BofA problem: Paying off mortgage results in default

Written by Biloxi

Here is another homeowner who never missed a mortgage payment that became a victim of a bank's major blunder. This homeowner was not seeking a loan modification or refinance. The homeowner was paying off her entire home in full. Here is Nancy Schweitzer's story and her nightmare with Bank of America:

"My credit should be pristine," Schweitzer said. "I did everything right."



It was with great pride that she paid off her mortgage in November, 24 years early. The monthly payments, she said, were leaving her too little spending money. With the mortgage gone, she would also avoid decades of interest payments.



Her lender, Bank of America, had given her the payoff amount and reminded her she also had money in her escrow account for taxes. The Bank of America representative told her not to worry — when she paid off the mortgage, the $2,776.13 in escrow would be applied to the principal.



On Nov. 13, Schweitzer went to her bank and obtained a cashier's check for $61,385.44 which, combined with the escrow money, equaled the $64,161.57 payoff.

Unfortunately, Ms. Schweitzer's happiness didn't last that long:

A month later, Schweitzer became concerned when she hadn't received any documents that showed she owned her house free and clear. So she called Bank of America, where a representative told her the escrow money hadn't been applied to the principal.


"The person I spoke to was going to correct the error that day," she said. "I thought it was settled."

It wasn't.


On Jan. 15, Schweitzer received a letter from Bank of America informing her that her monthly payment was past due.

"We want to help you avoid foreclosure," the letter said.

And here is another example of a bank's major blunder of ruining a homeowner's credit who was current on her mortgage and had paid off her entire house payment. Bank of America as well as the other major banks created a very dysfunctional industry where customer service has become lost in translation. And here is an interesting nugget from Propublica that gives exampples of a dysfunctional industry:

It was common industry practice to tie employees' pay to keeping calls short. Among the four largest servicers, calls with homeowners average around eight minutes, according to data the companies submitted to Congress last year.

Many employees tasked with working with homeowners were moved from collections departments, and multiple current and former servicing employees said the emphasis was still on collections.

“Your manager is telling you, ‘Collect, collect, collect,’ ” said Debra Foley, who also had no experience when she was hired by Countrywide near the end of 2008. “Most people want to stay in their house. So why aren’t they”—meaning banks—“helping?”

Mairone said Bank of America, which acquired Countrywide in 2008, has since “created more of a distinction between what a collector does and then what a modification associate will do to help the customer.”

Retaining experienced employees has also been a problem for servicers. Most of the large servicers reported to Congress last year that their call centers had annual turnover rates around 25 percent.



And certainly struggling homeowners are not the only target for banks to abuse. Current homeowners on mortgage payment are now the new victims in foreclosure fraud.