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(The Consumerist)   Paying extra on your mortgage and sending it in early? At Wells Fargo, that's a Foreclosin'   (consumerist.com) divider line 115
    More: Fail, Wells Fargo, loan modification  
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6351 clicks; posted to Business » on 17 May 2013 at 10:15 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-05-17 08:48:48 AM
Of all the quotes in all the world, this is one that I least expected to ever see in a Consumerist article:

This all seems a bit off to us, so we've reached out to our own contacts at Wells Fargo to see if there is any further explanation.
 
2013-05-17 09:01:39 AM
and people wonder how the housing bubble could have burst and why people don't pay their mortgages.
 
2013-05-17 09:08:39 AM

SurfaceTension: Of all the quotes in all the world, this is one that I least expected to ever see in a Consumerist article:

This all seems a bit off to us, so we've reached out to our own contacts at Wells Fargo to see if there is any further explanation.


Yeah, my suspicion is that this homeowner and Wells Fargo have different interpretations of what "paid off" means.

I mean, my further suspicion is that this is Wells Fargo's fault, but I do want more of an explanation here.
 
2013-05-17 09:08:45 AM
fta: "Apparently those guidelines require that the borrower pay exactly the amount owed and exactly when it is supposed to be paid, as the bank tells WFTV his early payments violated the guidelines of the modification."

Maybe the guy should have had a lawyer read the modification to him. It's a BS detail, but if it's in the paperwork...
 
2013-05-17 09:13:21 AM
"For some loans, completing trial payments is a significant step toward a permanent modification; however, in this instance, the loan was part of a mortgage-backed security and in a protected pool, with specific payment guidelines. We are working with [the homeowner] to explain the guidelines and explore options that may help."

Prepayment is bad for the MBS investor. I doubt that prepayment was in the original contract, although who the f*ck ever reads those, but it sure sounds like the guy bought a house, then Walls Fargo packaged it after the fact as part of a pool of loans that were assured to be 'same payment always on time' and then this guy had the gall to actually prepay on it. In which case they owe him a big f*cking apology and some money on top.

IMO, mortgage backed securities are a mess. It's like an index fund of stocks, only nothing within the index fund has any knowable value until it's sold.
 
2013-05-17 09:16:31 AM

sno man: Maybe the guy should have had a lawyer read the modification to him. It's a BS detail, but if it's in the paperwork...


This is probably the case, my guess is that his real estate lawyer never explained prepayment penalties to him. Wells Fargo should have made this clear to the person or given him a way to modify the loan so prepayment isn't penalized.

I mean seriously there should never EVER be a penalty for paying off loans ahead of time. EVER. It should be a goddamn law.
 
2013-05-17 09:16:50 AM
Don't people realize that by OVERPAYING scheduled payments that they are denying these Brave Pioneers interest, and that means that their profit margin on these mortgages will be reduced? That violates the TOS and that means that this man is a monster?

I mean, if folks paid back everything that they owed early, it would cost the industry billions, and that will cost CEOs millions upon millions. Won't someone think of the poor lenders? Won't someone think of the jobs lost as folks get their credit histories in order? You cannot charge outrageous sums to folks, if their credit is sterling. By paying back early, he is denying them scheduled profits, and thus putting jobs on the line. Won't someone think of the job creators?
 
2013-05-17 09:18:47 AM

hubiestubert: Don't people realize that by OVERPAYING scheduled payments that they are denying these Brave Pioneers interest, and that means that their profit margin on these mortgages will be reduced? That violates the TOS and that means that this man is a monster?

I mean, if folks paid back everything that they owed early, it would cost the industry billions, and that will cost CEOs millions upon millions. Won't someone think of the poor lenders? Won't someone think of the jobs lost as folks get their credit histories in order? You cannot charge outrageous sums to folks, if their credit is sterling. By paying back early, he is denying them scheduled profits, and thus putting jobs on the line. Won't someone think of the job creators?


This is why you are favorited. :)
 
2013-05-17 09:38:40 AM
Just another reason to stay with my credit union.
 
2013-05-17 09:49:05 AM
I now actually root for big business to crush the little guy all because of The Consumerist.
 
2013-05-17 10:01:20 AM

Lucubrationist: Just another reason to stay with my credit union.


Until they sell your mortgage to somebody else....
 
2013-05-17 10:05:28 AM
Please let this be an example where public media shaming of a "technically right" company gets them to change their tune and not f*ck this guy out of his home, credit rating and career just to prove some corporate bureaucrat right.
 
2013-05-17 10:09:57 AM

bdub77: This is probably the case, my guess is that his real estate lawyer never explained prepayment penalties to him. Wells Fargo should have made this clear to the person or given him a way to modify the loan so prepayment isn't penalized.


I've heard of prepayment penalties, but never "foreclosure" as one.

You're right though, prepayment penalties should be outlawed.

I wouldn't doubt if sub-prime loans have higher prepayment penalties, even though their higher interest rate is because of the increased risk, and prepayments reduce their risk.
 
jgi
2013-05-17 10:20:07 AM

Lucubrationist: Just another reason to stay with my credit union.


Just another reason to stay out of debt.
 
2013-05-17 10:24:50 AM

bdub77: Prepayment is bad for the MBS investor. I doubt that prepayment was in the original contract, although who the f*ck ever reads those, but it sure sounds like the guy bought a house, then Walls Fargo packaged it after the fact as part of a pool of loans that were assured to be 'same payment always on time' and then this guy had the gall to actually prepay on it. In which case they owe him a big f*cking apology and some money on top.


I doubt this is what happened.  Wells Fargo selling the loan wouldn't change the initial contract.

The article said this was part of a loan modification process, so that is where this went south somehow, not due to MBS.
 
2013-05-17 10:27:25 AM
Soooo...he got in trouble because his overpayment behavior negatively impacts the investment made on the MBS?  Makes sense.  Right....yeah punish those trying to pay their bills!!!  Good on you Wells!!!
 
2013-05-17 10:35:57 AM
This doesn't seem right. Prepayment has to be allowed (without penalty) on a mortgage, because otherwise you wouldn't be able to sell the house before the mortgage is up.
 
2013-05-17 10:50:12 AM

MugzyBrown: bdub77: Prepayment is bad for the MBS investor. I doubt that prepayment was in the original contract, although who the f*ck ever reads those, but it sure sounds like the guy bought a house, then Walls Fargo packaged it after the fact as part of a pool of loans that were assured to be 'same payment always on time' and then this guy had the gall to actually prepay on it. In which case they owe him a big f*cking apology and some money on top.

I doubt this is what happened.  Wells Fargo selling the loan wouldn't change the initial contract.

The article said this was part of a loan modification process, so that is where this went south somehow, not due to MBS.


Yeah, this seems to be more of a situation where he went to the bank claiming that the mortgage payments were too much so they offered him a modification (which presumably lowered his payment by either lowering the interest rate or extending the length of the loan).  He then starts dropping all kinds of money on them and at irregular intervals, so they come back to him and say "why do you need this modification if you were capable of making all these payments?"

Now, how that gets to foreclosure, I don't know.  But this seems to be less of a matter of prepayment penalties and more of a matter of somebody asking for a loan modification and then acting like he never needed one in the first place.
 
2013-05-17 10:53:38 AM
Mortgages are complex legal contracts. Whenever I've acquired one or re-financed, I pay an attorney to review it and let me know what the document really means. It's much cheaper than trusting a mortgage lender. If you don't fully understand the consequences of a contract or agreement, you only have yourself to blame. Caveat emptor
 
2013-05-17 10:56:51 AM
I am not going to read the trumped up drama bullshiat article from The Consumerist, I would just like to say. It wouldn't surprise me with WF.
 
2013-05-17 10:57:09 AM

Lost Thought 00: This doesn't seem right. Prepayment has to be allowed (without penalty) on a mortgage, because otherwise you wouldn't be able to sell the house before the mortgage is up.


Depends on the contract you agree to for the loan, they can allow you to pay more, pay off, etc. or not, that's one of those things you check and agree to prior to signing off on it.

I'm assuming when they did the loan modification that they altered that and the dude signed off on it regardless, either not reading it, or thinking he had no choice in the matter.

/I say this with experience since I'm in the middle of closing on a home now and my personal mortgage specialist  made sure to point out all this stuff and go over each and every page with me, and that prepayment part was very important...

**FUN FACT** Paying an additional $100 a month or so towards your principal can allow you to pay off a 30 year mortgage in about 15 years.
 
2013-05-17 10:57:24 AM

bdub77: sno man: Maybe the guy should have had a lawyer read the modification to him. It's a BS detail, but if it's in the paperwork...

This is probably the case, my guess is that his real estate lawyer never explained prepayment penalties to him. Wells Fargo should have made this clear to the person or given him a way to modify the loan so prepayment isn't penalized.

I mean seriously there should never EVER be a penalty for paying off loans ahead of time. EVER. It should be a goddamn law.


Virtually all municipal bonds are arranged this way and many loans that offer exceptionally low interest also require the full interest payment.  If the bondholder (or in this case the MBS holder) can get a lower rate of return than they were guaranteed then why bother?
 
2013-05-17 11:03:16 AM

Mr. Eugenides: bdub77: sno man: Maybe the guy should have had a lawyer read the modification to him. It's a BS detail, but if it's in the paperwork...

This is probably the case, my guess is that his real estate lawyer never explained prepayment penalties to him. Wells Fargo should have made this clear to the person or given him a way to modify the loan so prepayment isn't penalized.

I mean seriously there should never EVER be a penalty for paying off loans ahead of time. EVER. It should be a goddamn law.

Virtually all municipal bonds are arranged this way and many loans that offer exceptionally low interest also require the full interest payment.  If the bondholder (or in this case the MBS holder) can get a lower rate of return than they were guaranteed then why bother?


We aren't talking about munis, we are talking about loans. A muni bond is not a loan. And because an MBS is a pool of loans, prepayment should be factored into the interest structure and be seen as part of the risk associated with purchasing a pool of mortgages.I think what rugman11 said is probably the case. This guy applied for a mortgage mod and there were penalties associated with it because if he prepays after getting a mortgage mod he's essentially tried to ripoff the bank.
 
2013-05-17 11:03:33 AM

KellyX: Lost Thought 00: This doesn't seem right. Prepayment has to be allowed (without penalty) on a mortgage, because otherwise you wouldn't be able to sell the house before the mortgage is up.

Depends on the contract you agree to for the loan, they can allow you to pay more, pay off, etc. or not, that's one of those things you check and agree to prior to signing off on it.

I'm assuming when they did the loan modification that they altered that and the dude signed off on it regardless, either not reading it, or thinking he had no choice in the matter.

/I say this with experience since I'm in the middle of closing on a home now and my personal mortgage specialist  made sure to point out all this stuff and go over each and every page with me, and that prepayment part was very important...

**FUN FACT** Paying an additional $100 a month or so towards your principal can allow you to pay off a 30 year mortgage in about 15 years.


Your fun fact is a valid strategy but your conclusion is anywhere from accurate to completely wrong. Some people have mortgage balances of $35,000. Others have balances of $350,000. Let me assure you that an extra $100 a month will not have the same effect on both.
 
2013-05-17 11:03:49 AM
In a business sense this doesn't make any sense at all for Wells Fargo. It would cost them a lot more money to foreclose on this guy then to just accept the payments he is sending them. Wells should be grateful he's actually paying them back.
 
2013-05-17 11:05:15 AM
So the banks are realizing that they are losing interest profits to homeowners who pay their balances down early, so they concoct a plan to increase their profits by offering a lower interest rate in return for a promise to only pay the amount due each month. It is then up to the homeowner to decide whether to accept these new terms or reject them and stay with the original loan. If you pay attention to what you read, you will never end up in a situation like this. The owner must have signed something agreeing to make minimum payments.
 
2013-05-17 11:05:20 AM

Inyego: Mortgages are complex legal contracts. Whenever I've acquired one or re-financed, I pay an attorney to review it and let me know what the document really means. It's much cheaper than trusting a mortgage lender. If you don't fully understand the consequences of a contract or agreement, you only have yourself to blame. Caveat emptor


While this is generally true, it is often the case that a court will not hold fine print against an ordinary consumer based on the idea that there is a huge power/information disparity between a well lawyered up corporation and a regular guy.  Now my expertise is totally not in mortgages, and it may be that a court would look at this contract and state that this guy is SOL, but as a legal rule caveat emptor is usually only reserved for "sophisticated parties," (i.e. guys with easy access to legal counsel).
 
2013-05-17 11:07:28 AM

KellyX: **FUN FACT** Paying an additional $100 a month or so towards your principal can allow you to pay off a 30 year mortgage in about 15 years.


That's no where near a fact.  The impact of paying down the principal depends on the total loan amount and the interest rate.  The higher the rate, the more compound interest the prepayment eliminates over time.  The higher the initial principal of course the less a set amount will impact the loan.

It's good to pay down a mortgage early if you can, but virtually all debt today has a much higher interest rate so you are better off reducing consumer debt before mortgage debt.

For me, my mortgage is at 3%, the car is at 4% and credit cards would be at 12% (if I carried a balance).  Better to keep the cards paid off and pay off the car early.
 
2013-05-17 11:08:06 AM

jgi: Lucubrationist: Just another reason to stay with my credit union.

Just another reason to stay out of debt.


Rather unrealistic unless you like living in a rental.
 
2013-05-17 11:08:13 AM

rugman11: Yeah, this seems to be more of a situation where he went to the bank claiming that the mortgage payments were too much so they offered him a modification (which presumably lowered his payment by either lowering the interest rate or extending the length of the loan).  He then starts dropping all kinds of money on them and at irregular intervals, so they come back to him and say "why do you need this modification if you were capable of making all these payments?"

Now, how that gets to foreclosure, I don't know.  But this seems to be less of a matter of prepayment penalties and more of a matter of somebody asking for a loan modification and then acting like he never needed one in the first place.


The guy didn't read or understand the terms and he is now getting screwed.  And this type of thing gets to foreclosure based on simple laziness of the side of the bank.  Technically they are in the right but it doesn't help public perception of the bank nor bank profits when they make stupid moves like this.  The bank should work with the guy to resolve the problem and move on.

/but this being Florida - all bets are off.
 
2013-05-17 11:09:15 AM

bdub77: A muni bond is not a loan.


The level of derp in that statement is beyond epic.
 
2013-05-17 11:10:24 AM

Mr. Eugenides: bdub77: A muni bond is not a loan.

The level of derp in that statement is beyond epic.


Oh I'm sorry let me spell it out for you. A MORTGAGE LOAN IS NOT A MUNICIPAL BOND.
 
2013-05-17 11:10:27 AM
(featured partner)
 
2013-05-17 11:11:38 AM

Teiritzamna: Inyego: Mortgages are complex legal contracts. Whenever I've acquired one or re-financed, I pay an attorney to review it and let me know what the document really means. It's much cheaper than trusting a mortgage lender. If you don't fully understand the consequences of a contract or agreement, you only have yourself to blame. Caveat emptor

While this is generally true, it is often the case that a court will not hold fine print against an ordinary consumer based on the idea that there is a huge power/information disparity between a well lawyered up corporation and a regular guy.  Now my expertise is totally not in mortgages, and it may be that a court would look at this contract and state that this guy is SOL, but as a legal rule caveat emptor is usually only reserved for "sophisticated parties," (i.e. guys with easy access to legal counsel).


I take your point, however I use caveat emptor as a rule to live by, not so much as as a legal rule.
 
2013-05-17 11:12:36 AM

bdub77: Mr. Eugenides: bdub77: sno man: Maybe the guy should have had a lawyer read the modification to him. It's a BS detail, but if it's in the paperwork...

This is probably the case, my guess is that his real estate lawyer never explained prepayment penalties to him. Wells Fargo should have made this clear to the person or given him a way to modify the loan so prepayment isn't penalized.

I mean seriously there should never EVER be a penalty for paying off loans ahead of time. EVER. It should be a goddamn law.

Virtually all municipal bonds are arranged this way and many loans that offer exceptionally low interest also require the full interest payment.  If the bondholder (or in this case the MBS holder) can get a lower rate of return than they were guaranteed then why bother?

We aren't talking about munis, we are talking about loans. A muni bond is not a loan. And because an MBS is a pool of loans, prepayment should be factored into the interest structure and be seen as part of the risk associated with purchasing a pool of mortgages.I think what rugman11 said is probably the case. This guy applied for a mortgage mod and there were penalties associated with it because if he prepays after getting a mortgage mod he's essentially tried to ripoff the bank.


Please, for the love of God, tell me that you aren't really that retarded.
 
2013-05-17 11:12:52 AM
I bought a cheap house in the 90s and eventually ended up with them as a mortgage company.

I paid extra on it, and every single farking month I would have to call them and have them fix how they applied the excess payments.  No, you dumbfarks I'm not paying the next 3 payments with the goal of not having a payment until August.  I'm paying this for the current payment and the rest goes to principle reduction.  No, I don't want it all to go to principle reduction, I want the first third to be applied as the regular payment.

I was so happy when I overpaid the last bit to make them refund the $5 extra I sent them.  It probably cost them $20 to cut the check...
 
2013-05-17 11:13:47 AM

JohnBigBootay: KellyX: Lost Thought 00: This doesn't seem right. Prepayment has to be allowed (without penalty) on a mortgage, because otherwise you wouldn't be able to sell the house before the mortgage is up.

Depends on the contract you agree to for the loan, they can allow you to pay more, pay off, etc. or not, that's one of those things you check and agree to prior to signing off on it.

I'm assuming when they did the loan modification that they altered that and the dude signed off on it regardless, either not reading it, or thinking he had no choice in the matter.

/I say this with experience since I'm in the middle of closing on a home now and my personal mortgage specialist  made sure to point out all this stuff and go over each and every page with me, and that prepayment part was very important...

**FUN FACT** Paying an additional $100 a month or so towards your principal can allow you to pay off a 30 year mortgage in about 15 years.

Your fun fact is a valid strategy but your conclusion is anywhere from accurate to completely wrong. Some people have mortgage balances of $35,000. Others have balances of $350,000. Let me assure you that an extra $100 a month will not have the same effect on both.


Guess I shouldn't of mentioned a dollar amount, that is just in my personal case...
 
2013-05-17 11:13:54 AM
It's sad that I have to spell it out. Most people with any kind of context would understand my statement. F*cking legal nazis.
 
2013-05-17 11:14:37 AM

bdub77: IMO, mortgage backed securities are a mess. It's like an index fund of stocks, only nothing within the index fund has any knowable value until it's sold.


it's a bigger mess than most people can imagine.

so, bank makes loan to borrower, borrower uses money to buy house, house is collateral for loan.  all is pretty simple.

then, bank pools that loan with a hundred (or more) other loans, with varying risks, and sells it.  here it gets farked up.

extremely simply, I'm leaving out some steps/parties.  but here goes on the quick: so, the package of loans gets bought by a trustee, how holds title to the loans.  the right to the payments goes to the investors, who paid for the pool of loans to the bank.  the trustee is set up to protect the investors' interest and gets paid by the investors some fee.  then, some company is hired to service the loan (process payments, deal with non-payment).  they get paid a fee for processing payments.  but, they get paid a lot for foreclosing, collection attempts, and they kept all fees on the loan (late fees, etc). notice, you have 2 parties here who expect a fee and one party who is losing that money in fees.  and you have the exact same amount of money coming in as if it were a traditional loan that the original bank kept on its books.  so, the investors bought loans at a premium (they paid more than 100% value of loans) for the rights to payments.  now, those payments are cut down because they have to pay the servicer and the trustee.  so, already, someone has gotten screwed.

the servicer is the main problem in this relationship.  they are financially encouraged to foreclose, charge fees, etc.  their interests are adverse to both the original borrower and the trustee and his investors. the servicer wants to keep from or get as much money from the investors, which means, he wants to fark the borrower, because that's how he makes money.

keep in mind, the investors knew this was a long term investment, with 15 and 30 year loans.  they are in it for the long haul.  not the servicer, the servicer makes the least amount of money if a loan gets paid on time and lives its proper term.  the investor sees value and wants the most value for that loan, and can wait.  the servicer sees value in foreclosure.  never before in history has a party been incentivized so unanimously to force foreclosure.  so, predictably, they force foreclosure.  they've invented fees.  they've misapplied payments to charge late fees.  they've waited to process fees to get late fees.  they've done just about everything in the book, some legal, some illegal, to fark with a borrower's payments.  and it's not like this is rare, the two biggest servicing companies have been in and out of the courts for all of these practices.  these practices are ubiquitous.

now, the way to fight these people will require a lawyer.  and a good one.  very few lawyers know shiat about the loan pool stuff.  you have to go to the SEC, and pull the pooling and service agreements.  this is the agreement for everything related to the loan pool, including the servicing procedures. here's where you can usually find the problem.

often, the servicer is doing something outside this agreement, because they want to fark everyone and get theirs.  this was the trouble with the robo-signing, fake late fee penalties, misapplication of payments, and you name it that is ubiquitous across the country.  but, getting to this point is a pain in the ass.  another major problem with this kind of thing, is who owns the loan?  that question raises the issue, who can foreclose?  the servicer is just some third party processor, he has no rights in the loan itself.  the trustee owns the loan, and the investors own the rights to payment.  so, is there some way that the servicer got foreclosure rights?  finally, who has the original loan documents?  it's just a mess, and borrowers get farked, because it's very heavy handed litigation to fight against this group of well heeled opponents.  and they will fight, because the last thing they want is the cat out of the bag.  and they know they can, because, obviously, the borrower is not rich, or he wouldn't be here.  and the lawyer to do this will cost, because it will be very time consuming and complex litigation.

it's all a big mess, and one of the areas of finance that should have been more regulated, because you have something like 5 parties involved, who are all seriously adverse to each other's interests, even to the point that they are encouraged to force the other parties to breach.  and the one who is least protected will inevitably get farked, the original borrower.

/ again, this is a massive simplification, written on the quick. and even simplified, it takes a lot of words.  plus, finance people will probably look at it differently than law people. but, moral of the story, the little guys get farked.  the borrowers get farked and the investors get farked.  and the guys who set this whole thing up get to feast on their farked flesh.

// as an aside, there are some seriously shady things going on with refinances right now.  be very careful, lenders are highly encouraged to refinance loans in ways that make them money, and ultimately screw the borrower (larger monthyl payments, large fees, misrepresented rates, etc).  essentially, don't ever do anything that is rushed and read every page.  if they try to prevent you, then you are about to be farked.  there are thousands of cases where the lender promised orally this, and the borrower signed something very different.  and you'll never get that oral evidence in.  (and don't say, you should know what's in the document, you signed it.  it's fraud no matter how you cut the bacon.  in any other contract you could introduce the fraud as evidence, but credit agreements are more protected from attack -- because, guess who has a better lobby group?).  this is the worst time to try to do business with banks in a long time.  it's criminal, the stuff that's going on.
 
jgi
2013-05-17 11:17:08 AM

Speaker2Animals: jgi: Lucubrationist: Just another reason to stay with my credit union.

Just another reason to stay out of debt.

Rather unrealistic unless you like living in a rental.


If you say that it is so, you make it so. That's a choice.
 
2013-05-17 11:20:52 AM

TheGreatGazoo: I bought a cheap house in the 90s and eventually ended up with them as a mortgage company.

I paid extra on it, and every single farking month I would have to call them and have them fix how they applied the excess payments.  No, you dumbfarks I'm not paying the next 3 payments with the goal of not having a payment until August.  I'm paying this for the current payment and the rest goes to principle reduction.  No, I don't want it all to go to principle reduction, I want the first third to be applied as the regular payment.

I was so happy when I overpaid the last bit to make them refund the $5 extra I sent them.  It probably cost them $20 to cut the check...


We had a family friend sue BofA many, many years ago...They had been sending in double payments for like 15+ years and the bank was applying all extra payments to interest.  Long story short, the judge laid the smackdown on BofA and when it was all said and done, with the readjustment of the funds, the bank ended up owing them like $12K.

/they were older, did not use computers/internet and did not really understand lending.
 
2013-05-17 11:23:38 AM
More proof that the Professional Investor Class is more important than you.
 
2013-05-17 11:24:07 AM

sno man: fta: "Apparently those guidelines require that the borrower pay exactly the amount owed and exactly when it is supposed to be paid, as the bank tells WFTV his early payments violated the guidelines of the modification."

Maybe the guy should have had a lawyer read the modification to him. It's a BS detail, but if it's in the paperwork...


um
it is IMPOSSIBLE to pay "exactly" when it is due. period.
if you mail a check in, it will get there early, on the day, or late, but it is impossible for every check to be there exactly when it is due.
so rational people send their check early, with enough time to get there on or before.

Sure, with electronic payments, it can be posted every month on exactly the same date.

plus, paying extra violated the terms??
HAHAHAH AHAHAHAH HAHAHAHAHAHAHAHA

/time to reinstate glass-steagall and start breaking these banks up
 
2013-05-17 11:24:08 AM
Also for the record, I work on software that deals with banking and insurance industries and I understand the formulas that go into these kinds of risk calculations. There is a lot going on in risk management to reduce liabilities and risks associated with things like mortgage and bond prepayments. The value of your MBS goes down when someone makes prepayments. It's very complicated, but it increases the bank's liabilities. They don't generally like this, but then that's part of the risk associated with holding an MBS - with most but not all MBSes. This guy's house was packaged into a construct of other houses that assume a regular cash flow.

With standard loans there should not be penalties associated with prepayments, and if you have one you are either doing something shady or the bank is doing something shady. Not everyone prepays their mortgage, so . This is why, for the record, I really don't like MBSes because of the way they are packaged you rarely know what you are actually getting into when you purchase one without knowing the cash flows. You might own a block of mortgage backed securities that are all being prepaid, or all not paying at all. This was why unraveling them was such a mess.

Mortgage mods are a different story. You can always refinance your mortgage, which would more than likely take it out of the realm of whatever bank is trying to screw you over. This guy probably tried to get a deal with the bank without refinancing, but didn't understand the implications of that decision.
 
2013-05-17 11:25:46 AM

jake_lex: SurfaceTension: Of all the quotes in all the world, this is one that I least expected to ever see in a Consumerist article:

This all seems a bit off to us, so we've reached out to our own contacts at Wells Fargo to see if there is any further explanation.

Yeah, my suspicion is that this homeowner and Wells Fargo have different interpretations of what "paid off" means.

I mean, my further suspicion is that this is Wells Fargo's fault, but I do want more of an explanation here.


I think I got this one: Wells Fargo has just been caught doing what they solemly double-secret promised to stop doing last year when they shelled out thier part of the $25 Billion robo-signing settlement: specifically, they were allowing people to enter into mortgage modification programs, but then secretly putting anyone who was in one, on the fast-track to foreclosure by "accelerating the note".

The swore to stop doing that last year, under pain of huge civil and criminal penalties, but as this happened in Rick Scott's new "business friendly" Florida, I won;t hold my breath about the AG hammering them for this
 
2013-05-17 11:26:03 AM

TheGreatGazoo: I bought a cheap house in the 90s and eventually ended up with them as a mortgage company.

I paid extra on it, and every single farking month I would have to call them and have them fix how they applied the excess payments.  No, you dumbfarks I'm not paying the next 3 payments with the goal of not having a payment until August.  I'm paying this for the current payment and the rest goes to principle reduction.  No, I don't want it all to go to principle reduction, I want the first third to be applied as the regular payment.

I was so happy when I overpaid the last bit to make them refund the $5 extra I sent them.  It probably cost them $20 to cut the check...


I thought that pretty much EVERYONE in the universe understood that extra money was money to pay down the principle. FFS, BOA got it right for me without having to explain it to them.

This sounds like a new scam.
 
2013-05-17 11:28:10 AM

bdub77: This guy's house was packaged into a construct of other houses that assume a regular cash flow.


and that is NOT the borrower's problem.
death to the banks

FFS
this is what happens when we "fix" a system which was working perfectly at the time.
reinstate glass-steagall exactly as it was. period.
break the farking banks up already

assholes
 
2013-05-17 11:29:35 AM

hubiestubert: Don't people realize that by OVERPAYING scheduled payments that they are denying these Brave Pioneers interest, and that means that their profit margin on these mortgages will be reduced? That violates the TOS and that means that this man is a monster?


After yanking your tongue out of your cheek...

Even though the bold is true, what about the extra cash on hand? Taking more now in exchange for less later has, I'm sure, value associated with it on either side, but if a bank has more if a warchest to make other loans, how is that a bad thing?

// I know that an extra $100/month means dick to a bank, but if 1,000 people do that, the bank can now lend $100k that they couldn't before
// or does fractional reserve kill that concept dead, since they can lend $100k with only ~$3-4k on hand (I hope they raised that requirement back to 10%, at least)
 
2013-05-17 11:29:46 AM

pute kisses like a man: bdub77: IMO, mortgage backed securities are a mess. It's like an index fund of stocks, only nothing within the index fund has any knowable value until it's sold.

it's a bigger mess than most people can imagine.

so, bank makes loan to borrower, borrower uses money to buy house, house is collateral for loan.  all is pretty simple.

then, bank pools that loan with a hundred (or more) other loans, with varying risks, and sells it.  here it gets farked up.

extremely simply, I'm leaving out some steps/parties.  but here goes on the quick: so, the package of loans gets bought by a trustee, how holds title to the loans.  the right to the payments goes to the investors, who paid for the pool of loans to the bank.  the trustee is set up to protect the investors' interest and gets paid by the investors some fee.  then, some company is hired to service the loan (process payments, deal with non-payment).  they get paid a fee for processing payments.  but, they get paid a lot for foreclosing, collection attempts, and they kept all fees on the loan (late fees, etc). notice, you have 2 parties here who expect a fee and one party who is losing that money in fees.  and you have the exact same amount of money coming in as if it were a traditional loan that the original bank kept on its books.  so, the investors bought loans at a premium (they paid more than 100% value of loans) for the rights to payments.  now, those payments are cut down because they have to pay the servicer and the trustee.  so, already, someone has gotten screwed.

the servicer is the main problem in this relationship.  they are financially encouraged to foreclose, charge fees, etc.  their interests are adverse to both the original borrower and the trustee and his investors. the servicer wants to keep from or get as much money from the investors, which means, he wants to fark the borrower, because that's how he makes money.

keep in mind, the investors knew this was a long term investment, with 15 and 30 year lo ...


Spot -farking-on.  the most concise and accurate exegsis of this whole mess I think I've ever read.  Nice work.  (and I say that as someone who, let's just say had way more access than he wanted to , to the primary source doucments on the entire financial collapse caused by this nonsense.
 
2013-05-17 11:31:15 AM

namatad: TheGreatGazoo: I bought a cheap house in the 90s and eventually ended up with them as a mortgage company.

I paid extra on it, and every single farking month I would have to call them and have them fix how they applied the excess payments.  No, you dumbfarks I'm not paying the next 3 payments with the goal of not having a payment until August.  I'm paying this for the current payment and the rest goes to principle reduction.  No, I don't want it all to go to principle reduction, I want the first third to be applied as the regular payment.

I was so happy when I overpaid the last bit to make them refund the $5 extra I sent them.  It probably cost them $20 to cut the check...

I thought that pretty much EVERYONE in the universe understood that extra money was money to pay down the principle. FFS, BOA got it right for me without having to explain it to them.

This sounds like a new scam.


It's not just an understanding. it's the codified law of every state in the union, and common law before that.  Absolutely no excuse for farking that up
 
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