Foreclosure Fraud: How You Can Be Driven to Default Even if You Pay On Time

CBS MoneyWatch ^ | 101310 | Jane Bryant Quinn

[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.

[Straight Vermonter]

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.

[nkycincinnatikid]

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.

[nkycincinnatikid]

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.

[RobRoy]

This reminds me of when I tried to make an online payment of $2500 to my BofA Visa card. I didn’t 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 (it’s 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 here’s 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. We’ve 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 didn’t 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.