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We has met the enemy and they is us

by Blair Rugh

The title to this article is the sage words of the comic strip character Pogo the Possum. Unfortunately, too often they are true. Many of the regulations on the banking industry are the result of egregious things that financial institutions have done to their customers and the failure of some bankers to adequately respond to customer complaints. The Expedited Funds Availability Act and Regulation CC were the result of some banks holding funds deposited by their customers far longer than was necessary for those funds to clear. Some banks had the policy of holding funds ten days from the day of deposit or even longer, when, in almost all cases, the funds would clear in two or three days. The banking industry brought the regulation upon itself.


A sad story. A couple got a construction/perm loan to build a new home. The loan was secured by the couple’s existing home and the home to be constructed. They continued living in their existing home until the new home was constructed. Construction was completed, the loan went into the permanent phase with an escrow for taxes and insurance, and the old home was sold. When mail was forwarded to the couple from their old address, they realized that the mortgage company still had their old address in its records; so, they called and told the mortgage company of its error, were told the problem was corrected, and they began receiving the mortgage company’s mailings at their new address.  Life was good – temporarily.


Shortly thereafter, they received a hello/good-by letter from the mortgage company and a new servicer advising that the servicing of their mortgage had been transferred. They continued to make their payments; life was still good. Two or three years later, they received a notification from their county that the taxes on their new home had not been paid for the last two years. They contacted the new servicer and were assured that the taxes had been paid. With that comfort, they went about their business. Shortly thereafter, they received another hello/good-by letter telling them that the servicing of their loan had been transferred to another servicer. They then received another notice from the county telling them that their real estate taxes were still delinquent and that collection procedures would be initiated, including foreclosure. Turns out the prior servicer had been paying the taxes but on their old home. After the second servicing transfer, the county realized that the taxes on the old home had been double paid and had refunded the excess payments to the old servicer who had paid them.


The couple contacted the new servicer which said that it could not help them because the problem had been caused by the prior servicer. They contacted the prior servicer which said it could not help because it no longer had the records. And the new servicer demanded that the unpaid taxes be immediately paid. The problem still has not been resolved.


No wonder we have more stringent RESPA mortgage servicing rules. Now, in this case, it is apparent that the problem relates to a data entry error when the loan was originally established and a subsequent clerical failure. The property address in the lender’s automation system was incorrectly entered. Subsequently, when the borrowers called to get their mailing address changed, no one checked the property address to see if it needed to be changed as well. Also, when the subsequent servicer was told that the taxes were not paid, all it did was check the escrow and determine that a disbursement had been made. There was no check to determine that the taxes had been paid properly.


When a customer complains, unless the complaint is totally frivolous, that complaint should be taken seriously. Resolution of the complaint means checking into what really happened and then resolving the issue. A cursory review just to get the issue off of your desk as quickly as possible is not complaint resolution. Don’t be the enemy.


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