Real Estate News and Advice
October 25, 2007
Agent News > Agent Advice
The Subprime Servicing Scam: Beware
by George W. Mantor
realtytimes.com
...Servicing companies have gone from passive collectors and distributors of other people's money to active, predatory, hard-money lenders targeting sub-prime borrowers.
They might not even wait for you to get into trouble, but simply insist you are late.
Scam 1. We take so long to process our mail it could really cost you.
Most mortgages have a grace period of sorts. If your payment is due on the first, a late charge won't be imposed until the fifteenth. But your payment is technically late the day after the due date.
And that is when the telemarketers of the servicing firm begin to call. The purpose of this call is to scare you into believing that, "due to extended internal processing times and the unpredictability of mail delivery," you are going to incur a late fee. To avoid that hefty late charge, they suggest stopping payment on your check and allowing them to take the money directly from your bank account.
Do not be tempted. It will certainly cost you at least for the stop payment on the check, and wouldn't you know it, the mortgage servicer can also charge you a fee for this.
Cha$$$Ching$$$
Scam 2. Please try our easy pay program.
This is the hi-tech version of number three. Your bank statement shows the payment came out on time, but the mortgage servicer doesn't credit the payment to your account for two weeks. Late fees begin to mount up while you send copies of your bank statements showing the withdrawals. Nonetheless, they insist you are late, and late on the late fees, and monies start to compound.
Cha$$$Ching$$$
Scam 3. We didn't get your payment and you can't prove we did.
You send your check and they cash it. But no matter how many cancelled checks you trot in front of them, they deny receiving payment. See above.
Cha$$$Ching$$$
Scam 4. We're here to help in your time of need.
And if you do actually fall behind on your payments, they will sniff out money you didn't even know you had and wring it out of you.
They will try to get as much money from you as they possibly can. First as a sizable down payment and then as high a monthly make-up payment as you'll agree to. They take all of your cash and leave you with a payment that might be 35 percent higher than the one you already couldn't make.
In the process you'll be asked to sign away many of your rights and you do it because they said they care.
They exploit you at your most vulnerable time, because they know that most people would do anything not to lose their home. They intimidate you into suspending judgment and going along out of fear and embarrassment.
And why? Greed. They get paid a small fee to process payments, but when a payment is missed, they can charge whatever fees they want and keep all of the money. They are nothing more than shakedown artists operating in a largely unregulated arena, who have figured out a way to wring millions of dollars out of nervous consumers.
And because they can. You didn't choose your servicing company, they chose you. They chose you because they know all about you and know that you will make a good target. You can't fire them, quit them or take your business elsewhere. Once they begin to destroy your credit, you couldn't get another loan to pay them back even if you wanted to. And even if you refinance, there is no guarantee you won't wind up back with the same servicer.
Lest you doubt their motives, it is a well known business axiom that you reward the behavior you want.
Read the remarks of the president of Ocwen Loan Servicing, Ronald M. Faris, after a $1.8 million judgment was awarded to a customer. "We make sure our employees are aligned with this effort by paying them incentive bonuses when they succeed in keeping borrowers in their homes."
Now that sounds noble if not a bit self-serving. But the incentive isn't paid for keeping a borrower in their home, it's a percentage of the money collected. Abuse of borrowers is their business plan and the longer they keep them in their home, the more money they can collect.
Right now all of the focus is on the predatory loan-makers not the loan servicers. There isn't any help coming from lawmakers. As a matter of fact, industry lobbyists crafted the legislation that makes it all perfectly legal. Therefore, you need to protect yourselves..... |
