Morbid mortgages turn dreams into nightmares
By John Latta • Bankrate.com

Owning a home can go from the American Dream to a Transylvanian nightmare when the demons get their claws into your mortgage.

Our readers shared their spine-tingling horror stories of havoc and near-foreclosure.

An Oklahoma man writes that his mother had a home loan with the Moaning Mummy Mortgage Co., which filed bankruptcy earlier this year. "The lending company refused her payments and redirected her check to five offices before the initial uncashed checks were returned to her."

Our man desperately tried to find someone in each of those five offices who could lead him to the proper place to pay the mortgage. "On the advice of mother's banker, she would put the money into an account destined for the home payment, until we could locate the right office." Our man now wrote to each of the five offices. No replies.

Some little while later, "Mother was reading the local newspaper. While scanning the public records, she noticed her name and address -- the lending company was foreclosing on her property." Down at the courthouse the man and his mother found records showing that indeed the house was going on the block. But the story has a happy ending: they managed to save the house.

Inevitably, there was an e-mail from a man whose mortgage was sold. The deal wasn't a bad one for him, so he refinanced with his new bank. His first bank statement after the deal showed that his first new mortgage payment check had not cleared. He contacted the company and was told, " ... not to worry. Refinances were backed up." And of course, "Just keep making payments."

When his next bank statement showed that his second payment under the new deal hadn't cleared either, he called again. "I was told again, 'Don't worry. Things are still backed up from refinances.' They still didn't show any record of my new account."

The next surprise was a foreclosure notice. Our man tried like crazy to reach someone to sort it out but it wasn't until he found a bank vice president in another part of the country that he found a sympathetic ear. The VP directed him back to the customer service people in his own city and those folks said they didn't handle foreclosure, another department did. Finally, after yet another letter stating foreclosure proceedings were under way, our exasperated writer prevailed.

There's also a cautionary tale or two in our e-mails for borrowers who are a little too eager. When a house-hunting couple came upon a two-story, four-bedroom home, they just had to have it. They found a mortgage service and were told there'd be no problem getting a 100 percent loan. So, "We proceeded to ask the homeowners if we could remove a couple of walls and add two doorways." You know what happened next. That 100 percent loan "became 95, which became 90, that finally ended up at 85 percent at a ballooned rate of 14.08 percent for 15 years, then a total payment of $53,000 one lump sum." Unable to back out because of the work already started on the house, the couple now says, "We don't know where to turn to or who to talk to."

A nightmare about closing on a property came in one of our e-mails.

"When we hooked up with our mortgage banker, on that nice little itemized list of closing costs, they indicated the MONTHLY amount that we would pay into private mortgage insurance on one line, and put the ANNUAL amount on another line in parentheses, since we were to get credited for it, since we were to pay it monthly.

"Come closing day, we were charged for it twice, and even thought we showed our copy to the lawyer, and he called the mortgage broker to have it corrected, they said.'Oh, the parentheses were the error! They DO have to pay BOTH, since they did sign for it, or they could just, oh, delay the closing and risk losing the house if they don't secure another mortgage by the deadline.' Of course we didn't want to risk losing the house, so we went ahead and overpaid."

-- Posted: Oct. 29, 1999