Options after mortgage servicer fails?

Bounced refund checks. Contradictory information about where to send mortgage payments. House payments that are supposed to be automatically debited but aren't. These are some of the issues faced by hundreds of thousands of former customers of Taylor, Bean & Whitaker.

If you boil down all the advice that regulators and mortgage companies give to former customers of Taylor, Bean & Whitaker, it is this: Be patient, and trust that everything will turn out all right. But the abrupt closure of TBW in early August and the chaotic aftermath do not inspire much confidence in regulators. And borrowers can be forgiven for wondering if they can trust any mortgage servicer.

TBW created two sets of victims: its former customers and its current customers.

The former customers were people who had mortgages with Taylor, Bean & Whitaker and who paid off those home loans in July or early August, either by refinancing or by selling their homes. TBW owed these former borrowers the money that had been set aside in escrow to pay for insurance and taxes, but had not yet been paid to insurance companies or taxing authorities. In early August, these former TBW customers got escrow refund checks from TBW. The refund checks bounced.

Current TBW customers had different issues. Those who make their mortgage payments by automatic debit say that their August payments have not been collected, six weeks after they were due. Other customers got letters telling them to make future mortgage payments to a company called Roundpoint, and soon afterward they got letters telling them to make their payments to a company called Cenlar. They didn't know whom to pay. They fear that they will be assessed late fees and get black marks on their credit reports even though they tried to pay on time.

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How TBW failed

All of this came about because Ocala, Fla.,-based TBW was cut off abruptly by federal authorities Aug. 4. TBW was one of the three biggest originators of mortgages insured by the Federal Housing Administration, or FHA. On Aug. 4, the FHA discovered that TBW's auditor had quit "after discovering certain irregular transactions," and that a TBW official had lied about the auditor's resignation. The FHA and Ginnie Mae, the company that securitizes government-insured loans, suspended TBW immediately. The suspension most likely was a death blow to the lender.

The FHA's action occurred one day after agents of the FBI and of the Special Inspector General of the Troubled Asset Relief Program raided TBW's headquarters. The same day, the feds also raided the Orlando, Fla., office of Alabama-headquartered Colonial BancGroup, which was TBW's main creditor. At around the same time, TBW's bank accounts at Colonial were frozen, according to TBW's state overseer, the Florida Office of Financial Regulation.

The freezing of TBW's bank accounts at Colonial, plus the FHA's suspension, caused a cascade of problems that continue to haunt consumers a month and a half later. Consumers complain that they get the runaround from financial institutions and regulators.

"If there were somebody who could just lay out the plan to me and say that we're working through the process, and this is what the process is, and within a certain time period something will be done, I would be fine with that," says Troy Kerwin, a former TBW borrower in South Bend, Ind. "But the fact that no one's taking ownership is the part that gets to me."

Kerwin had a TBW mortgage and refinanced with a local bank in July. A few weeks later, he got an escrow refund check for the proper amount -- $3,307 -- from TBW. The check, dated Aug. 4, was drawn on an account at Platinum Community Bank, which Kerwin later found out was owned by TBW. He deposited the check, and found out Aug. 24 that it had been returned for nonsufficient funds.

On Sept. 4, the Office of Thrift Supervision closed Platinum Community Bank, and the FDIC took over to liquidate it.


Kerwin has filed complaints with the Florida attorney general, the Florida Office of Financial Regulation, the federal Department of Housing and Urban Development, the FDIC, the Federal Trade Commission, Bank of America, Cenlar, Platinum Community Bank in Illinois, and the state banking authority in Alabama, among others. He's still out $3,307.

State and federal officials are closed-mouth about the links among Colonial, Platinum and TBW. But it seems plausible that the escrow refund checks came from a Platinum account that was supposed to receive a deposit from Colonial -- but the deposit was never made because TBW's accounts at Colonial were frozen after the FBI raid.

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