Posted on 02/01/2008 10:06:48 AM PST by no nau
When you're on the one of the fast-tracks to foreclosure, accepting a payment can imply that the servicer agrees you aren't delinquent. It's legal advice vs. positive cash flow. Guess which way they lean? Even among those who accept it, they will apply it to one of the mysterious and invisible "suspense" accounts and not to the principal or interest.
Typically, a payment is returned because it does not include additional fees or charges that may or may not have been appropriate for the loan.
In more egregious levels of the scam, it is returned to add another month's late fees and interest, and in particular, they will be returned in the third month which opens the door to acceleration and even more fees, including legal fees to one of the foreclosure mills and reinstatement charges under a forbearance agreement.
These kinds of cases are not errors or simple mistakes. It is a well-thought out, carefully calculated and very systematic scheme. There are behavior forecasting models applied to loan portfolios that they claim can accurately predict which borrowers are supposedly more likely than others to default and which among those are less likely to be able to put up a fight.
You're a loan officer - look at the tools the industry offers for judging risk in originating and underwriting loans. The same kinds of analytical tools have been developed by and for the special servicers for them to maximize their return on investment. Put it this way, they wouldn't buy problem loans if they thought they might lose money on them.
They stand behind the phony shield of the "sub-prime" borrower, such that any action they take is justified because the hapless consumer is nothing more than a deadbeat that is trying to live in a house without paying for it.
When it's the borrower's word against theirs, the vast majority of victims are instantly discounted, and a very simplistic view of the world such as yours, dominates the discussion. "Companies wouldn't do that," is the most common view, followed quickly by "that would be illegal," along with, "if you made your payment on time you wouldn't have a problem."
None of those immediate conclusions is true when it comes to a victim of a scheme such as predatory servicing.
Speeding is illegal but almost everyone does it because the chances of being caught are very slim if you're familiar with the roads you're driving on. The laws that penalize speeders haven't stopped people from speeding, nor have the laws against driving while intoxicated stopped people from drinking and driving.
We live in a society that is apparently willing to put up with a certain amount of illegal behavior.
No matter what you ask them on the phone, it doesn't matter; they don't have to answer honestly. No one is getting criminally prosecuted for outright lying or misleading a borrower, despite what the laws say. Here and there a few civil suits get filed and then settled in private, and in at least one case an actual (albeit miniscule) penalty was assessed against Fairbanks, but it is still simply to profitable and too easy to stand back and say this is what you get when you have sub-prime borrowers.
They paid the speeding fine because they were unlucky enough to have been caught.
So first, take off the blinders and realize not everyone in the lending industry behaves in the way you expect. They have other motives that you may still not accept as real.
Sounds almost like the ex-credit card company of mine that takes 6-10 business days to cash your check. One day late and they hit you with a $35 late fee plus interest.
Interesting stories at the site about shady dealings by mortgage loan holders. “No nau”, thanks for posting the article.
Always pay your credit cards and mortgage online.
There are a few other similar “scams” that come up, like a bank not processing your payoff for a few weeks, until the loan accrues more interest and therefore you still owe money, and the charge a penalty next month when you don’t pay.
The credit/loan industry has its share of bad actors.
And always get to know their "posting" policies, weekend rules and time zones, i.e. a payment received after 1PM ET today posts the next day. And ALWAYS ALWAYS print out a copy of the "payment accepted" notification with tracking number.
And most important, don't wait until the last possible day/hour to post your online payment. You'll never know when your internet connection might have issues, their secure website might be down... all are of course not their fault.
I love that all your credit card payments are due on Sundays. We are getting rid of all CCs permanently. Dave Ramsey is right: they are sharks!
This is the same routine that was attempted on us several years ago. As a result of buy-outs, savings and loan debacles, and mortgage companies just selling our mortgage to each other we ended up with 5 different companies over the life of our loan.
Got sick about 15 yrs. ago, missed two payments and they did not credit a third on time and whattaya know, we are in foreclosure. No amount of talk or money(other than an EXTRA 5 grand)would change their mind. Talked to a real estate attorney and he said this is the way they operate: grab homes that have lots of equity, foreclose, sell house, pocket profit and extra fees and the hell with the owners. Their thinking was the hell with the law and the borrower will not have the money to pursue in court. Of course, no lawyer will take it on a contingent either.
We own the damn thing outright now but I have always wondered if there are any honest mortgage companies out there?
“Sounds almost like the ex-credit card company of mine that takes 6-10 business days to cash your check. One day late and they hit you with a $35 late fee plus interest.”
Then jack your rate up.
My loan got transferred to Ocwen when Aegis went bankrupt. They charge a ten dollar fee for that.
Do a search of +Ocwen and +fraud if you want to see why I am nervous about this company.
“The credit/loan industry has its share of bad actors.”
Share? I’d say at least half are sharks in one form or another.
Student Loan companies work pretty much the same way. I am dealing with one now whose abllity to lie on the phone is breathtaking.
I also have some mortgage horror stories also. Greenpoint was practically a loan shark. But the wildest one is this obsure company my mortgage was sold to, that they wouldn’t let me pay off the mortgage unless I went down to Miami and paid it in person.
1 PM? You're lucky. I had one bank claim the time the payment needed to arrive was 8 AM, which is before they get the day's mail. They could have just as easily moved the due date back to 5 PM the previous day, but that would have cut them out of late fees of people trying to push payment to the last moment.
Now I always pay on line, usually two days before the due date. The 1.0% annual interest I would get on those extra two days of holding the money just isn't worth the hassle of pushing payments to the last minute.
Actually one good one, from a major financial firm’s servicer, is that a payment for principal (specifying principal on the check and with a letter saying its for principal) will automatically apply it towards the next payment instead of towards principal. Had to make a call in December about that one.... They corrected it..
There are a few other similar “scams” that come up, like a bank not processing your payoff for a few weeks,
The National City check *just cleared* on Monday, 1/28. The Capital One check “mysteriously” isn’t accounted for yet, and they hit the customer’s account for a payment. I stopped payment and overnighted a check which they *did* get. Had a nightmare with a payoff with Cap One last year - they cashed the check, “keyed” the payoff in incorrectly so it looked like there was still a balance owing. It took TWO MONTHS for us to get the title.
Just get your mortgage from a lender that won’t sell it.
I’m originate loans for such a lender, #2 in the country. I’m amazed when my rate may be .125% higher than some small lender and people choose that lender solely based on interest rate.
They have no idea how to choose a lender, and what things a good company can offer.
Escrow accounts get messed up when loans are sold, etc. etc....
Do a search of +Ocwen and +fraud if you want to see why I am nervous about this company
Look up foreclosure.com and see how many are Ocwen foreclosures...scary.
There is nothing predatory about these practices. The author even admits that there is a legal concern of waiver if the lender accepts partial payments from the borrower. This is a legitimate concern. Moreover, if a foreclosure is already in process, a waiver by the bank might get the case dismissed, which means that they will have to start all over again in the process. Do you have any idea how many hoops a bank has to jump through to foreclose on residential real estate and have it sold? The delays and expense is exhorbitant. The need to forclose RARELY benefits the bank.
Can you afford to have a different company rewrite the note and get yourself away from Ocwen? It may well be worth it in the long run, especially with interest rates they have now (unless yours are currently lower).
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