 

own insurance” (new text underlined). 

 In this round, the first paragraph of Version WP stated that the mortgage company “may 

purchase insurance on your behalf.” In the notices for the third round, the word 

“insurance” in this sentence was replaced with the phrase “force-placed insurance,” to

test whether the inclusion of this term might spur consumers into action more quickly.

Round 3: Los Angeles, California (April 3-4, 2012)

In the third round of interviews, two versions of the force-placed insurance notice were tested. 

The first was a revised Version WP notice from the previous round. Unlike in the previous 

rounds, this notice was intended to model the second communication that a consumer would 

receive before he or she could be charged for force-placed insurance. Therefore, it noted in two 

places that it was the “second and final notice” the consumer would receive.
28

The other version of the notice (Version RN) reflected a scenario in which the mortgage 

company had purchased force-placed insurance the previous year, and was now informing the 

consumer that it would renew its force-placed policy if proof of coverage was not provided. 

Version RN was otherwise identical to Version AP from the second round of testing.

Due to time constraints, participants reviewed only one of the two versions of the force-placed 

insurance notice: three were shown Version WP and eight were shown Version RN.

Key Interview Findings

Understanding of the Mortgage Company’s Right to Obtain and Renew Force-Placed 

Insurance

 All participants understood from the notices that the mortgage company did not have 

proof of insurance on their property.

o All three participants who were shown Version WP understood that the mortgage 

company had sent them a previous notice with the same information.

o All but one of the eight participants who were shown Version RN understood that for 

the past year their home had been covered by insurance purchased on their behalf by 

the mortgage company.

 Five of the eight participants who were shown Version RN understood that for the past 

year they had been paying the premiums for the force-placed insurance. The remaining 

three participants incorrectly believed that the mortgage company had been paying for the 

coverage. However, based on their answers to subsequent questions, these three 

participants seemed to understand that they would ultimately be responsible for this cost. 

 All participants understood that if they did nothing, the mortgage company could 

purchase insurance coverage on their behalf (or renew it, in the case of Version RN).

 All participants understood that if they did not want the mortgage company to purchase 

or renew insurance coverage on their behalf, they needed to provide the mortgage 

company with proof of insurance coverage.

Potential Disadvantages of Force-Placed Insurance

 All participants understood that insurance they purchased on their own would probably 

be less expensive and offer better coverage than what the mortgage company purchased.

Participants’ Reactions to the Force-Placed Insurance Notice

 All participants indicated that if they received the letter, they would act to get their own 

insurance coverage and that they would do so quickly in order to avoid being charged for 

any period during which they did not have coverage. They also understood that if they 

provided proof of insurance coverage, they would not be charged by the mortgage 

company for insurance coverage purchased on their behalf.
29

Participants’ Understanding of the Circumstances under Which They Would Be Charged

 All three participants who were shown Version WP understood that even if force-placed 

insurance was already in place on their property for a period of time (e.g., four months), 

they could still purchase their own insurance and it would be beneficial for them to do so.

 Participants who were shown Version WP were asked if they could be charged for a onemonth period during which they had force-placed insurance and no other coverage. Two 

of the three participants understood that they could be charged for that time. The 

remaining participant incorrectly believed that if she provided proof of insurance at any 

time, she would not have to pay for any force-placed insurance premiums from the 

previous months.

 Participants who were shown Version RN were asked if they could still get their own 

insurance policy if they waited until after the mortgage company had already renewed the 

force-placed coverage. All eight participants understood that they could purchase their 

own coverage at any time.

 Participants who were shown Version RN were told to imagine a scenario in which they 

waited until several months after the mortgage company had renewed their force-placed 

policy before purchasing their own insurance. All of these participants understood that 

they could still purchase their own insurance, and that if they provided proof of coverage 

to the mortgage company it would cancel its force-placed policy and would stop charging 

them for it.

Subsequent Design Decisions

Because results showed that participants’ comprehension of the statement was high, only a few 

changes were made to the notice following the third round of testing.

 As noted above, the term “force-placed insurance” was included in the notices used in 

this round to test whether it might spur consumers to take action more quickly. Because 

most participants in the third round of testing did not seem to notice this reference, the 

term “force-placed” was removed from the notice.

 The notices used in testing indicated that consumers could contact their mortgage 

company by phone, e-mail, mail, or fax. Because testing showed that almost all 

consumers preferred to contact their mortgage company by phone, other contact 

information was removed from the notice. 
30

Chapter VII: Conclusion

This report summarizes work conducted by ICF from November 2011 through July 2012 in 

support of CFPB’s efforts to develop rules and model forms related to mortgage servicing. It 

describes the forms that were initially drafted by ICF in collaboration with CFPB and how 

findings from cognitive testing led to revisions to those forms. 

The empirical research findings described in this report will be an important source of data for 

CFPB as it prepares its proposed rules and finalizes its model forms. This direct input from 

consumers will help ensure that new disclosure forms are easy for consumers to understand and 

use in making decisions about their mortgages.
APPENDIX A:

SAMPLE RECRUITMENT SCREENER
Participant Screener for Mortgage Servicing Interviews

Los Angeles, CA

April 3rd-4th, 2012

General Information and Recruiting Specifications

 Ten In-Depth Interviews

o Interviews will be held during slots scheduled for [date and time]

o Length of interview: 60 minutes

o Twelve interview slots have been scheduled to ensure at least 10 interviews occur.

 RECRUITERS: Ask all interview participants to bring their reading glasses, if necessary,

because they will be asked to read several sample mortgage documents as part of the interview.

Recruiting Script

Hello, my name is [first and last name]. May I speak to [candidate]?

If someone other than Respondent asks why you are calling, say: I’m calling regarding an important

US government study about mortgage loans and disclosures.

Say to Respondent: I am calling from Atkins Research Group for ICF International. ICF International

is working with a US government agency, the Consumer Financial Protection Bureau to conduct a

study to learn about consumers’ opinions regarding the effectiveness and helpfulness of information

they receive about their mortgage from their mortgage company. These questions have been approved

by the US government Office of Management and Budget and have been assigned OMB Control

Number 3170-0018.

We would like to invite you to participate in an interview being held during the week of April 2nd,

2012. In this interview, we will ask you to review some sample mortgage disclosure forms, perform a

series of tasks with respect to those forms, and give your opinion about how helpful those forms are.

These interviews are being held so that the government can learn more about how borrowers

understand information regarding their mortgages and can receive information that assists borrowers in

making appropriate decisions with respect to their mortgages. There will be no forms or information

relating to your own mortgage (or anyone else’s); the forms are generic. It is important that you know

that we will be audio- and videotaping your interview so that we can be sure to collect what you say

accurately. However, your name will not appear in any reports. Also, just so you are not surprised, we

want to emphasize that this will be a one-on-one interview, not a focus group.

We will pay you $65 at the end of the interview for your participation. Do you have a few minutes to

answer some pre-qualifying questions? (If not, What would be a convenient time to call back?)
If necessary: We are not selling anything, we are only looking to find people to participate in a study

that the CFPB is conducting. Everything you say will be kept private except where required by law.

Further, your personal information will not be given to CFPB.

Q1: Do you currently own a home that you live in?

 Yes Æ Continue

 No ÆThank respondent politely and end call.

Q2: Do you currently have a mortgage on this property?

 Yes Æ Continue

 NoÆThank respondent politely and end call.

Q3: Are you the person in your household who is responsible for making decisions related to this

mortgage?

 Yes ÆContinue

 Yes, in cooperation with my [spouse, partner, etc.] ÆContinue

 No ÆThank respondent politely and end call.

Q4: Do you work or have you ever worked for a bank or other financial institution, in the real estate

industry, or the mortgage industry?

 Yes ÆThank respondent politely and end call.

 No ÆContinue

Q5: Have you participated in any other interviews or focus groups in the past 6 months?

 Yes ÆThank respondent politely and end call.

 No ÆContinue

Q6: ARTICULATION QUESTION: In a few sentences, could you describe the process through

which you found your current mortgage lender?

 If respondent gives a thoughtful, articulate answer ÆRespondent qualifies

 If respondent does not give a thoughtful, articulate answer ÆThank respondent politely and

end call.

Screening Criteria Recruiting Quotas

Q7: In the past two years, have you ever had difficulty

coming up with the money for a mortgage payment?

a) Yes

b) No

x At least 7 recruits should answer

“Yes”
Screening Criteria Recruiting Quotas

Q8: Some mortgages have an adjustable interest rate—that

is, an interest rate that can change over time. Does

your mortgage have a rate that is adjustable or will

become adjustable in the future?

a) YesÎSkip to Q9

b) No

c) I don’t know

Q8b) Ask only if Q8=(b) or (c): Have you ever had a

mortgage with an adjustable interest rate?

a) Yes

b) No

c) I don’t know

x At least 7 recruits should answer (a)

to either Q8 or Q8b

x At least 4 recruits should answer

either (b) or (c) for both Q8 and Q8b

Q9: What is your age?

a) 18 to 35

b) 36 to 50

c) 51 or above

x At least 2 recruits should answer (a)

x At least 4 recruits should answer (b)

x At least 4 recruits should answer (c)

Q10: Which of the following categories best reflects your

race or ethnicity? You can choose more than one

category.

a) White

b) Black or African-American

c) Hispanic or Latino

d) Asian

e) Native American or Pacific Islander

x At least 5 recruits should respond

(b), (c), (d), or (e) (Respondents who

choose more than one category

should be counted as (b), (c), (d), or

(e)

Q11: What is the highest level that you reached in school?

a) High school degree or less

b) Some college work

c) College graduate

x At least 3 recruits should respond (a)

x At least 4 recruits should respond (b)

Q12: Gender x At least 5 recruits of each gender

If participant qualifies: Based on your responses, we would like to invite you to participate in an

interview, which will be held at [address of interview facility]. The interview will last about 60

minutes. We will be showing you some sample documents for you to refer to, so if you use reading

glasses please be sure that you bring them. We will provide you with a $65 stipend for participating in

the interview.
APPENDIX B:

PARTICIPANT DEMOGRAPHIC

INFORMATION
Towson, MD

Feb. 1-2, 2012

(n=10)

Memphis, TN

Feb. 29-Mar. 1, 2012

(n=10)

Los Angeles, CA

Apr. 3-4, 2012

(n=11)

Total

(n=31)

Gender

Male 5 4 5 14 (45%)

Female 5 6 6 17 (55%)

Age

18-35 2 1 1 4 (13%)

36-50 3 4 6 13 (42%)

51 or older 5 5 4 14 (45%)

Highest Level of Education

High school degree or less 5 4 2 11 (35%)

Some college 4 4 4 12 (39%)

College graduate 1 2 5 8 (26%)

Race/Ethnicity

Black or African American 5 7 4 16 (52%)

White or Caucasian 5 3 3 11 (35%)

Hispanic or Latino 0 0 4 4 (13%)

Difficulty Making Mortgage Payments in Past 2 Years?

Yes 7 8 7 22 (71%)

No 3 2 4 9 (29%)

Experience with Adjustable Rate Mortgages (ARM)

Currently has an ARM 4 3 3 10 (32%)

Previously had an ARM 2 3 4 9 (29%)

Never had an ARM 4 4 4 12 (39%)
APPENDIX C:

MODEL FORMS USED IN TESTING
Round 1:

Towson, MD

February 1-2, 2012
Springside Mortgage Mortgage Statement

Statement Date: 3/20/2012

Adam and Mary Jones

4700 Oak Ridge Ln

Bethesda, MD 20814

Account Number 1234567

Payment Due Date 4/1/2012

Amount Due $1,829.71

If payment is received after 4/15/12, pay $1,989.71

Account Information Current Payment Due

Property Address 4700 Oak Ridge Ln Principal $386.46

Bethesda, MD 20814 Interest $1,048.07

Remaining Loan Balance $264,776.43 Escrow (for Taxes and Insurance) $235.18

Maturity Date September 2039 Regular Monthly Payment $1,669.71

Interest Rate (Until October 2012) 4.75% Total Fees Charged $160.00

Prepayment Penalty $35,000.00 Total Amount Due $1,829.71

Contact Us

By Phone: 1-800-555-1234

Online: www.springsidemortgage.com

See back for mailing addresses

Transaction Activity

Date Description Charges Payments

3/16/12 Late Fee (charged because payment was received after 3/15/2012) $160.00

3/17/12 Payment Received – Thank you $1,669.71

Past Payments Breakdown

Paid Last Month Paid Year to Date

Principal $384.93 $1,150.25

Interest $1,049.60 $3,153.34

Escrow (Taxes and Insurance) $235.18 $705.54

Fees $0.00 $0.00

Partial Payment (Unapplied) $0.00 $0.00

Total $1,669.71 $5,009.13

Important Messages

If You Are Experiencing Financial Difficulty: If you would like mortgage counseling or assistance, you can find a list of counselors in

your area on the U.S. Department of Housing and Urban Development's website at www.hud.gov. On the back of this page, we have

also provided contact information for three state- or federally-approved counseling programs in your area.

We are pleased to have you as a Springside Mortgage customer. We are known throughout the country for the quality of our service

and our dedication to providing financial security for our customers. We will do everything we can to make you feel at home, and to

ensure you receive the friendly, professional service you deserve.

Springside Mortgage

Springside Mortgage

8100 Market Ave

Bethesda, MD 20814

Amount Due

Due By 4/1/2012: $1,829.71

If received after 4/15/2012: $1,989.71

Please designate how you want us to apply any

additional funds.

Additional Principal $ .

Additional Escrow $ .

Other Charges (specify): $ .

Total Amount Enclosed $ .

1234567 34571892 342359127
Payment Options

Springside Mortgage provides you the following options for making

your mortgage loan payments.

x Mail: P.O. Box 11111, Baltimore, MD 21264

x Online*: www.springsidemortgage.com

x Pay-by-phone**: 1-800-123-4567

x Automatic Deduction: Enroll at www.springsidemortgage.com

x In Person: At any Springside Mortgage branch

*Select “My Mortgage Info” from the “Online Services Menu.”

** A fee may apply for this service.

Online Services

Springside Mortgage offers a variety of online services to help you

better manage your mortgage loans including:

x Payments

x Electronic Statements

x “Notify me” alerts for payments received or escrow

disbursements

You can also view your loan payment history, amortization schedule,

principal balance, interest rate and escrow account activity

Simply visit www.springsidemortgage.com and select “My Mortgage

Info” from the online services menu. For further assistance please

contact us at 1-800-678-4567.

Payment Information

x Additional Amount: Please designate how you want additional

funds to be applied; we will apply them as directed provided

your account is current. If your account is current,

undesignated funds will be applied per the terms of your

mortgage loan documents. Regardless of the account status,

principal prepayments will only be applied to your account if

your contract allows for prepayments.

x Please be prompt. Payments must reach Springside Mortgage

by the due date. Your payment is credited on the day it is

received at our payment center, not the day it is postmarked.

Payments made at a Springside Mortgage branch prior to the

change of the business day will be credited the same day.

Payments are not accepted at Springside Mortgage origination

offices.

x If you are in bankruptcy or received a bankruptcy discharge of

debt, this communication is not an attempt to collect a debt

against you personally, but strictly for informational purposes

only.

x Notice of Negative Information: We may report information

about your account to the Credit Bureaus. Late payment,

missed payments, other defaults, or bankruptcy filing on your

account may be reflected in your credit report.

Mortgage Counseling and Assistance

If you would like counseling or assistance, you can find a list of

counselors in your area on the U.S. Department of Housing and

Urban Development's website at www.hud.gov. Below is contact

information for the housing finance authority in your state and for

three state- or federally-approved counseling programs in your area.

x Maryland Department of Housing and Community

Development

100 Community Place

Crownsville, MD 21032

410-514-7000 or 1-800-756-0119

www.mdhousing.org

x Consumer Credit Counseling Services of Maryland and

Delaware, Inc.

757 Frederick Rd

Baltimore, MD 21228

1-866-731-8486

www.cccs-inc.org

x St. Ambrose Housing Aid Center, Inc.

321 E. 25th St

Baltimore, MD 21218

410-366-8550 x235

www.stambros.org

x Housing Initiative Partnership, Inc.

6525 Belcrest Road, Suite 555

Hyattsville, MD 20782

301-699-3835

www.hiphomes.org

Automated Account Information

Account information is easy to access through Springside Mortgage’s

Automated Phone Service by calling 877-555-9988 or 1-800-555-

2222. Please have your loan number and the first five (5) digits of

your Social Security Number to access this convenient service.

Automated information is available Monday-Sunday 7:00 a.m to

11:00 p.m., Eastern Time.

Consumer Complaints and Inquiries

x You can direct any complaints and inquiries to Springside

Mortgage by referencing the “Contact Us” section on the first

page of this statement.

x You have the right to file complaints about Springside Mortgage

with your state banking department.

Service Fee Schedule (Unless Limited by State Law)*

Amortization Schedule: $25.00

Account History (per year): $10.00

Duplicate 1098/Escrow Analysis: $10.00

Verification of Mortgage: $20.00

Document Copies (per request): $20.00

Subsequent Payoff Statement: Varies

Automated Payment by Phone: $15.00

Fax Fee: Varies

Returned Check Fee: Varies

*May be subject to change

Important Springside Mortgage Contact Information

Payments:

P.O. Box 11111

Baltimore, MD 21264

Correspondence Address:

P.O. Box 12111

Buffalo, NY 14240

Fax Numbers:

Fax payoff requests: 1-866-221-2222

Fax all other Customer Service requests: 1-866-555-5555

Overnight Mail:

1 Fountain Plaza

Buffalo, NY 14203

Questions about Insurance:

P.O. Box 32309

Springfield, OH 45501

Questions about Tax:

P.O. Box 209433

Fort Worth, TX 76161

Homeowners Insurance/Property Tax Information

x Insurance Requirements: The terms of your loan require that

you maintain homeowners insurance coverage not less than

the replacement value of your property. We suggest that you

consult your insurance company to determine these coverage

amounts. Flood Insurance is required for all properties located

in a Special Flood Hazard Area as designated by FEMA.

x Policy Information: To protect our mutual interests, the

mortgage clause of your policy must include the following:

Springside Mortgage, its Successors and/or Assigns, Mortgage

Loan #____, P.O. Box 392, Springfield, OH 20932. If you pay

your own insurance, please ensure that you provide us with

your current insurance information by visiting our website at

www.mycoverageinfo.com. You may also mail or fax a copy of

the declaration page to our office (Fax # 1-877-495-4455).

x Damaged Property: In the event of damage to your home,

notify your insurance agent. After the claim has been filed,

please contact us at 1-888-555-3434 so that we may guide you

through this process.

x Loans with Tax Escrow: If your property taxes are paid from an

escrow account with us and you receive a tax bill, please

forward the bill immediately to the following address:

Springside Mortgage, P.O. Box 30944, Fort Worth, TX 39393.

Please be sure to write your loan number on the bill. It is no

longer necessary to forward paid tax receipts on non-escrow

accounts. For property-related tax questions please call 1-877-

555-4444.
January 20, 2012

Changes to Your Mortgage Interest Rate and Payments on July 20, 2012

This notice tells you that your interest rate may begin to change on July 20, 2012. Note that any change to

your interest rate may also change your mortgage payment. For more detailed information, please refer to your

loan agreement(s).

Current Rate and

Monthly Payment

Estimated New Rate and

Monthly Payment

Interest Rate 4.25% 5.75%

Total Monthly Payment $1,746.00 $2,463.00

(due August 1, 2012)

Interest Rate: The interest rate on your adjustable rate mortgage (ARM) will change based on an index, plus a

margin of 2.25%. Your index is the 1-year LIBOR index, which is published daily in the Wall Street Journal.

Rate Limits: Beginning July 20, 2012, your rate can change each year by no more than 2.00%. Your rate can not go

higher than 11.625% over the life of the loan.

New Monthly Payment: The table above shows our estimate of your new interest rate and new monthly payment.

The index on which your interest rate is based may change at any time, making it impossible to predict exactly what

your interest rate and payment will be after July 20, 2012. The estimate is based on today’s index value, your margin

of 2.25%, your current loan balance of $243,267 and your remaining loan term of 324 months.

Possible Alternatives: If you seek an alternative to the upcoming changes to your interest rate and payment, the

following options may be possible (most are subject to lender approval):

x Refinance your loan with us or another lender.

x Sell your home and use the proceeds to pay off your current loan.

x Renegotiate your loan terms with us.

x Payment forbearance, which temporarily gives you more time to pay your monthly payment.

x Transfer ownership of the property directly to us in order to avoid foreclosure.

Prepayment Penalty: Keep in mind that if you pay off your loan, refinance or sell your home before May 1, 2012

you could be charged a penalty of up to $4,323.13.

If You Anticipate Problems Making Your Payments: Contact us at 1-800-555-4567 as soon as possible. If you

would like counseling or assistance, you can contact any of the following:

Federal and State Housing Finance Agencies:

x U.S. Department of Housing and Urban Development (HUD): For a list of counseling agencies or

programs in your area, go to www.hud.gov or call 800-569-4287.

(continued on other side)
x Maryland Department of Housing and Community Development

100 Community Place

Crownsville, MD 21032

410-514-7000 or 1-800-756-0119

www.mdhousing.org

Federally- or State-approved counseling agencies and programs:

x Consumer Credit Counseling Services of Maryland and Delaware, Inc.

757 Frederick Rd

Baltimore, MD 21228

1-866-731-8486

www.cccs-inc.org

x St. Ambrose Housing Aid Center, Inc.

321 E. 25th St

Baltimore, MD 21218

410-366-8550 x235

www.stambros.org

x Housing Initiative Partnership, Inc.

6525 Belcrest Road, Suite 555

Hyattsville, MD 20782

301-699-3835

www.hiphomes.org
Springside Mortgage

1234 Main St

Baltimore, MD 21216

January 22, 2012

Adam and Mary Jones

4700 Oak Ridge Ln

Towson, MD 21204

Subject: PROVIDE PROOF OF INSURANCE for 4700 Oak Ridge Lane, Towson, MD 21204

Dear Mr. and Mrs. Jones:

Under the terms of your mortgage, you must maintain adequate homeowners’ insurance coverage on

the property referred to above. Our records show that your existing homeowners’ insurance policy has

expired or been cancelled, and we do not have evidence that you have obtained new coverage.

If you do not have insurance coverage, we have the right to purchase hazard insurance on your behalf

and charge you for the cost. The insurance that we buy:

x Will cost you an estimated $2,100.00 per year, which is probably more expensive than insurance

you can buy yourself.

x May not provide as much coverage as an insurance policy you buy yourself.

In order to avoid being charged, you must show us evidence that you have your own insurance

coverage for the property. If you do provide evidence of coverage, you will not be charged for any

period during which you had your own insurance.

You can show us that you have insurance by providing us with your insurance policy number, the

identity of your insurance company or agent, and contact information for the insurance company or

agent. You can also send us a copy of your insurance binder, certificate, or policy. You can send us this

information by fax, mail, or email.

The total cost of the insurance we buy will include the premium and any applicable taxes or fees. If you

have an escrow account, this cost may be charged to your escrow account. If you do not have an escrow

account, we may establish an escrow account in accordance with the terms of your mortgage.

If you have any questions, please contact us at 1-800-123-4567 or service@springsidemortgage.com.

You may also write to us at 1234 Main Street, Baltimore, MD 21216 or send a fax to 410-555-9999,

Attention: Customer Service.

Sincerely,

Jennifer Brown

Loan Officer
Round 2:

Memphis, TN

February 29-March 1, 2012
$351,569.29

Account Information

Property Address 4700 Oak Ridge Ln

Memphis, TN 38109

Outstanding Principal $264,776.43

Maturity Date September 2039

Interest Rate (Until October 2012) 4.75%

Prepayment Penalty $3,500.00

Adam and Mary Jones

4700 Oak Ridge Ln

Memphis, TN 38109

Past Payments Breakdown

Paid Last Month Paid Year to Date

Principal $0.00 $765.32

Interest $0.00 $2,103.74

Escrow (Taxes and Insurance) $0.00 $470.36

Fees $0.00 $0.00

Partial Payment (Unapplied) $900.00 $900.00

Total $900.00 $4,239.42

Transaction Activity (2/20 to 3/19)

Date Description Charges Payments

3/13/12 Partial Payment Received $900.00

3/16/12 Late Fee (charged because full payment not received by 3/15/2012) $160.00

3/19/12 Property Inspection Fee $250.00

Springside Mortgage

P.O. Box 11111

Memphis, TN 38101

Amount Due

Due By 4/1/2012: $2,849.42

$160 late fee will be charged after 4/15/12

Please designate how you want us to apply any

additional funds.

Additional Principal $ .

Additional Escrow $ .

Total Amount Enclosed $ .

Mortgage Statement

Statement Date: 3/20/2012

Springside Mortgage

Springside Mortgage

1234567 34571892 342359127

Important Messages

If You Are Experiencing Financial Difficulty: If you would like mortgage counseling or assistance, you can find a list of counselors in

your area on the U.S. Department of Housing and Urban Development's website at www.hud.gov. On the back of this page, we have

also provided contact information for three state- or federally-approved counseling programs in your area.

We are pleased to have you as a Springside Mortgage customer. We are known throughout the country for the quality of our service

and our dedication to providing financial security for our customers. We will do everything we can to make you feel at home, and to

ensure you receive the friendly, professional service you deserve.

Account Number 1234567

Payment Due Date 4/1/2012

Amount Due $2,849.42

If payment is received after 4/15/12, $160 late fee will be charged.

Explanation of Amount Due

Principal $386.46

Interest $1,048.07

Escrow (for Taxes and Insurance) $235.18

Regular Monthly Payment $1,669.71

Total Fees Charged $410.00

Overdue Payment $769.71

Total Amount Due $2,849.42

Contact Us

By Phone: 1-800-555-1234

Online: www.springsidemortgage.com

See back for mailing addresses
Payment Options

Springside Mortgage provides you the following options for making

your mortgage loan payments.

x Mail: P.O. Box 11111, Memphis, TN 38101

x Online*: www.springsidemortgage.com

x Pay-by-phone**: 1-800-123-4567

x Automatic Deduction: Enroll at www.springsidemortgage.com

x In Person: At any Springside Mortgage branch

*Select “My Mortgage Info” from the “Online Services Menu.”

** A fee may apply for this service.

Online Services

Springside Mortgage offers a variety of online services to help you

better manage your mortgage loans including:

x Payments

x Electronic Statements

x “Notify me” alerts for payments received or escrow

disbursements

You can also view your loan payment history, amortization schedule,

principal balance, interest rate and escrow account activity

Simply visit www.springsidemortgage.com and select “My Mortgage

Info” from the online services menu. For further assistance please

contact us at 1-800-678-4567.

Payment Information

x Additional Amount: Please designate how you want additional

funds to be applied; we will apply them as directed provided

your account is current. If your account is current,

undesignated funds will be applied per the terms of your

mortgage loan documents. Regardless of the account status,

principal prepayments will only be applied to your account if

your contract allows for prepayments.

x Please be prompt. Payments must reach Springside Mortgage

by the due date. Your payment is credited on the day it is

received at our payment center, not the day it is postmarked.

Payments made at a Springside Mortgage branch prior to the

change of the business day will be credited the same day.

Payments are not accepted at Springside Mortgage origination

offices.

x If you are in bankruptcy or received a bankruptcy discharge of

debt, this communication is not an attempt to collect a debt

against you personally, but strictly for informational purposes

only.

x Notice of Negative Information: We may report information

about your account to the Credit Bureaus. Late payment,

missed payments, other defaults, or bankruptcy filing on your

account may be reflected in your credit report.

Mortgage Counseling and Assistance

If you would like counseling or assistance, you can find a list of

counselors in your area on the U.S. Department of Housing and

Urban Development's website at www.hud.gov. Below is contact

information for the housing finance authority in your state and for

three state- or federally-approved counseling programs in your area.

x Tennessee Housing Development Agency

404 James Robertson Pkwy, Ste 1200

Nashville, TN 37243-0900

615-815-2200 or 1-800-228-THDA

www.thda.org

x Financial Counselors of America

3294 Poplar Ave, Ste 304

Memphis, TN 38111

901-722-5000 or 1-877-450-4404

www.financialcounselors.org

x Memphis Consumer Credit Education Association

1661 Aaron Brenner Dr, Ste 201

Memphis, TN 38120

901-321-6800

www.mccea.net

x Memphis Housing Resource Center

2400 Poplar Ave, Ste 220

Memphis, TN 38112

901-529-1151

www.mhrc.info

Automated Account Information

Account information is easy to access through Springside Mortgage’s

Automated Phone Service by calling 877-555-9988 or 1-800-555-

2222. Please have your loan number and the first five (5) digits of

your Social Security Number to access this convenient service.

Automated information is available Monday-Sunday 7:00 a.m. to

11:00 p.m., Eastern Time.

Consumer Complaints and Inquiries

x You can direct any complaints and inquiries to Springside

Mortgage by referencing the “Contact Us” section on the first

page of this statement.

x You have the right to file complaints about Springside Mortgage

with your state banking department.

Service Fee Schedule (Unless Limited by State Law)*

Amortization Schedule: $25.00

Account History (per year): $10.00

Duplicate 1098/Escrow Analysis: $10.00

Verification of Mortgage: $20.00

Document Copies (per request): $20.00

Subsequent Payoff Statement: Varies

Automated Payment by Phone: $15.00

Fax Fee: Varies

Returned Check Fee: Varies

*May be subject to change

Important Springside Mortgage Contact Information

Payments:

P.O. Box 11111

Memphis, TN 38101

Correspondence Address:

P.O. Box 12111

Buffalo, NY 14240

Fax Numbers:

Fax payoff requests: 1-866-221-2222

Fax all other Customer Service requests: 1-866-555-5555

Overnight Mail:

1 Fountain Plaza

Buffalo, NY 14203

Questions about Insurance:

P.O. Box 32309

Springfield, OH 45501

Questions about Tax:

P.O. Box 209433

Fort Worth, TX 76161

Homeowners Insurance/Property Tax Information

x Insurance Requirements: The terms of your loan require that

you maintain homeowners insurance coverage not less than

the replacement value of your property. We suggest that you

consult your insurance company to determine these coverage

amounts. Flood Insurance is required for all properties located

in a Special Flood Hazard Area as designated by FEMA.

x Policy Information: To protect our mutual interests, the

mortgage clause of your policy must include the following:

Springside Mortgage, its Successors and/or Assigns, Mortgage

Loan #____, P.O. Box 392, Springfield, OH 20932. If you pay

your own insurance, please ensure that you provide us with

your current insurance information by visiting our website at

www.mycoverageinfo.com. You may also mail or fax a copy of

the declaration page to our office (Fax # 1-877-495-4455).

x Damaged Property: In the event of damage to your home,

notify your insurance agent. After the claim has been filed,

please contact us at 1-888-555-3434 so that we may guide you

through this process.

x Loans with Tax Escrow: If your property taxes are paid from an

escrow account with us and you receive a tax bill, please

forward the bill immediately to the following address:

Springside Mortgage, P.O. Box 30944, Fort Worth, TX 39393.

Please be sure to write your loan number on the bill. It is no

longer necessary to forward paid tax receipts on non-escrow

accounts. For property-related tax questions please call 1-877-

555-4444.
Springside Mortgage

1234 Main St

Memphis, TN 38101

February 20, 2012

Adam and Mary Jones

4700 Oak Ridge Ln

Memphis, TN 38109

Changes to Your Mortgage Interest Rate and Payments on August 20, 2012

Under the terms of your Adjustable Rate Mortgage (ARM), you had a three-year period during which your interest

rate stayed the same. That period ends on August 20, 2012, so on that date your interest rate may change. After that,

your interest rate may change annually for the rest of your loan term. Any change in your interest rate may also

change your mortgage payment.

Current Rate

and Monthly Payment

Estimated New Rate and

Monthly Payment

Interest Rate 4.25% 5.75%

Total Monthly Payment $1,746.00 $2,463.00

(due September 1, 2012)

Interest Rate: On August 20, 2012 and every year after that, we will calculate your interest rate by taking a published “index

rate” and adding a certain number of percentage points, called the “margin.” Under your loan agreement, your index rate is

the 1-year LIBOR and your margin is 2.25%. The LIBOR index is published daily in the Wall Street Journal.

Rate Limits: Your rate can change each year by no more than 2.00%. Your rate cannot go higher than 11.625% over the life

of the loan.

New Interest Rate and Monthly Payment: The table above shows our estimate of your new interest rate and new monthly

payment. This estimate is based on today’s LIBOR index, your margin of 2.25%, your current loan balance of $243,267 and

your remaining loan term of 324 months. However, if the LIBOR index has changed on August 20, your new interest

rate and payment may be different from what is shown above.

Possible Alternatives: If you seek an alternative to the upcoming changes to your interest rate and payment, the following

options may be possible (most are subject to lender approval):

x Refinance your loan with us or another lender.

x Sell your home and use the proceeds to pay off your current loan.

x Modify your loan terms with us.

x Payment forbearance temporarily gives you more time to pay your monthly payment.

x Transfer ownership of the property directly to us in order to avoid foreclosure.

Prepayment Penalty: Keep in mind that if you pay off your loan, refinance or sell your home before June 1, 2012 you could

be charged a penalty of up to $4,323.13.

If You Anticipate Problems Making Your Payments: Contact Springside Mortgage at 1-800-555-4567 as soon as possible.

If you would like counseling or assistance, you can contact any of the following:

Federal and State Housing Finance Agencies:

x U.S. Department of Housing and Urban Development (HUD): For a list of counseling agencies or programs in your

area, go to www.hud.gov or call 800-569-4287.

(Continued on other side)
x Tennessee Housing Development Agency

404 James Robertson Pkwy, Ste 1200

Nashville, TN 37243-0900

615-815-2200 or 1-800-228-THDA

www.thda.org

Federally- or State-Approved Counseling Agencies and Programs:

x Financial Counselors of America

3294 Poplar Ave, Ste 304

Memphis, TN 38111

901-722-5000 or 1-877-450-4404

www.financialcounselors.org

x Memphis Consumer Credit Education Association

1661 Aaron Brenner Dr, Ste 201

Memphis, TN 38120

901-321-6800

www.mccea.net

x Memphis Housing Resource Center

2400 Poplar Ave, Ste 220

Memphis, TN 38112

901-529-1151

www.mhrc.info
WP

Springside Mortgage

1234 Main St

Memphis, TN 38101

February 22, 2012

Adam and Mary Jones

4700 Oak Ridge Ln

Memphis, TN 38109

Subject: PLEASE PROVIDE PROOF OF INSURANCE for 4700 Oak Ridge Lane, Memphis, TN 38109

Dear Mr. and Mrs. Jones:

Our records show that your homeowners’ insurance policy lapsed on February 20, 2012, and we do not

have evidence that you have obtained new coverage. Because insurance is required on your property,

we may purchase insurance on your behalf.

You should immediately purchase or renew your own insurance policy, because the insurance we

purchase:

x Will cost you an estimated $2,100.00 per year, which is probably more expensive than insurance

you can buy yourself.

x May not provide as much coverage as an insurance policy you buy yourself.

If we purchase insurance on your behalf, you will have to pay us for any period during which you did not

have insurance. However, we will not charge you for any period during which you can prove you had

your own insurance.

You can show us that you have insurance by providing us with your insurance policy number, the

identity of your insurance company or agent, and contact information for the insurance company or

agent. You can also send us a copy of your insurance binder, certificate, or policy. You can send us this

information by fax, mail, or email.

If you have any questions, please contact us at 1-800-123-4567 or service@springsidemortgage.com.

You may also write to us at 1234 Main Street, Memphis, TN 38101 or send a fax to 410-555-9999,

Attention: Customer Service.

Sincerely,

Jennifer Brown

Loan Officer
AP

Springside Mortgage

1234 Main St

Memphis, TN 38101

February 22, 2012

Adam and Mary Jones

4700 Oak Ridge Ln

Memphis, TN 38109

Subject: PLEASE PROVIDE PROOF OF INSURANCE for 4700 Oak Ridge Lane, Memphis, TN 38109

Dear Mr. and Mrs. Jones:

Our records show that your homeowners’ insurance policy lapsed on February 20, 2012, and we do not

have evidence that you have obtained new coverage. Because insurance is required on your property,

we have purchased insurance on your behalf.

You should immediately purchase or renew your own insurance policy, because the insurance we

purchased:

x Will cost you $2,100.00 per year, which is probably more expensive than insurance you can buy

yourself.

x May not provide as much coverage as an insurance policy you buy yourself.

If you give us proof of insurance coverage, we will cancel our policy and will not charge you for any

period during which you had your own insurance. However, you will have to pay us for any period

during which you did not have insurance.

You can show us that you have insurance by providing us with your insurance policy number, the

identity of your insurance company or agent, and contact information for the insurance company or

agent. You can also send us a copy of your insurance binder, certificate, or policy. You can send us this

information by fax, mail, or email.

If you have any questions, please contact us at 1-800-123-4567 or service@springsidemortgage.com.

You may also write to us at 1234 Main Street, Memphis, TN 38101 or send a fax to 410-555-9999,

Attention: Customer Service.

Sincerely,

Jennifer Brown

Loan Officer
Round 3:

Los Angeles, CA

April 3-4, 2012
$351,569.29

Account Information

Property Address 4700 Oak Ridge Ln

Los Angeles, CA 90010

Outstanding Principal $264,776.43

Maturity Date September 2039

Interest Rate (Until October 2012) 4.75%

Prepayment Penalty $3,500.00

Adam and Mary Jones

4700 Oak Ridge Ln

Los Angeles, CA 90010

Past Payments Breakdown

Paid Last

Month

Paid Year to

Date

Principal $0.00 $383.31

Interest $0.00 $1,051.22

Impound $0.00 $235.18

Fees $0.00 $410.00

Partial Payment (Unapplied)* $1,000.00 $1,490.00

Total $1,000.00 $3,569.71

Transaction Activity (2/20 to 3/19)

Date Description Charges Payments

3/13/12 Partial Payment Received* $1,000.00

3/16/12 Late Fee (charged because

full payment not received

by 3/15/2012)

$160.00

3/19/12 Property Inspection Fee $250.00

Springside Mortgage

P.O. Box 11111

Los Angeles, CA 90010

Amount Due

Due By 4/1/2012: $4,339.13

$160 late fee will be charged after 4/15/12

Please designate how you want us to apply any

additional funds.

Additional Principal $ .

Additional Escrow $ .

Total Amount Enclosed $ .

Mortgage Statement

Statement Date: 3/20/2012

Springside Mortgage

Springside Mortgage

1234567 34571892 342359127 DN

Important Messages

*Partial Payments: Any partial payments that you make are not

applied to your mortgage, but instead are held in a separate

suspense account. If you pay the balance of a partial payment,

the funds will then be applied to your mortgage.

Account Number 1234567

Payment Due Date 4/1/2012

Amount Due $4,339.13

If payment is received after 4/15/12, $160 late fee will be charged.

Explanation of Amount Due

Principal $386.46

Interest $1,048.07

Impound $235.18

Regular Monthly Payment $1,669.71

Total Fees and Charges $410.00

Overdue Payment $2,259.42

Total Amount Due $4,339.13

Contact Us

By Phone: 1-800-555-1234

Online: www.springsidemortgage.com

See back for mailing addresses

**Delinquency Notice**

You are late on your mortgage payments. Failure to bring your

loan current may result in fees and foreclosure—the loss of your

home. As of March 20, you are 49 days delinquent on your

mortgage loan.

Recent Account History

x Payment due 12/1/11: Fully paid on time

x Payment due 1/1/12: Fully paid on 2/3/12

x Payment due 2/1/12: Unpaid balance of $589.71

x Payment due 3/1/12: Unpaid balance of $2,079.71

x Current payment due 4/1/12: $1,669.71

x Total: $4,339.13 due. You must pay this amount to bring

your loan current.
Payment Options

Springside Mortgage provides you the following options for making

your mortgage loan payments.

x Mail: P.O. Box 11111, Los Angeles, CA 90010

x Online*: www.springsidemortgage.com

x Pay-by-phone**: 1-800-123-4567

x Automatic Deduction: Enroll at www.springsidemortgage.com

x In Person: At any Springside Mortgage branch

*Select “My Mortgage Info” from the “Online Services Menu.”

** A fee may apply for this service.

Online Services

Springside Mortgage offers a variety of online services to help you

better manage your mortgage loans including:

x Payments

x Electronic Statements

x “Notify me” alerts for payments received or escrow

disbursements

You can also view your loan payment history, amortization schedule,

principal balance, interest rate and escrow account activity

Simply visit www.springsidemortgage.com and select “My Mortgage

Info” from the online services menu. For further assistance please

contact us at 1-800-678-4567.

Payment Information

x Additional Amount: Please designate how you want additional

funds to be applied; we will apply them as directed provided

your account is current. If your account is current,

undesignated funds will be applied per the terms of your

mortgage loan documents. Regardless of the account status,

principal prepayments will only be applied to your account if

your contract allows for prepayments.

x Please be prompt. Payments must reach Springside Mortgage

by the due date. Your payment is credited on the day it is

received at our payment center, not the day it is postmarked.

Payments made at a Springside Mortgage branch prior to the

change of the business day will be credited the same day.

Payments are not accepted at Springside Mortgage origination

offices.

x If you are in bankruptcy or received a bankruptcy discharge of

debt, this communication is not an attempt to collect a debt

against you personally, but strictly for informational purposes

only.

x Notice of Negative Information: We may report information

about your account to the Credit Bureaus. Late payment,

missed payments, other defaults, or bankruptcy filing on your

account may be reflected in your credit report.

Mortgage Counseling and Assistance

If you would like counseling or assistance, you can find a list of

counselors in your area on the U.S. Department of Housing and

Urban Development's website at www.hud.gov. Below is contact

information for the housing finance authority in your state and for

three state- or federally-approved counseling programs in your area.

x California Department of Housing and Community

Development

1800 3rd St

Sacramento, CA 95811

916-445-4782

www.hcd.ca.gov

x Consumer Credit Counseling Service of Orange County

2450 E. Lincoln

Anaheim, CA 92806

714-547-2227 or 866-784-2227

www.cccsoc.org

x Neighborhood Assistance Corporation of America – Los

Angeles

241 South Market St

Inglewood, CA 90301

310-412-2600 or 888-297-5568

www.naca.com

x Los Angeles Neighborhood Housing Services, Inc.

3926 Wilshire Blvd, Suite 200

Los Angeles, CA 90010

213-381-2862 or 888-895-2467

www.lahs.org

Automated Account Information

Account information is easy to access through Springside Mortgage’s

Automated Phone Service by calling 877-555-9988 or 1-800-555-

2222. Please have your loan number and the first five (5) digits of

your Social Security Number to access this convenient service.

Automated information is available Monday-Sunday 7:00 a.m. to

11:00 p.m., Eastern Time.

Consumer Complaints and Inquiries

x You can direct any complaints and inquiries to Springside

Mortgage by referencing the “Contact Us” section on the first

page of this statement.

x You have the right to file complaints about Springside Mortgage

with your state banking department.

Service Fee Schedule (Unless Limited by State Law)*

Amortization Schedule: $25.00

Account History (per year): $10.00

Duplicate 1098/Escrow Analysis: $10.00

Verification of Mortgage: $20.00

Document Copies (per request): $20.00

Subsequent Payoff Statement: Varies

Automated Payment by Phone: $15.00

Fax Fee: Varies

Returned Check Fee: Varies

*May be subject to change

Important Springside Mortgage Contact Information

Payments:

P.O. Box 11111

Los Angeles, CA 90010

Correspondence Address:

P.O. Box 12111

Buffalo, NY 14240

Fax Numbers:

Fax payoff requests: 1-866-221-2222

Fax all other Customer Service requests: 1-866-555-5555

Overnight Mail:

1 Fountain Plaza

Buffalo, NY 14203

Questions about Insurance:

P.O. Box 32309

Springfield, OH 45501

Questions about Tax:

P.O. Box 209433

Fort Worth, TX 76161

Homeowners Insurance/Property Tax Information

x Insurance Requirements: The terms of your loan require that

you maintain homeowner’s insurance coverage not less than

the replacement value of your property. We suggest that you

consult your insurance company to determine these coverage

amounts. Flood Insurance is required for all properties located

in a Special Flood Hazard Area as designated by FEMA.

x Policy Information: To protect our mutual interests, the

mortgage clause of your policy must include the following:

Springside Mortgage, its Successors and/or Assigns, Mortgage

Loan #____, P.O. Box 392, Springfield, OH 20932. If you pay

your own insurance, please ensure that you provide us with

your current insurance information by visiting our website at

www.mycoverageinfo.com. You may also mail or fax a copy of

the declaration page to our office (Fax # 1-877-495-4455).

x Damaged Property: In the event of damage to your home,

notify your insurance agent. After the claim has been filed,

please contact us at 1-888-555-3434 so that we may guide you

through this process.

x Loans with Tax Escrow: If your property taxes are paid from an

escrow account with us and you receive a tax bill, please

forward the bill immediately to the following address:

Springside Mortgage, P.O. Box 30944, Fort Worth, TX 39393.

Please be sure to write your loan number on the bill. It is no

longer necessary to forward paid tax receipts on non-escrow

accounts. For property-related tax questions please call 1-877-

555-4444.
Account Information

Property Address 4700 Oak Ridge Ln

Los Angeles, CA 90010

Outstanding Principal $260,000.00

Maturity Date September 2039

Interest Rate (Until October 2012) 4.75%

Prepayment Penalty $3,500.00

Adam and Mary Jones

4700 Oak Ridge Ln

Los Angeles, CA 90010

Past Payments Breakdown

Paid Last

Month

Paid Year

to Date

Principal $384.93 $765.32

Interest $1,049.60 $2,103.74

Impound $235.18 $470.36

Fees $0.00 $0.00

Total $1,669.71 $4,239.42

Transaction Activity (2/20 to 3/19)

Date Description Charges Payments

3/16/12 Late Fee (charged because payment was received after 3/15/2012) $160.00

3/19/12 Payment Received – Thank you $1,669.71

Springside Mortgage

P.O. Box 11111

Los Angeles, CA 90010

Amount Due

Due By 4/1/2012:

 Option 1 (Full):

 Option 2 (Interest-Only):

 Option 3 (Minimum):

$1,829.71

$1,443.25

$1,156.43

$160 late fee will be charged after 4/15/12

Additional Principal $ .

Total Amount Enclosed $ .

Mortgage Statement

Statement Date: 3/20/2012

Springside Mortgage

Springside Mortgage

1234567 34571892 342359127 P

Important Messages

If You Are Experiencing Financial Difficulty: See back for information

about mortgage counseling or assistance.

Account Number 1234567

Payment Due Date 4/1/2012

Amount Due Option 1 (Full): $1,829.71

Option 2 (Interest-Only): $1,443.25

Option 3 (Minimum): $1,156.43

If payment is received after 4/15/12, $160 late fee will be charged.

Contact Us

By Phone: 1-800-555-1234

Online: www.springsidemortgage.com

See back for mailing addresses

Explanation of Amount Due

Option 1 (Full) Option 2 (Interest-Only) Option 3 (Minimum)

Principal $386.46 $0 $0

Interest $1,048.07 $1,048.07 $761.25

Impound $235.18 $235.18 $235.18

Regular Monthly Payment $1,669.71 $1,283.25 $996.43

Total Fees and Charges $160.00 $160.00 $160.00

Total Amount Due $1,829.71 $1,443.25 $1,156.43

If you make this payment... ... your principal balance will

decrease, and you will be

closer to paying off your loan.

... your principal balance will

stay the same, and you will

not be closer to paying off

your loan.

... your principal balance will

increase. You will be

borrowing more money and

losing equity in your home.
Payment Options

Springside Mortgage provides you the following options for making

your mortgage loan payments.

x Mail: P.O. Box 11111, Los Angeles, CA 90010

x Online*: www.springsidemortgage.com

x Pay-by-phone**: 1-800-123-4567

x Automatic Deduction: Enroll at www.springsidemortgage.com

x In Person: At any Springside Mortgage branch

*Select “My Mortgage Info” from the “Online Services Menu.”

** A fee may apply for this service.

Online Services

Springside Mortgage offers a variety of online services to help you

better manage your mortgage loans including:

x Payments

x Electronic Statements

x “Notify me” alerts for payments received or escrow

disbursements

You can also view your loan payment history, amortization schedule,

principal balance, interest rate and escrow account activity

Simply visit www.springsidemortgage.com and select “My Mortgage

Info” from the online services menu. For further assistance please

contact us at 1-800-678-4567.

Payment Information

x Additional Amount: Please designate how you want additional

funds to be applied; we will apply them as directed provided

your account is current. If your account is current,

undesignated funds will be applied per the terms of your

mortgage loan documents. Regardless of the account status,

principal prepayments will only be applied to your account if

your contract allows for prepayments.

x Please be prompt. Payments must reach Springside Mortgage

by the due date. Your payment is credited on the day it is

received at our payment center, not the day it is postmarked.

Payments made at a Springside Mortgage branch prior to the

change of the business day will be credited the same day.

Payments are not accepted at Springside Mortgage origination

offices.

x If you are in bankruptcy or received a bankruptcy discharge of

debt, this communication is not an attempt to collect a debt

against you personally, but strictly for informational purposes

only.

x Notice of Negative Information: We may report information

about your account to the Credit Bureaus. Late payment,

missed payments, other defaults, or bankruptcy filing on your

account may be reflected in your credit report.

Mortgage Counseling and Assistance

If you would like counseling or assistance, you can find a list of

counselors in your area on the U.S. Department of Housing and

Urban Development's website at www.hud.gov. Below is contact

information for the housing finance authority in your state and for

three state- or federally-approved counseling programs in your area.

x California Department of Housing and Community

Development

1800 3rd St

Sacramento, CA 95811

916-445-4782

www.hcd.ca.gov

x Consumer Credit Counseling Service of Orange County

2450 E. Lincoln

Anaheim, CA 92806

714-547-2227 or 866-784-2227

www.cccsoc.org

x Neighborhood Assistance Corporation of America – Los

Angeles

241 South Market St

Inglewood, CA 90301

310-412-2600 or 888-297-5568

www.naca.com

x Los Angeles Neighborhood Housing Services, Inc.

3926 Wilshire Blvd, Suite 200

Los Angeles, CA 90010

213-381-2862 or 888-895-2467

www.lahs.org

Automated Account Information

Account information is easy to access through Springside Mortgage’s

Automated Phone Service by calling 877-555-9988 or 1-800-555-

2222. Please have your loan number and the first five (5) digits of

your Social Security Number to access this convenient service.

Automated information is available Monday-Sunday 7:00 a.m. to

11:00 p.m., Eastern Time.

Consumer Complaints and Inquiries

x You can direct any complaints and inquiries to Springside

Mortgage by referencing the “Contact Us” section on the first

page of this statement.

x You have the right to file complaints about Springside Mortgage

with your state banking department.

Service Fee Schedule (Unless Limited by State Law)*

Amortization Schedule: $25.00

Account History (per year): $10.00

Duplicate 1098/Escrow Analysis: $10.00

Verification of Mortgage: $20.00

Document Copies (per request): $20.00

Subsequent Payoff Statement: Varies

Automated Payment by Phone: $15.00

Fax Fee: Varies

Returned Check Fee: Varies

*May be subject to change

Important Springside Mortgage Contact Information

Payments:

P.O. Box 11111

Los Angeles, CA 90010

Correspondence Address:

P.O. Box 12111

Buffalo, NY 14240

Fax Numbers:

Fax payoff requests: 1-866-221-2222

Fax all other Customer Service requests: 1-866-555-5555

Overnight Mail:

1 Fountain Plaza

Buffalo, NY 14203

Questions about Insurance:

P.O. Box 32309

Springfield, OH 45501

Questions about Tax:

P.O. Box 209433

Fort Worth, TX 76161

Homeowners Insurance/Property Tax Information

x Insurance Requirements: The terms of your loan require that

you maintain homeowner’s insurance coverage not less than

the replacement value of your property. We suggest that you

consult your insurance company to determine these coverage

amounts. Flood Insurance is required for all properties located

in a Special Flood Hazard Area as designated by FEMA.

x Policy Information: To protect our mutual interests, the

mortgage clause of your policy must include the following:

Springside Mortgage, its Successors and/or Assigns, Mortgage

Loan #____, P.O. Box 392, Springfield, OH 20932. If you pay

your own insurance, please ensure that you provide us with

your current insurance information by visiting our website at

www.mycoverageinfo.com. You may also mail or fax a copy of

the declaration page to our office (Fax # 1-877-495-4455).

x Damaged Property: In the event of damage to your home,

notify your insurance agent. After the claim has been filed,

please contact us at 1-888-555-3434 so that we may guide you

through this process.

x Loans with Tax Escrow: If your property taxes are paid from an

escrow account with us and you receive a tax bill, please

forward the bill immediately to the following address:

Springside Mortgage, P.O. Box 30944, Fort Worth, TX 39393.

Please be sure to write your loan number on the bill. It is no

longer necessary to forward paid tax receipts on non-escrow

accounts. For property-related tax questions please call 1-877-

555-4444.
Springside Mortgage

1234 Main St

Los Angeles, CA 90010

March 29, 2012

Adam and Mary Jones

4700 Oak Ridge Ln

Los Angeles, CA 90010

Changes to Your Mortgage Interest Rate and Payments on September 29, 2012

Under the terms of your Adjustable Rate Mortgage (ARM), you had a three-year period during which your interest

rate stayed the same. That period ends on September 29, 2012, so on that date your interest rate may change. After

that, your interest rate may change annually for the rest of your loan term. Any change in your interest rate may also

change your mortgage payment. Also, as of September 29, 2012 your mortgage payment will include principal as well

as interest.

Current Rate

and Monthly Payment

Estimated New Rate

and Monthly Payment

Interest Rate 4.25% 6.25%

Principal - none - $1,556.14 Interest $861.57

Escrow (Taxes and Insurance) $460.27 $502.67

Total Monthly Payment $1,321.84 $2,058.81

(due October 1, 2012)

Interest Rate: On September 29, 2012 and every year after that, we will calculate your interest rate by taking a published

“index rate” and adding a certain number of percentage points, called the “margin.” Under your loan agreement, your index

rate is the 1-year LIBOR and your margin is 2.25%. The LIBOR index is published daily in the Wall Street Journal.

Rate Limits: Your rate cannot go higher than 11.625% over the life of the loan. Your rate can change each year by no more

than 2.00%. If not for this rate limit, your estimated rate on September 29 would be 1.00% higher. This additional amount

may be applied to your interest rate when it adjusts again next year.

New Interest Rate and Monthly Payment: The table above shows our estimate of your new interest rate and new monthly

payment. This estimate is based on today’s LIBOR index, your margin of 2.25%, your current loan balance of $243,267 and

your remaining loan term of 324 months. However, if the LIBOR index has changed on September 29, your new interest

rate and payment may be different from what is shown above. Your new payment will cover all of your interest and some

of your loan's principal, and therefore will reduce your loan balance.

Possible Alternatives: If you seek an alternative to the upcoming changes to your interest rate and payment, the following

options may be possible (most are subject to lender approval):

x Refinance your loan with us or another lender.

x Sell your home and use the proceeds to pay off your current loan.

x Modify your loan terms with us.

x Payment forbearance temporarily gives you more time to pay your monthly payment.

x Transfer ownership of the property directly to us in order to avoid foreclosure.

Prepayment Penalty: Keep in mind that if you pay off your loan, refinance or sell your home before September 1, 2012 you

could be charged a penalty of up to $4,323.13.

If You Anticipate Problems Making Your Payments: Contact Springside Mortgage at 1-800-555-4567 as soon as possible.

If you would like counseling or assistance, you can contact any of the following:

(Continued on other side)
Federal and State Housing Finance Agencies:

x U.S. Department of Housing and Urban Development (HUD): For a list of counseling agencies or programs in your

area, go to www.hud.gov or call 800-569-4287.

x California Department of Housing and Community Development

1800 3rd St

Sacramento, CA 95811

916-445-4782

www.hcd.ca.gov

Federally- or State-Approved Counseling Agencies and Programs:

x Consumer Credit Counseling Service of Orange County

2450 E. Lincoln

Anaheim, CA 92806

714-547-2227 or 866-784-2227

www.cccsoc.org

x Neighborhood Assistance Corporation of America – Los Angeles

241 South Market St

Inglewood, CA 90301

310-412-2600 or 888-297-5568

www.naca.com

x Los Angeles Neighborhood Housing Services, Inc.

3926 Wilshire Blvd, Suite 200

Los Angeles, CA 90010

213-381-2862 or 888-895-2467

www.lahs.org
RN

Springside Mortgage

1234 Main St

Los Angeles, CA 90010

March 29, 2012

Adam and Mary Jones

4700 Oak Ridge Ln

Los Angeles, CA 90010

Subject: PLEASE PROVIDE PROOF OF INSURANCE FOR 4700 Oak Ridge Lane, Los Angeles, CA 90010

Dear Mr. and Mrs. Jones:

Because we did not have evidence that you had hazard insurance on the property listed above, we

purchased force-placed insurance coverage on your behalf, effective May 13, 2011. Before we charged

you for this policy, we sent you two notices by mail asking you to provide us proof that you had your

own hazard insurance coverage. We still do not have evidence that you have obtained your own

coverage.

The policy that we purchased is scheduled to expire on May 12, 2012. Because insurance is required on

your property, we are going to renew the policy we obtained and charge the premium to you.

You should immediately purchase your own insurance policy, because the insurance we purchased:

x Costs you $2,100.00 per year, which is probably more expensive than insurance you can buy

yourself.

x May not provide as much coverage as an insurance policy you buy yourself.

If you give us proof of insurance coverage at any time, we will cancel our policy and will not charge you

for any period during which you had your own insurance. However, you will have to pay us for any

period during which you did not have insurance.

You can show us that you have insurance by providing us with your insurance policy number, the

identity of your insurance company or agent, and contact information for the insurance company or

agent. You can also send us a copy of your insurance binder, certificate, or policy. You can send us this

information by fax, mail, or email.

If you have any questions, please contact us at 1-800-123-4567 or service@springsidemortgage.com.

You may also write to us at 1234 Main Street, Los Angeles, CA 90010 or send a fax to 323-555-9999,

Attention: Customer Service.

Sincerely,

Jennifer Brown

Loan Officer
WP

Springside Mortgage

1234 Main St

Los Angeles, CA 90010

March 29, 2012

Adam and Mary Jones

4700 Oak Ridge Ln

Los Angeles, CA 90010

Subject: SECOND AND FINAL NOTICE: PLEASE PROVIDE PROOF OF INSURANCE for 4700 Oak Ridge

Lane, Los Angeles, CA 90010

Dear Mr. and Mrs. Jones:

This is your second and final notice that our records show that your homeowners’ insurance policy

lapsed on February 24, 2012. We still do not have evidence that you have obtained new coverage.

Because insurance is required on your property, we may purchase force-placed insurance on your

behalf.

You should immediately purchase or renew your own insurance policy, because the insurance we

purchase:

x Will cost you an estimated $2,100.00 per year, which is probably more expensive than insurance

you can buy yourself.

x May not provide as much coverage as an insurance policy you buy yourself.

If we purchase insurance on your behalf, you will have to pay us for any period during which you did not

have insurance. However, if you give us proof of insurance at any time, we will not charge you for any

period during which you can prove you had your own insurance.

You can show us that you have insurance by providing us with your insurance policy number, the

identity of your insurance company or agent, and contact information for the insurance company or

agent. You can also send us a copy of your insurance binder, certificate, or policy. You can send us this

information by fax, mail, or email.

If you have any questions, please contact us at 1-800-123-4567 or service@springsidemortgage.com.

You may also write to us at 1234 Main Street, Los Angeles, CA 90010 or send a fax to 323-555-9999,

Attention: Customer Service.

Sincerely,

Jennifer Brown

Loan Officer
ICF International

9300 Lee Highway

Fairfax, VA 22031