Don’t trust the loan servicer for a moment, was my advice to the client who was trying to track payments he’d made on his home mortgage .
The mortgage industry has created an inhabited accounting swamp around your home; the lender’s representative lives in that swamp.
Don’t turn your back on a carnivorous predator.
I’m sad to foster cynicism and us-them ways of looking at the world. But that’s my best legal advice.
Don’t rely on anything the loan servicer tells you on the phone. Nothing.
Use what you gather on the phone as clues, but draw no conclusions from what you’re told.
Why customer service can’t be trusted
Money lies at the heart of the loan servicing problem. Good customer service is expensive.
The outfits who are contracted to collect the payments on your home loan operate on narrow margins in a competitive business. Cheaper is better (for them).
People: The obvious place to reduce your costs and make more money is to hire the cheapest employees you can get. Short their training, and give them no flexibility in handling their jobs.
So, the voice on the phone trying to answer your questions is probably not up to the job.
Procedures: When you get a written copy of how your payments have been credited to your loan balance, you often see payments posted, then reversed, then reapplied differently.
One of my colleagues reports a loan history where the servicer made SIXTY FOUR entries on the loan ledger in a single day.
One payment and they tried 64 different ways to credit it to the loan.
Handoffs: The same servicer seldom handles a loan for the life of that loan. Instead, the servicing rights are handed off from one servicer to another, presumably someone who will charge the owner of the loan even less to pretend to do the job.
Usually, what the new servicer gets doesn’t include any loan history that you could audit; the new guy just gets a series of single numbers representing, supposedly, the bottom line number in each column.
Phone calls don’t make good evidence
The fundamental problem with relying on what the servicer says is the phone: How do you prove what was said on the phone?
Words are fleeting and misunderstandings are easy. If there’s trouble, and there often is, there’s no paper record.
Oral agreements aren’t worth the paper they’re written on, goes the old saw.
Customer service leads to foreclosure
One recent client was dealing with “customer service” trying to determine how much money was required to bring the loan current before the foreclosure sale five days off.
Three days from the foreclosure sale, they admitted that the servicing had been transferred and they had no authority.
Worse, the new servicer said the loan isn’t in our system yet, so we can’t tell you.
When you’re in default
First off, don’t wait til the last minute. Foreclosure is serious stuff and it deserves your full attention when you see the problem.
Use federal law to get the accounting and answers you are entitled to.
Don’t trust anything you’re told on the phone. If it’s important, get it in writing.
If you need legal protection, start interviewing bankruptcy lawyers early. Arrive at the last minute, and many lawyers assume you’ll be a rotten client.