Beware of Paying Your Mortgage Early

[tangomonster]

This was going on in August but I missed it:

An elderly couple in Florida got a loan modification for the mortgage on their home. They sent their first check in on December 23 2010---but the payment was due in January, so the bank was upset with the early payment (?). Then---reading different accounts---there either wasn't a signature on the February payment because it was electronic or she wrote the wrong routing number on the check----so the bank moved to foreclose.

Supposedly it's been straightened out and the bank is even paying for the couple's legal fees, but definitely not a case where the early bird gets the worm!

Bank of America Moves to Foreclose on Florida Couple For Paying Mortgage Early - ABC News

Makes me want to join those young people protesting Wall Street....

 

[rescueme]

A note/mortgage at age 70/78?

"the couple owes about $177,000 on their 1,591-square-foot New Port Richey home"

What the H*** were they thinking? Give me a break...

"Makes me want to join those young people protesting Wall Street...."

Uh, you think those "unwashed masses" really have anything to protest other than to look for a handout (not to be political - really, but I was present during the protests in Gothenberg, Sweden back in 2001 and all I saw was young folk who didn't have a clue, and tore up paving stones to smash windows of private business owners for a demonstration that had no result).

 

[M Paquette]

An elderly couple in Florida got a loan modification for the mortgage on their home. They sent their first check in on December 23 2010---but the payment was due in January, so the bank was upset with the early payment (?). Then---reading different accounts---there either wasn't a signature on the February payment because it was electronic or she wrote the wrong routing number on the check----so the bank moved to foreclose.

Supposedly it's been straightened out and the bank is even paying for the couple's legal fees, but definitely not a case where the early bird gets the worm!

Bank of America Moves to Foreclose on Florida Couple For Paying Mortgage Early - ABC News

What? Oh, it's just Bank of America again. Damn fine customer service there. Really on top of things.

Paid it off? Paid cash? No problem! We're foreclosing on you!
Bank Of America To Pay Florida Couple In Mistaken Foreclosure Case | Fox News
Bank of America forecloses on house that couple had paid cash for - St. Petersburg Times

In fact, you don't even need to have a mortgage with them, and they'll still be happy to foreclose your property!
Lauderdale man's home sold out from under him in foreclosure mistake - Sun Sentinel

 

[DangerMouse]

Hmm odd that all these cases referenced are in Florida.

 

[eridanus]

Uh, you think those "unwashed masses" really have anything to protest other than to look for a handout

Yes.

 

[tangomonster]

Hmm odd that all these cases referenced are in Florida.

I hadn't noticed that, DM--but yeah. Probably just a coincidence---I'm sure BOA is just as incompetent/corrupt in the other 49 states!

 

[donheff]

Yes.

+1 Uh oh, getting political

 

[MichaelB]

Hmm odd that all these cases referenced are in Florida.

Well, they did have that specially enabled foreclosure process where they hired retired judges to reduce the backlog of foreclosure cases

The Florida Bar News, Belvin Perry Jr., chief judge for the state’s Ninth Judicial Circuit, said that during July (2010), 1,319 cases had been closed by three senior judges in the district’s two counties, Orange and Osceola.

That's 20 cases a day for 22 days per judge. Figuring breaks and such, a case each 15 minutes.

They were aided by the largest foreclosure firm in Florida, run by David J. Stern. That is, until his firm went bust after his employees attested that they forged signatures and did not check the documents.

Four bad foreclosures in Florida is not a surprise, it's a miracle. That is, a miracle there weren't thousands more.

 

[Nords]

A note/mortgage at age 70/78?

"the couple owes about $177,000 on their 1,591-square-foot New Port Richey home"

What the H*** were they thinking? Give me a break...

My parents-in-law took out a 30-year mortgage on their retirement condo a few years ago in their 70s.

Both of our mortgages will be paid off when I'm 79 years old...

 

[brewer12345]

Uh, you think those "unwashed masses" really have anything to protest other than to look for a handout .

Sure. Lack of "poon," beer running out, not enough doobage, etc.

 

[harley]

Guess I should head up to Wall Street to join in. I'm certainly qualified. Except for the unwashed part, of course.

 

[JPatrick]

Sure. Lack of "poon," beer running out, not enough doobage, etc.

Yep

 

[RunningBum]

A note/mortgage at age 70/78?

"the couple owes about $177,000 on their 1,591-square-foot New Port Richey home"

What the H*** were they thinking? Give me a break...

"Makes me want to join those young people protesting Wall Street...."

Why make assumptions about others?

If you're cash poor but have a good pension, it makes sense to me.

Pretty sure my 76/74 yr old neighbors have a mortgage, recalling some conversation about a property appraisal a few years back. They do have cash, but I'm sure they have nice pensions too as he was a Fortune 500 VP.

 

[veremchuka]

A note/mortgage at age 70/78?

"the couple owes about $177,000 on their 1,591-square-foot New Port Richey home"

What the H*** were they thinking? Give me a break...

Sounds like another Ric Edelman client!

 

[chinaco]

It looks like these people were doing ok and the husband had medical problems late in life. Based on the informration in the article, the husband retired from GM around age 63 (or so). GM probably provided some sort of pension... or his union probably did.

Since the house was worth $177k and now is worth $130k (big drop in value)... that might mean they bought that house in the last several years (bad timing to buy a new home) or saw they equity go up and decided to refi for the cash (e.g., needed more extra money or some reason). Who knows. It says the husband is bed-ridden. The money might have been used to pay for medical expenses. Maybe their house had hurricane damage that the insurance company would not cover... it could be anything.

Medical costs have ruined many people financially. Sometimes because they did not have good information or knowledge and made poor choices during their crisis.

The "Bank was almost a bad guy" is not the real story (IMO)... but there may be some real lessons in this story for people... if we knew the rest of the story! This article's conclusion is: don't assume you made the mistake (related to mortgage issues with the bank). The real lesson is about not getting caught up in a problem like this in retirement!!!

Be careful cashing out the house at an advanced age and holding a mortgage... especially if one has [not] done some pretty solid risk planning (e.g., LTC, emergencies, etc) Why? Because the house is often a shielded asset if one owns it. In many states, one spouse can keep modest home if the other spouse requires Medicaid assistance (need to check the individual states rules). Even in some of the more strict states, the spouse of a Medicaid recipient and keep a certain amount of income (usually a low amount), a small amount of cash, and the home. Some state have more lenient rules and allow the spouse to keep more.

Risk planning is critical but few do it. IMO - the less financial cushion people have to absorb personal financial shocks (self insure), the more important it is to use insurance to mitigate the financial impact of an adverse event. For LTC, since Medicaid exists, even if one cannot afford a personal LTCi policy... they still need to develop a plan of action(s). Sometimes knowing what [not] to do is as important as what to do! Plus, one does not want to try to figure something like that out in the middle of a crisis...

 

[HFWR]

Sure. Lack of "poon," beer running out, not enough doobage, etc.

This is an outrage!

 

[thefinancebuff]

An elderly couple in Florida got a loan modification for the mortgage on their home. They sent their first check in on December 23 2010---but the payment was due in January, so the bank was upset with the early payment (?). Then---reading different accounts---there either wasn't a signature on the February payment because it was electronic or she wrote the wrong routing number on the check----so the bank moved to foreclose.

A loan modification isn't a guaranteed right. The bank can agree to offer it. The bank can refuse to offer it. In this case the bank first offered it, then withdrew the offer. If the borrowers stuck to the original terms of the mortgage, which the bank is legally entitled to insist on, paying early would not have mattered.

It sounds like the bank would be better off not offering the loan modification. No good deed goes unpunished? I don't know why one should blame the bank for not giving something it's not obligated to offer in the first place. You give an inch ...

 

[eridanus]

A loan modification isn't a guaranteed right. The bank can agree to offer it. The bank can refuse to offer it. In this case the bank first offered it, then withdrew the offer. If the borrowers stuck to the original terms of the mortgage, which the bank is legally entitled to insist on, paying early would not have mattered.

Eh? Are you posting to the wrong thread?

 

[thefinancebuff]

Eh? Are you posting to the wrong thread?

Why? Quoting from the OP again:

"An elderly couple in Florida got a loan modification for the mortgage on their home. They sent their first check in ..."

 

[tangomonster]

Finance Buff, I'm not understanding why you think the bank can withdraw the offer. I agree that modification is something they don't have to offer---but once they do, isn't it legally binding?

 

[thefinancebuff]

Finance Buff, I'm not understanding why you think the bank can withdraw the offer. I agree that modification is something they don't have to offer---but once they do, isn't it legally binding?

The offer was conditional on receiving payments in a specific time period. None were made in that time window although one was made before the period started. A judge later decided that one should count although it wasn't literally what the offer was. I only said the bank is punished for doing something it didn't have to do in the first place. If banks learn a lesson from this case, fewer people will get a loan modification.

 

[eridanus]

The offer was conditional on receiving payments in a specific time period. None were made in that time window although one was made before the period started. A judge later decided that one should count although it wasn't literally what the offer was. I only said the bank is punished for doing something it didn't have to do in the first place. If banks learn a lesson from this case, fewer people will get a loan modification.

Did you read the article?

A payment was made by Jan 1st. BofA decided it wasn't valid, even though they accepted the payment, because it wasn't made ON January 1st. As in, the payment wasn't received EXACTLY on January 1st.

"By not making January's payment on January 1st, the Bullingtons had failed to comply with HAMP's terms." [emphasis added]

But the Bullingtons had already paid for January and the check was accepted.

HAMP, which is the loan modification program, in no way dictates that a payment has to be made EXACTLY on the due date. That's not only asinine but it's not what the program requires. It's also impossible to make a bank payment EXACTLY on January 1st; it is a bank holiday after all.

This is simply a case of BofA losing a payment in their vast system and the BofA bureaucrats refusing to acknowledge it. To make it some kind of moral lesson against mooching homeowners is stretching what happened to an extreme.

 

[thefinancebuff]

Which month the payment is for is pretty clear if you are current with your payments. If you are current, and you make a payment on 12/22, it will be applied toward January. Once you are behind, it's not that clear. If you didn't pay for October and November, and you make a payment on 12/22, the bank will accept it, but is it for the payments you owed for October and November, or is it for January as required under the loan modification? It's not clear. Applying the payment toward back payments seems to be just as reasonable as applying it as the required payment under loan mod. That's why I said the borrowers wouldn't get into this mess if they stayed current and the bank wouldn't get into this mess if they didn't offer the loan modification.

 

[eridanus]

Fair enough, if that's what happened, though it's not clear that they were late. In fact, the article title is,

"Florida Couple Foreclosed On For Paying Mortgage Early" [emphasis added]

Considering that BofA apologized, and the story made the news, and a US Rep and State Senator got involved, it would seem that any assumptions would come down on the side of, "The bank screwed up."

'Sen. Fasano said yesterday he found the whole situation "wild, just wild."'

But, hey, you can read whatever you want into the story.

 

[thefinancebuff]

Fair enough, if that's what happened, though it's not clear that they were late. In fact, the article title is,

"Florida Couple Foreclosed On For Paying Mortgage Early" [emphasis added]

Considering that BofA apologized, and the story made the news, and a US Rep and State Senator got involved, it would seem that any assumptions would come down on the side of, "The bank screwed up."

'Sen. Fasano said yesterday he found the whole situation "wild, just wild."'

But, hey, you can read whatever you want into the story.

I agree it's not clear. You never get the whole story from articles in the media. In the borrowers' mind the payment was intended for January. From that point of view, it was early. From their account's point of view, it may not be early; it may be late. Reporters didn't ask or report on this critical question. "Florida Couple Foreclosed On For Paying Mortgage Late" wouldn't make a good headline, would it?