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 industry’s slimy underside, firms push borrowers into default and foreclosure, even when they’ve 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 industry’s slimy underside, firms push borrowers into default and foreclosure, even when they’ve 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???
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