FPT Guy is a writer, the owner and managing editor of Financial Planning Tips – attempting to liven up the topic of personal financial planning – while helping to guide folks to financial security and freedom.
The collapse of the housing bubble wasn’t an end to questionable lending tactics. In fact some of the problems are still rampant and very much a problem for the majority of home owners. Do yourself a favor by learning about the problems that affect current home owners before jumping onto the bandwagon.
1. Reverse Mortgages Can Be Risky Propositions
Reverse mortgages are available to people aged 62 or older. It is a special kind of mortgage that taps into a home owner’s equity to allow him to live mortgage-free or even free of an equity line of credit. Unfortunately, lenders aren’t legally able to take into consideration the home owner’s ability to pay property taxes and home insurance. What does this mean for you or someone you know who has a reverse mortgage? Well, the inability to pay these fees can lead to the loss of the house anyway from a tax sale or property damage due to fire or weather.
2. Bank of America Mortgages – Watch Out
Forbes describes Countrywide as Bank of America’s “worst acquisition ever made” with good reason. Not only did Bank of America acquire too many mortgages (i.e lending too many stated income mortgages), now they’re apparently providing poor customer service and confusing letters to home owners. BoA is in the middle of multiple lawsuits due to questionable practices. For example, some people received foreclosure notices even though they made proper payment arrangements. It’s kind of difficult to erase debt on your mortgage when your bank sends you into foreclosure for no reason.
3. Some Mortgages Branches Can Operate Independently
Sometimes mortgage branches, and I’m talking about the individual offices that make up a large company, operate more independently of one another. This might seem like no big deal, but it can invalidate any good things you’ve heard in the grape vine about a mortgage company. Those compliments may have been for another branch of the same company. Your own branch might have shoddy customer service and no empathy for common mortgage problems.
4. Robo-Signing is Rampant
The term robo-signing refers to a person signing an affidavit or other document without having read it, or signing another person’s signature to it. It is a new term for an old practice. Both of these acts are a federal crime, but robo-signing in the mortgage business remains a problem. Home owners are receiving letters with the same name signed in dozens of different ways. In addition, the information in those documents have been verified like they should have been.
Even worse, people who are known to have robo-signed hundreds of documents aren’t being punished. The problem is so wide-spread that it’s hard to point to select individuals. Some refinance mortgage companies have made promises to end robo-signing, but if they’re willing to commit a federal crime thousands of times, they might be willing to lie to save face too. There’s nothing to do about this except confirm the identify of whomever signs important mortgage documents you receive.
In conclusion, many things can go wrong after making a mortgage official. No one is immune from the mistakes, corruption or unfortunate but everyday practices of a mortgage company. It doesn’t take accountancy courses to know that you care more about your money than anyone else. It’s always a good idea to educate yourself in order to reduce your risk by studying the mortgage business’s ins-and-outs on your own.
Crystal’s Comments: I actually think that one of the reasons Chase offered us a no-cost refinance was to get fresh paperwork. I am sure that a lot got lost between the Washington Mutual to Chase transition…