“Why do mortgage servicers love to hit consumers with bogus fees and charges?”

“Why do mortgage servicers love to hit consumers with bogus fees and charges?”

Mortgage servicers (Bank of America, Chase, Citimortgage, Nationstar, Ocwen, Wells Fargo,  etc) make very little money on “servicing” your loan.

Actually, if they can charge you a late fee, a BPO (Broker Price Opinion), property inspection, etc. then normally they make more money from this than a month’s worth of servicing fee.

So from a financial perspective, there is great incentive for the servicers to come up with a fee or charge.

Because this is money that goes directly in the servicer’s pocket, not the pocket of the true owner of the loan.

“Explain some examples of these types of bogus fees”

These are just a few examples to illustrate how this works.

Late fees are when you don’t send in the full payment in time.  Full payment is your scheduled principal, interest, and escrow payment.

BPO — Broker Price Opinion.  This is when a real estate professional looks at your house to give an opinion on the value of your home.

Property inspection — when someone drives by your property and takes pictures to determine if you still live there.

Forced placed insurance — when you don’t keep up your homeowner’s insurance and the mortgage company “forces” insurance on the property to protect the lender’s interest only.

“Are these types of fees ever allowed under the contract?”

Yes.

There is a lot of mis-information about fees and charges with some self proclaimed experts telling consumers these are never allowed.

That is simply untrue.

You can read your mortgage and note and see what is allowed and when it is allowed.

“When are these fees illegal?”

Here are some simple examples.

Late fees — your payment is due on March 10.  Late fee/charge on March 25.  You send in your payment and it is received by the mortgage company (actually a “lockbox company” gets the check) on March 24.  But the mortgage company waits to deposit your check till the 25th.  Or it doesn’t credit the account until the bank releases the money on the 26th.

So a late fee is slapped on your loan.

This is illegal under the contract and federal law — especially the new CFPB regulations to RESPA which went into effect on January 10, 2014.

BPO — you are one month behind but then you make a payment.  The mortgage company, however, doesn’t apply your $1500 payment to the February payment that is due.

Instead it says you owe $75 late fee so your $1500 payment is “short” $75.  So now you are late for March and it orders a BPO.

This is illegal because a mortgage servicer/company cannot deduct any type of charge or fee from your regular payment in order to make you late again.

This is known as the “waterfall” or “cascading” late cycle where mortgage companies illegally hit you with late fee every month and it keeps reducing the amount going to principal and interest.

Also, this is an excuse to hit you with $150 BPO fee but this is illegal.

Property inspection — same thing we talked about with BPOs.

Also, these charges are inflated.

The mortgage company may pay an inspection company $10 to do the inspection but it will put that down as a fee of $60.

Usually the inspection company is a related company to the mortgage company and it is lying about the amount to jack up the fees.

Often the inspections are not even done so it is certainly illegal to charge for things never done.

Finally, there is no reasonable basis to do an inspection when the mortgage company believes you are still in the house.

But these companies will do inspections month after month not to protect the mortgage company but to gouge you with illegally inflated fees.

Forced placed insurance — this was probably the highest profit margin of any activity of mortgage companies.

They would force insurance on you when they knew you had insurance because your $1500 State Farm insurance could be replaced with a $7500 policy that the mortgage company kept half of it as a “commission.”

The new rules enacted on January 10, 2014, make it clear forced placed insurance is to be a very rare event.

Not a routine illegal way to jack up profits at your expense.

“You say they are illegal, which laws do they violate?”

Alabama state law.  The mortgage company must follow and abide by the contracts — the note and the mortgage.

Federal law.  There are three major laws that are violated routinely by mortgage companies when they do bogus fees.

The Fair Debt Collection Practices Act (FDCPA).

The Fair Credit Reporting Act (FCRA).

The Real Estate Settlement Procedures Act (RESPA), especially with the new January 10, 2014 regulations that were added.

“How do these fees violate Alabama state law?”

The mortgage company must follow and abide by the contracts.

The note and the mortgage.

Those contracts do not allow the mortgage company to pay itself for charges and fees out of your regular payment unless you send extra.

They do not allow for bogus and false inspections or BPOs or forced placed insurance.

“How do these fees violate the FDCPA?”

Most mortgage servicing companies are “debt collectors” under the FDCPA as they received the servicing rights (right to bill, collect payments, etc) when the loan was in default (one day after due date).

The FDCPA prohibits any type of lying or charging of fees that are not allowed by law or contract.

So when Bank of America or Ocwen or Nationstar or whoever it is puts a late fee when it is not authorized, this will violate the FDCPA if the company is a “debt collector.”

They have also lied — misrepresented — about what is owed.

They say you owe $300 for property inspections when you really don’t.  That’s an FDCPA violation.

Having these bogus fees and charges will also cause you to be considered late or owing more than you really do.

So your credit reporting will be wrong which violates the FDCPA (and the FCRA).

“How do these fees violate the FCRA?”

The FCRA requires accurate credit reporting.

When a mortgage company puts all of these bogus charges and fees, it will say you owe more than you really do.

Sometimes — well, often — Wells Fargo or whoever the company is will report this on your credit report.

They may also report you being 30 or 60 or 90 days late when you are only “late” because the company failed to follow the contract and the law.

You normally have to dispute with the credit reporting agencies first — this means Equifax, Experian, TransUnion, etc. in order to put any liability on your mortgage company under the FCRA.

Send your proper dispute letter to the agencies and to the mortgage company.

“How do these fees violate RESPA?”

RESPA was amended on January 10, 2014, to make many unfair practices illegal.

Well, they already were illegal.

but some judges didn’t think so which is why the CFPB (Consumer Financial Protection Bureau) made it clear these practices can be illegal.

Fees and charges must be reasonable and not inflated.  So for Ocwen to say the inspection cost $60 when it really cost $6, that is illegal.

Especially on forced placed insurance — the old way of doing business by cheating homeowners is over.

As a practical matter, the mortgage company has to notify you several times before force-placing and must normally simply keep your current policy in place.

Instead of charging you 5 times as much for no coverage and getting thousands in kickbacks.

We will go into more detail later.

When there is wrong conduct on the part of mortgage companies, we send out either “Request for Information” or “Notice of Error” letters.

The mortgage companies routinely violate these which lead to even more violations of the RESPA.

“What do I get out of suing the mortgage company when I catch it doing these bogus fees?”

You get a number of things.

• Statutory damages even if you were not harmed — which all of these will cause you harm.
  • This amount is $1000 per case for violations of the FDCPA.
  • $2,000 per violation of RESPA and up to $1,00o per violation of the FCRA.
• Actual damages for emotional distress, out of pocket money you have spent, damage to credit reporting, etc.
• Attorney fees are paid for at the end of the case by the mortgage companies.
• Often mortgage companies will want to modify your loan to give you a better deal.
  • This is to keep the cost of paying you damages down so you can end up with a very attractive loan.
  • In addition, you’ll  have your attorney fees paid — when these companies flagrantly violate the law.

“I want to take the next step — what do I do?”

Give us a call at 205-879-2447 if you live in Alabama.

Tell the receptionist you are having a problem with your mortgage/mortgage servicer and want to speak to Randi Curb.

She’s our foreclosure/mortgage paralegal, and then she will set us up a meeting together.

Or you can fill out our contact form and we will get right back with you.

Either way you want to contact us is fine and we look forward to helping you soon.

Thanks for reading, and have a great day!

John Watts