Countrywide tried to steal my parents' money - How you can avoid being a victim of mortgage servicing fraud

by Xin Lu on 21 February 2009 14 comments
Photo: countrywide

A few weeks ago I wrote an article about checking your mortgage statement, and interestingly enough my family was recently confronted with an erroneous mortgage statement.  This is the story of how Countrywide tried to steal my parents' money.  Additionally, I will give you some related information on the unscrupulous practice known as mortgage servicing fraud.

My parents are very fiscally responsible people, and they have been prepaying their mortgage by a significant amount every month. What happened was that Countrywide did not correctly apply their prepayments to the amount of  principal they owed  Fortunately, my mom keeps her own payment schedule in a spreadsheet so she spotted the error.  The difference in her schedule and Countrywide's was more than $700.

My mom called Countrywide promptly and pointed out the error, and the representative replied that the mistake was made because my parents paid extra principal payments online.  The representative also stated that if they wanted to make additional principal payments they needed to send in a check by mail.  This was an obvious lie because on Countrywide's web portal they have a box specifically marked for extra principal payments.   So my mom asked the representative why the extra payment option is there on the web interface if people had to send in physical checks.  This would mean that every single person making extra principal payments online would not be credited correctly.  The representative had no good answer and agreed to fix my parents' amortization schedule.

According to my mom Countrywide's  electronic only statement looked like they credited the principal and interest separately and correctly, but the principal amount was completely wrong.  She was only able to discover this because she kept her own schedule of payments.  I researched this situation online and apparently it happens more than you think.  There is an entire website called Mortgage Servicing Fraud devoted to describing and exposing these tricks the mortgage servicers play on honest paying customers. It was founded by a man named Jack Wright who lost his home to an evil servicer named EMC that  recently got slapped by the FTC.
 

On his site, you can see the various ways the mortgage servicers scam consumers.  Here is a quick summary of the common ways they do this.

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  •  They manipulate payment schedules like they did in the case of my parents.  Basically, they do not credit your principal payments correctly and the amortization schedule gets more and more skewed with each payment.
  •  If you impound your property taxes and insurance, they pay your taxes and insurance late and then add a late penalty.
  •  They force place an insurance policy on your property that the property does not need and raise the amount you need to pay.
  •  They withhold your payments and say that your payment is late, and then charge a late fee.

According to Mortgage Servicing Fraud, the most unscrupulous servicers mainly target consumers who they deem to be immigrants or  lowly educated so that there is less of a chance of a complaint.  I have no evidence that Countrywide targeted my parents in this particular incident,  but my parents do have foreign sounding names so it does seem a little fishy. 

There are ways consumers can guard against these tactics.  First and foremost is to keep a record of all the payments you made and also your own mortgage schedule. Then if you suspect anything is wrong you can contact your servicer and ask for an entire schedule of their records.  According to the Real Estate Settlement Procedures Act you can write a "qualified written request" to your mortgage servicer on any disagreements.     The servicer is obligated to respond to you, and if you have proof of your own schedule then most of the time they should correct their mistake.  If they do not correct their mistake you can file a complaint with the FTC  and your state attorney general's office.  If enough people complain, these government offices will investigate.

If you do impound taxes and insurance, you should make sure that the taxes are paid on time and that the amount you are putting into escrow is correct.  There are some consumers who were lied to by their servicers when their servicers told them  that taxes have risen significantly.  You can check the tax amount for your parcel at your county tax collector's web pages, or you can just call them to find out.  The best way to avoid these problems is to forgo the impounding of taxes and insurance, but sometimes doing an impound reduces the mortgage rate.

The bottom line is that consumers have to be vigilant of the mistakes mortgage servicers make.  Some of these mortgage servicers are creating these problems on purpose to pad their profits, and some of them might just be plain incompetent. It is sad that you cannot trust these companies, but  as long as you can proof your side of the story it is possible for you to prevail.
 

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Guest's picture

Glad your parents were able to get that issue resolved. I do keep a schedule of our mortgage payments, and we also had an issue when we first set up automated extra monthly principle payments.

We don't have foreign sounding names, and we don't escrow our taxes or insurance. I'm inclined to believe that the mistake was due to incompetence on our lender's part. But you can believe that I had a representative walk me through each and every transaction until the mistake was clearly understood and corrected. Mistake or scam, it was $1400 of our money that was going unaccounted for, and I'm really glad I was following things closely enough to see that something had gone wrong.

Very useful advice you've put together in this post.

-Kate

Guest's picture
Guest

I have to say that I'm really not very comfortable with the tone of this article. There's no evidence presented that this was anything other than a mistake rather than a deliberate scam. I don't think it's very balanced to refer to a company as 'evil'...a company didn't come up with the policies you don't like - individulas did. Are you saying that everyone who ever worked for that company is also evil?

It is sad but not uncommon that company representatives are often not aware of the specifics of the company's website. I have found that to be the case with a number of companies.

Do i think that there are unsavory mortgage servicers out there...I'm sure there are. I'm just not sure you showed that Countrywide is one of them. And given that headline, you should have more proof.

Guest's picture
Guest

I live in CT and there is a great deal of discomfort that he received very favorable rates on his mortgages a few years ago while overseeing the mortgage practices of the time. The company giving him the 'sweetheart' deal is Countrywide. I am sure many people have mortgages with them and do not have a problem, but they do not seem to be a completely benevolent institution. The investigation in CT continues and some think he may be voted out of office the next time around because of this.

Guest's picture
spaces

That is awful. Good thing for your folks that they are knowledgeable and watch their payments closely. Otherwise, they may have not noticed the problem, or may have assumed that CW was correct.

Especially disturbing to me was what the representative said to them -- There is a point where bad training, whether negligent or deliberate, crosses into scam-hood, and I think CW crossed it when that representative erroneously insisted your mother was wrong and refused to correct the company's error. She shouldn't have had to press on. So many people would have backed down right there. I wonder how much CW and other companies have earned from these kinds of incidents over the years.

Guest's picture
Bellen

We've had, over the last 40 years, 7 mortages - 1 private, 2 with banks, 2 with a credit union and 2 with Countrywide. We have always prepaid our mortages, but not without some problems. The 2 with Countrywide and the current with a bank have been paid on-line. The one big difference is that we made sure there was a brick & mortar office within an hour's drive.

So, when we did have a problem with principal being credited properly, we drove to the office to have it corrected. Having papers in hand & records on line, both the Countrywide representative and us could see where the problem existed. The office manager at the Countrywide office was very helpful, took care of it immediately and while not admitting that on-line payment corrections could be difficult, told us we were better off coming to the office.

No, it should not be that difficult and no, we do not believe Countrywide targets certain people.

Philip Brewer's picture

@ Guest:

It may have been mistakes--but it was a lot more than just one mistake.

First, there was the on-line interface that lets you enter an amount to be applied as an extra principal payment, but that didn't seem to actually do so.  That could be a buggy website--in which case it probably means that hundreds or thousands of payments have been misapplied.  Alternatively, there could be a manual step where some clerk needed to apply the payment and just screwed up--but seemed to have screwed up more than once in the case of Xin's parents.  So, possibly mistakes, but if so either serious mistakes or else lots of them.

Second, there was the wrong information that Xin got when she inquired about the problem.  Again, possibly just a mistake--a support person who didn't know how their web interface worked (or, perhaps, knew it was busted and was trying to provide accurate information--but that would seem to indicate willful bad-acting on the part of the firm, if their service people know the web interface doesn't work and yet they haven't gotten it fixed).

I suppose it's possible that Xin's parents were the first to stumble upon this particular scenario, but it sure sounds like a systemic problem somewhere in how Countrywide applied extra principal payments.  If that was due to honest mistakes, Countrywide's next step would be to track down all the other affected people and fix the problem.  Let's just see if we hear anything about that happening, shall we?

Guest's picture
Debbie M

On my first mortgage, my mortgage company added wind insurance. I had actually read my homeowner's insurance policy and still remembered that high winds were covered. I now vaguely remember that calling my mortgage company didn't work and I had to sic my insurance company on them. That did work.

Xin Lu's picture
Xin Lu

As a reply to the Guest that said he/she is uncomfortable with the tone of this article, I actually said that I have no evidence that Countrywide did this on purpose, but if my mom hadn't complained then they would have gotten away with stealing my parents money.  It is as simple as that. 

If you actually read my article you would see that  I said another company called EMC was evil.  They were actually found guilty and paid money back to consumers.  This is the link to the EMC incident: http://www.ftc.gov/opa/2009/01/emc.shtm  I think that is proof enough.

Also I didn't say that everyone who works for Countrywide is evil, but the representative that talked to my mom obviously lied or was misinformed.  However, like Philip said, if what the representative said was true, then Countrywide has a serious problem on their hands and thousands of customers may be affected.  Many of these customers may be trusting Countrywide to do their mortgage calculations correctly, and they may lose a lot of money.  If Countrywide is not proactively trying to fix an actual systemic problem like this then it is a  serious issue and it is a scam. 

Guest's picture
Wilson

Countrywide was the leader in writing fraudulent mortgages, so this is hardly surprising. This is what happens when law enforcement is corrupted and zombie banks continue to stumble around in their continued quest for HUMAN FLESH

Guest's picture
Guest

Countrywide is the scumbag of the mortgage industry. They raised my FIXED RATE mortgage, which had always been paid on time, considerably. Their excuse was that they were setting up an escrow account to pay my taxes-that has never been part of my mortgage and I have always paid my taxes on time. Well suprise suprise when I got letters for both my county and my local taxes saying past due! I ended up paying the taxes myself. When I contacted Countrywide they could offer no explanation of why they didn't pay the taxes so I informed them that I would no longer be paying the extra couple hundred dollars with my payments. After two months of only paying my actual mortgage payment I received an Act 91 letter stating that my mortgage was past due and they would begin foreclosure proceedings if not paid the money due. When I called them they said the letter was because I had failed to remit to them the extra money for the escrow account which was to pay the real estate taxes--BALONEY!

And the government and the media continue to blame the housing and foreclosure crisis on adjustable rate mortgages. I also personally know one person whose home was foreclosed on for this same reason. Her fixed rate mortgage payment was $800.00, her bank increased it to $1400.00 for an "escrow account"-when she couldn't pay that amount monthly she lost her home.

Xin Lu's picture
Xin Lu

Hi Guest,

 

I know it's pretty unfair but while your issue is being resolved with a servicer you have to pay the full amount they request.  If you don't pay the full amount they reserve to not apply partial payments to your mortgage, and then they say your mortgage is late.  That's how bad servicers get to people.  I really suggest that you file a complaint with the FTC and your attorney general's office.  It's pretty sad that Countrywide is still up to this shadiness after being sued by so many states. It's also aggravating that they have so many politicians in their pockets and secured so much taxpayer money in bailouts.

Guest's picture

Another example of why it makes sense to keep your own records...you are your own first line of defense in these kinds of situations.

I will be starting my own record keeping book after reading this article.

I also think you should keep records for the equal pay plans that utility companies offer. I made extra payments and didn't see my payment go down. I still don't know what the deal was with that.

Guest's picture
victor w feeney

To whom can help

I have been a target of countrywide, inabilities and practices of bad business practices,

We had a 30 year note with Chase and never late,

Now with Countrywide and was promised a refinance on a 15 years note to 30 year note with there new Modification loan program this started in Feb 2009, and we call every month several time to ask about it and was told everything was Ok and will hear something shortly.
That was in March, Lisa James

We heard something alright on April15 a notice to Foreclosure, and need to come up with 2 months payment and the Mays payment also

We call several times and talked to 6 people with no help just Phone tags

So we when to the Locale office and the Person we first talked to (Jason Guinther) was there we told him the story and the he call countrywide, after talking to there office for 30mins, he said they were never going to notified us that we don’t qualify for the program or even why,

The inability for them to notified us doesn’t constitute an hardship for us,

I thing they encourages there people in this tactics,

Can anyone help us and advise a place to call anything

Vwf4506@insightbb.com

I only have till May the 8 according to the letter

Thanks very much in this very important matter

Guest's picture
Guest

To whom can help
>
> I have been a target of countrywide, inabilities and practices
> of bad business practices,
>
> We had a 30 year note with Chase and never late,
>
> Now with Countrywide and was promised a refinance on a 15
> years note to 30 year note with there new Modification loan
> program this started in Feb 2009, and we call every month
> several time to ask about it and was told everything was Ok and
> will hear something shortly.
> That was in March, Lisa James
>
> We heard something alright on April15 a notice to Foreclosure,
> and need to come up with 2 months payment and the Mays payment also
>
> We call several times and talked to 6 people with no help just
> Phone tags
>
> So we when to the Locale office and the Person we first talked
> to (Jason Guinther) was there we told him the story and the he
> call countrywide, after talking to there office for 30mins, he
> said they were never going to notified us that we don’t qualify
> for the program or even why,
>
> The inability for them to notified us doesn’t constitute an
> hardship for us,
>
> I thing they encourages there people in this tactics,
>
>
>
> Can anyone help us and advise a place to call anything
>
> Vwf4506@insightbb.com