Skip to comments.Foreclosure Fraud: How You Can Be Driven to Default Even if You Pay On Time
Posted on 10/13/2010 1:17:11 PM PDT by Fred
The new, 49-state investigation into foreclosure frauds comes as no surprise to people who follow the mortgage service business. Shoddy, deceptive paperwork has plagued homewowners for years. In the industrys slimy underside, firms push borrowers into default and foreclosure, even when theyve been making payments on time.
Their business model makes defaults profitable, says Marie McConnell who has been auditing mortgages for 24 years. The ugly chain of deception starts with the way the servicers handle your escrow account.
A mortgage service company collects your monthly payments, deducts a fee, and passes the remainder to the investors who own the loan. The majority of the servicing is done by big banks, such as JPMorgan Chase, Wells Fargo, and Bank of America. Your payments usually include a sum for property taxes and homeowners insurance premiums, which goes into an escrow account. The servicer uses that account to pay the taxes and premiums as they come due.
(Excerpt) Read more at moneywatch.bnet.com ...
The payments I made on a home I owned in the 80’s and 90’s went through escrow. Yeah, they overcharged taxes when they went up. I make the payments on the home I bought in Kentucky directly to the bank. There is no escrow. I pay my own taxes and homeowners insurance.
It keeps it simple.
“In the industrys slimy underside, firms push borrowers into default and foreclosure, even when theyve been making payments on time. “
That is just a crock.
I hate say it but there is a pattern that repeats over and over in this story, and in life in general for that matter:
- people don’t look at their bills.
Perhaps my wife and I were raised by paranoids, but there is NOTHING we receive having anything to do with money that we don’t check carefully. I don’t care who it’s from or how trustworthy they are supposed to be. It’s nothing personal, it’s just policy.
I have folks that work for us that set up these direct pay deals, and then months (sometimes years) later find out they’ve been screwed. Perhaps we’re not rich enough to understand or maybe we’re just tightwads - but I work too hard for my money. Not a dam dime goes out without me knowing it’s valid.
Servicers should be eliminated and banks should bear the full responsibility for the mortgage. That said, there is an element of personal responsibility, checking statements, escrows, etc..
What a mess...
What chaps me is they use this escrow money and you don’t get a dime in interest. Billions of dollars. That’s why they pay the taxes and insurance on the last day it’s due. One day amounts to a lot of money in interest gained.
Well, is this problem going to be solved?
This just doesn’t past the smell test. Where are the thousands of people out there screaming that their homes were taken away even though they were making their payments? Now AGs of all 50 states are getting involved right around election time.
Do you have any idea the infrastructure and cost it takes to pay taxes to thousands of taxing authorities for hundreds of thousands of borrowers?
In about 10 years and or until the next fraud comes up...
Yes, I do. That still doesn’t make me happy that they don’t pay interest on something that’s forced on you. If you don’t have 20% down payment even with great credit and qualifying income you have to pay into an escrow account.
Sadly, most people don’t know that any overage must be refunded within 45 days if it’s requested in writing. And the banks don’t inform people of this either.
There are people who’ve had overages for 30 years and when they pay off the loan they get it back. Usually a pretty good sum that never paid a penny in interest. They should at least be made to pay interest on any overage.
They make it profitable or they would not do it.
Lesson is, as several freepers have pointed out, PAY FOR INSURANCE AND PROPERTY TAXES YOURSELF, do not have the mortgage companies do it....
I have always paid for these fees myself, however, it never fails, my current lender, every year, claims that I am not paying my homeowners insurance, they conveniently lose my docs for this, and then attempt to charge me some massively INFLATED insurance premium...
Wells Fargo tried the insurance scam on me.
They bought my loan from the first bank. Fine
They sent me a new coupon book. Fine
They sent me a not saying I had not told them who to send insurance escrow to, so they had bought insurance for me, from their preferred company :).
They backed off in a nanosecond, once I called BS. They bought the loan...they should ask the seller who escrow payments go to (they figured out where the taxes went to right?). And if they really couldn’t figure it out, they could ask me...see I don’t know they need to know something until they ask.
Anyway, it got cleared up real quick. But, its a numbers game. If only 1% of borrowers don’t pay attention, they’ve made millions. Borderline criminal.
Since I have a mortgage I also have an escrow account with it.
When the taxes or insurance go up the end/start of the period they send me a note on total new fee’s and I’m given a choice - pay the full increase or my monthly fee will go up so much a month.
Since the fee’s and total amount are on the monthly statement the only “hidden” amount would be the insurance. I’d have to check with the wife to make sure thats the right amount.
Actually most escrow accounts that I see have shortages. The Feds strictly regulate how much can be kept in the accounts and most have a shortage 12 months after closing.
Most of the logic behind having taxes and insurance impounded is to make sure those items get paid.
Some people (first time home buyers especially) have a high degree of financial illiteracy and may not pay them on time
Our county has a discount for early payment. All the escrow accounts I know of pay early and get the discount.
Escrow accounts (for taxes and insurance) are one of the most misunderstood aspects of life.
I’m constantly amazed that otherwise bright people can be so stupid when it comes to understanding an escrow account.
Especially if you have an escrow shortage.
I agree. I wouldn’t surprise me a few, small, totally sleazy lenders tried to force homeowners into foreclosure by low balling the escrow and then putting the subsequent, “short” payments into suspense, but there is now way this is a widespread practice or one used by reputable banks. I also can’t believe any court approve such a foreclosure.
I have never heard of annual mortgage statements, as opposed to monthly.
Besides that, in today’s horrible housing market there is no financial incentive for lenders to try to force bogus foreclosures, on good paying borrowers. They are already taking huge losses on the underwater homes of defaulting borrowers, that they are forced to forclose on.
I can believe the part about lenders/services overestimating the escrow payments a bit, but that is pretty much nickel and dime stuff anyway, and in the end the borrower would be made whole.
Countrywide had an option that once the loan had been in good standing for 24 months, they would remove the insurance requirement and then the homeowner could pay the insurance directly. My guess is that this may be an option that these banks do not advertise, might be worth it to inquire...
Did you see the post on FR where an owner’s house was foreclosed on and there was NO MORTGAGE on the home???
or servicers have to have complete and unfettered compromise authority and without that authority they can not file the forclosure.
for mortgages specifically, original promissory notes. NO e-copies.
There just is no simple way to keep the banks from failing or defraunding you.
I had an issue once where my health insurance was cancelled because Blue Cross posted both my wife and my payments to her accout.
Thereby creating a huge windfall of overpayments for Blue Cross to use.
Repeated telephone efforts to get it staightened out were repeatedly met met with assurances from Blue Cross service representatives that the the payments had been reposted, all was fine, you worry too much, trust us, blah blah blah.
Naturally we did not record these calls, but you know Blue Cross possibly did.
When I went to the hospital however the hospital was informed by Blue Cross that my insurance had lapsed for non payment many months previously.
As Blue Cross now found themselves exposed to a lawsuit they simply denied everything, all the calls etc and claimed that both the payments had been properly posted to my wifes account at our instructions. The payments were made individually every moth using US Banks bill pay system, BUT according to US Bank we were responsibleto make actual hard copy captures of each computer transaction.
US Bank refused to provide us with any records showing these tranactions, only that X $ went to Blue Cross on X day.
I am personally satisfied that even had we made and saved copies of each transaction at the instant it was done, Blue Cross would have stonewalled because they evidently have no real legal oversight.
I am also personally satisfied that US Bank could and would have provided Blue Cross with the evidence they denied me had it been in Blue Crooes interest.
You can’t keep it simple enough to protect yourself from these industries.
They are essentially criminal enterprises.
How Y’all liken Kentucky so far?
For all you "blame the poor defrauded 'deadbeat home buyer" . . . It is going to get very ugly out there in reality village. Banks, mortgage lenders and Wall Street giants are going to go BK. "Good riddance," I say, and "Put that in your 'Too Big to Fail' Pipes and breathe deeply."
'Nuff said by me here on FR.
And the American taxpayer is the chump holding the 6 TRILLION DOLLAR bill for freddie/fannie/fha...free market..NOTTT
The left wing media seems to be trying to spin the mortgage default crisis into a “evil, crooked banks are stealing homes from innocent homeowners, who have never missed a payment crisis”.
The banks have screwed up royally, first by making these loans and second with shoddy paperwork and the consequences could become even more devastating than they already are, both the banks and the housing market. However, in 99.999 of cases banks are NOT trying to snatch homes that they (or perhaps, technically, some other lender in the chain who didn't properly transfer title) are not entitled to foreclose on.
In over 99% of foreclosures, people are losing their homes because they did not pay the mortgage.
It's all about solvency, not liquidity, just as it was two years ago.
how about banks which put in “forced place” insurance and that disqualifies the home owner from modification.
Next year will be hell on many financial levels.
Never ever have a direct payment. Always check the bills and statements.
And never ever use Wells Fargo. They don't check signatures. I became president of our kids' afterschool activity program so went to Wells Fargo to get new signature cards, change addresses, and the usual making sure everything was up to date. I'd already heard that the previous president (who had died) couldn't get new signature cards and continued writing checks and sure enough, they hadn't changed any names since the account had been opened many years before. Then they started hassling me and wanting my social, the bank that held my mortgage (ha, didn't have a mortgage - don't believe you so bring in the deed - I don't think so), my cars and the title holders (ha, didn't owe on them either and don't even ask for the title), and on down the list of personal info that had nothing whatsoever to do with the account. Then they demanded the ex-president come in - uh, hello, you know she died and half of you went to the funeral! Nope, didn't matter, they still insisted she come in. Needless to say, after a few minutes of this crap I told them to just close the account. They refused. I walked over to the teller's window and wrote a check for the entire amount and signed my name. The idiots cashed it.
Regarding the other stuff, it's why I like it simple. You can't guarantee things will go smoothly, but you can reduce the risk of screw ups. It's all about mitigating risk. I did learn to record transaction numbers though.
Speaking of insurance, I'm about to drop my health insurance and go with a $10,000 deductible package, btw.
And if they don't have that 20% some other fee is attached. Bottom line, don't buy until you have the 20%, pay your own taxes and insurance, and get the loan for as short a period as possible so they have less of a change to mess you over.
See my #29 below on Wells Fargo. I will NEVER do business with them.
The problem with waiting until you have 20%....if everyone did that, man, talk about a housing slump.
Which reminds me, wonder why we don’t hear about the PMI paying off 10, 15 or 17% of the loan?
A lot of these problems could be avoided by doing business with a credit union.
My credit card company did that to me several times even though we were on separate accounts. Of course, they stupidly thought I wouldn't catch the added charges for non-payment on my statements.
Always make a note everytime you speak to these people. At the end, ask for their name again and how to spell it. They'll know you're keeping a record so there's less chance of them messing you over. And always make a copy of every transaction. Order checks that come with a duplicate. It's your reciept to prove payment was made.
No, that's a big part of the housing problem now. People didn't bother saving before they bought a house that was out of their price range to begin with. That's why there's such a thing as starter homes. You don't need a McMansion first time outta the gate.
The problem now is people bought with ARM’s and interest only loans. Then when the rate adjusted they couldn’t afford the payment and couldn’t refinance (like they’d planned) because the house didn’t appraise. And they didn’t appraise because the price they’d paid initially was more than the house was worth BECAUSE they’d bought with ARM’s and interest only. Many of these people could have put 20% down and would still be upside down.
With that said, I agree it’s smarter to put the 20% down so you don’t have to pay PMI and can get the escrows waived. HOWEVER, there were 80/15 loans. People got two loans but only put 5% down and paid no PMI and got escrows waived. That means these loans that defaulted had no PMI to pay the bank. Plus, I’m sure these people didn’t pay their escrows either.
Then there are those who simply lost their job and can’t afford the payments. We’re definitely in a mess that’s gonna’ get worse.
Right now it’s not that easy to get a loan with good credit. BOA has bailed on the wholesale mortgage business. 3.5% does not attract many investors.
Want to get so outraged that your friends will start to fear for your sanity __ ? Read these two reports:
Naturally we did not record these calls, but you know Blue Cross possibly did.”
Insurance carriers note comments re each call on their system. You don’t need to record, but you should always make a written note of the date and time of your call, the full name of the person you spoke with and a summary of their comments. You can also log-on to BC systems now as a patient or a provider and check the status of your account. Recommend doing this at least once a month. If you have recently discussed a problem with them that needs resolution, give it 5 business days and then check the record. Repeat as necessary!
I don’t think that writing a mortgage for 90% or even 95% of a home’s value is so out of line but when lenders were writing 105% loans they were out of their minds.
I recently had to do that exact thing myself. My wife had a $5,000 deductible with Humana.
She minorly injured her eye at the Cincy convention center on a weekend.
Knowing that any hospital would probably make her wait for 8 to 10 hours to be seen we went to one of the Urgent Care clinics.
We saw folks without insurance treated for $50 for knife wounds etc.
Stupidly we told them we had insurance,
It eventually cost several thousand dollars for nothing, just to be safe, because she only has two eyes. What a joke.
Humana raised our rates after paying nothing to over $10,000.00 a year. Sooooo
I did Aetna $10,000.00 via the internet.
When I talked to my insurance broker, who had helplessly tried to deal with the Blue Cross fiasco and facilitated our change to Humana, she pretty much said “go for it”, “I can’t do anything for our clients in this business any longer”.
Kentucky is the most beautiful place on earth, glad you are here.
The names and dates of phone conversations are irrelevant if the carrier is in a fix and wants to deny, unless of course you want to spend a million dollars and ten years fighting their attorneys.
We had that.
However, your advice to actually check via the internet or even the phone # on the back of your card every month is GOLDEN.
Everyone MUST do that.
This reminds me of when I tried to make an online payment of $2500 to my BofA Visa card. I didnt press the period key hard enough and the number I submitted was $250,000. Now, I owed about $5,000 at the time, so here is what happened:
1. They processed my payment as two $99,999 payments and one $60,002 payment, for a total of three payments.
2. BofA paid off the full $5000.
3. The three payments bounced at my bank. For some reason my bank only charged the single $20 nsf fee though.
3. BofA reversed the payments and returned my balance to ~$5000. This was logged as a cash advance. The interest rate on remaining balance on a card that is cash advance is roughly twice the normal rate (its close to 20%).
4. BofA charged a returned check fee of $39 for EACH payment (remember, they broke it into three payments).
5. My wife got a nasty call from BofA saying we were late on our payment, etc.
The total cost to me for not including a decimal place on a payment was roughly $140 plus about $30 of extra interest in just a few days.
And heres the fallout:
When my wife discussed it with the BofA help desk person, they were belligerent and treated her like we were deadbeats. We have a perfect record with them. Weve never been late and never gotten close to our credit limit. The representative offered to remove ONE of the $39 charges and that was it. My wife was literally talking to them on one phone and me on another at the time and I responded to that offer as follows: I told her to tell them to leave the card active but we would stop using it. I’ve worked with the payment card industry (PCI) and have worked on PCI projects at two separate companies. I know how banks make money from card use. :)
I then called the help desk number the next day, knowing that they log the conversation for each call. The operator this time was very friendly and reversed all charges, removed the extra interest and moved the remaining balance from the high interest category to where it belonged.
This was our main card and the only one we didnt pay in full every month. We do now. It is also no longer our main card. We only have two, btw, and if Costco took this card we would only have one. :)
I paid the $20 NSF at my bank and did not even bug them about it...
One should never trust banks and always get transaction numbers after you talk with them. It matters.
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