What Are Coupon Books and When Can They Replace Periodic Statements?

A mortgage coupon book is a booklet of tear-off payment slips that you send back with each monthly payment. Federal rules let your servicer send a coupon book instead of a monthly periodic statement only if your loan has a fixed interest rate, the book shows the required loan details, the servicer gives you fuller account information when you ask, and it sends written delinquency notices if you fall more than 45 days behind. If you have an adjustable-rate mortgage, a coupon book cannot replace your periodic statements, though a small servicer can skip both.

What is a mortgage coupon book and how do you use it?

Under the CFPB's commentary, a coupon book has one page for each billing cycle during a set period, often one year, and servicers usually mail a new book once a year. Loan details usually appear on the inside front or back cover or on filler pages.

To pay with a coupon book:

1. Tear off the coupon for the month you are paying. Each coupon shows its due date and amount due.
2. Include the coupon with your check or money order, and write your loan number on the check. Servicers may set written payment requirements, such as sending the coupon or account number with each payment, mailing only checks or money orders, or using one post office box.
3. Mail it to the payment address in the book early enough to arrive by the due date. Your servicer must credit a full payment as of the day the payment reaches it, not the day you mail it.
4. Keep the book's toll-free number handy for balance and payment questions.

If you lose a coupon, you can still pay. A servicer that accepts a payment that does not follow its written instructions, such as a check sent without a coupon, must credit it within 5 days after it arrives. How servicers must credit full, partial, and late payments covers the crediting rules in detail.

What must the coupon book show?

Federal rules split the required information between each coupon and the book as a whole.

The principal balance in the book is the balance when the book's period began, so it does not reflect payments you make during the year. For a current balance, ask the servicer or check your online account. If you plan to pay off the loan, request a payoff statement, because the payoff amount adds interest and any unpaid fees.

When can a servicer send a coupon book instead of monthly statements?

A servicer may use a coupon book in place of periodic statements only when all four of these conditions are met:

1. Your loan has a fixed rate. Regulation Z, the federal Truth in Lending rule, treats a loan as fixed-rate only if it is neither an adjustable-rate mortgage (ARM) nor a step-rate mortgage (a loan whose rate changes on a schedule set at closing). If your rate can change, the coupon book option is not available.
2. The book contains the information in the table above.
3. The servicer provides more detail when you ask, by phone, in writing, in person, or electronically if you have agreed to electronic delivery.
4. The servicer sends written delinquency information for each billing cycle in which you are more than 45 days behind.

A full monthly statement carries much more than a coupon does, including a breakdown of each payment and a list of recent transactions. The periodic statement rule lists what it must contain.

Some borrowers receive neither a statement nor a coupon book. A small servicer, generally one that services 5,000 or fewer loans that it or an affiliate owns or originated, is exempt from both. Statements and coupon books can also stop on charged-off loans and for some borrowers in bankruptcy. Exceptions to the periodic statement rule explains each one.

What account information can you ask for?

A coupon book does not show how your payments were applied. A servicer using the coupon book option must give you these details on request:

• An explanation of the amount due: your monthly payment broken into principal, interest, and escrow (the share set aside for property taxes and insurance), plus fees charged since the last statement and any past-due amount.
• A payment breakdown: payments received since the last statement and since January 1 of the current year, showing how much went to principal, interest, escrow, fees, and any suspense account (a holding account for payments smaller than a full monthly payment).
• A transaction list: each credit or debit to the amount due since the last statement, with its date, description, and amount.
• Suspense account instructions: if the servicer is holding part of a payment, what you must do to have it applied.

What happens if you fall behind on a coupon book loan?

Once you are more than 45 days delinquent, the servicer must send you a written notice for each billing cycle while the delinquency lasts. The notice must show:

• how long you have been delinquent;
• the risks and costs you could face if you do not catch up, such as foreclosure or legal fees;
• your account history for the last 6 months or since the account was last current, whichever is shorter;
• any loss mitigation program you have agreed to, such as a repayment plan;
• whether the servicer has made the first notice or filing to start foreclosure;
• the total you must pay to bring the account current;
• a reference to the housing counselor contacts in your coupon book.

What should you watch for when paying with coupons?

• Changes to your payment amount. If your servicer notifies you of a new monthly payment, the amount printed on your remaining coupons may no longer match. Call the toll-free number and pay the amount the servicer confirms.
• Disputes and questions. Do not write a dispute or question on the coupon. The CFPB warns that a note on a payment form might not get the same protections as a separate letter. Send a letter to the address your servicer designates for errors and information requests. Rules for written communication with servicers explains the deadlines that letter triggers.
• Bill-pay services. If your bank mails a check for you, the payment counts as received when that check reaches the servicer, so schedule it several days before the due date.

What loan servicing is covers the servicer's other duties, from escrow to loss mitigation.