Lender malfeasance
When my husband changed jobs some years ago, we qualified for a discounted employee rate on insurance for our cars and home. So we changed our insurance policies for our two cars and our home over to his new company. The new insurance company notified our mortgage lender, Downtown Savings, in writing, of the change in insurance carriers and we advised our old insurance agent of the change. There was no gap in coverage. We thought everything was fine.Two or three months went by and all of a sudden we received a notice that we were delinquent in our mortgage payments, which was completely untrue -- I've had three mortgages and never been a day late in my life!
Come to find out that when our old insurance carrier notified Downtown Savings that we had cancelled our insurance with them, without recognizing the correspondence from our new insurance carrier which they had received, Downtown Savings -- on their own and without our authorization -- took out a homeowners insurance policy that cost four times what our homeowners insurance cost us, and used two months' worth of back mortgage payments to pay for it!
Then the bank had the audacity to report me (since the house was in my name) to the credit bureaus as being a deadbeat and, the final insult, filed a lawsuit against me to foreclose on the house!
I did some research on my own only to discover that we were not the only home owners scammed by this bank. I have no doubt that they made a commission or finder's fee from the insurance company they hired to "cover" our home "twice."
The experience cost us about $7,500. As you might imagine, I quickly refinanced my mortgage with an ethical mortgage lender and said good riddance to Downtown Savings. They are crooks!
-- Lori GedonMortgage planner perspective
Most borrowing horror stories happen as a result of lack of education. Many would have been able to avoid the horror stories had they taken the time to slow down the process to obtain a basic understanding of the mortgage process, what affects credit and the ramifications of their decisions.Most people take longer comparing plasma TVs and vacation spots than they do their mortgage -- that is why many have a bad experience at closing. By acting on impulse, as most do, they make the biggest financial decision in their life in a matter of minutes and then regret their actions.
My recommendation is to work with a local mortgage planner so you can meet face-to-face at their office and ensure that they have your best interest at heart and that you get a good vibe.
An added benefit is that a qualified planner is often a pillar of your community and as such will take the time to ensure you understand everything and that there are no surprises. After all, you may see them in the supermarket, so they will want you to have a good experience.
-- Dave Muti, Registered Mortgage Advisor
Parsippany, N.J.