Home Loan Focus

Archive for the ‘bank errors’ Category

Today, the day after Christmas, I received an email from American Express, stating something to the effect that your account is past due, and please make a payment.

That is never the type of email anyone wants to receive, but I was slightly confounded because I had paid my bill.  In fact, I had paid my bill three weeks before it was due.  So what was going on?

As it turns out, I had used my credit unions Bill Pay Service.  I had made a batch of payments back on December 1st, and for no apparent reason their system completely dropped/deleted/lost my payment to American Express.  I don’t know if it was due to user error, gremlins, a bug in the system, or some reverse lottery system.

All I know is that I had entered the payment, had marked it in my own bookwork along with several other payments made at the same time.  My credit union accepts these payments in batches and so it would seem impossible for the transaction to be lost.  There was money in the account, so this was not an issue of insufficient funds.  The transaction was just lost.

The Notification Problem

In this case, I made my payment on the 1st and it was not due until the 19th.  I assumed that everything was just fine.  American Express did not know there was a problem until 12-20, when they realized that my account was past due.  They sent me an email on 12-26, and sent a new bill.  I got the email but have not seen the bill yet.

The notification problem is that I’m not told about a problem until after it is too late.  After my account has been assessed a late fee and after my interest rate has been increased!

That can be avoided with many different solutions, but I’d like to focus on fixing the notification problem.  When I called in to fix things today, they mentioned that I could use alerts possibly to configure my account to keep me up to date as to what was going on.

So I logged into Americanexpress.com and clicked on this option

This took me to a screen where I could then configure a number of options, including a warning about an approaching due date, and a notification that my payment had been accepted.  With this configuration, if I always work to have my payment sent at least 5 days before it is due, I will know that there is a problem with my payment, if I receive an alert 3 days before the due date!

I also set up a couple other alerts to help protect my account as well.

I should point out that the spam filter on Firefox 3.0 blocked me from setting up these alerts all together as the enroll button triggers a pop up window with the terms and conditions.  I had to instead use Internet Explorer 7 and even then I had to allow the pop up windows completely for this site (not just the one time allow) in order to get this to work.

That big Whooosh sound you heard this week is probably the sound of Freddie Mac and Fannie Mae sucking serious wind. You may wonder how that will affect your ability to buy a house.

Here’s where the rubber hits the road in mortgages. On any given day a bank takes in deposits from people that are actually saving money. They then turn around and loan that money out to people in the forms of loans and mortgages.

Those loans or mortgages represent an asset on the books of the banks. The banks don’t like to sit on these assets, especially recently when they’ve made so many bad loans, so they look for a sucker to buy their bad assets. As it turns out there were two major suckers out there, Freddie Mac and Fannie Mae.

These institutions by the assets and have recently lost a lot of money as they started to realize that many of the loans and mortgages were garbage. That loss of money has hit their investors very hard in this week on Wall Street or stock prices plunge down to next to nothing.

They claim to have a lot of money in reserve, we’re talking cash on hand or cash that they can draw on through loans from banks or other investors. If they run out of money they can’t keep continuing to buy mortgages from banks are trying to sell them in those banks will either have to keep their mortgages on their own books or stop making mortgages altogether.

That would very likely represents situation it would cause interest rates to rise as banks take on greater risk and the available market or money tightens up as two of the biggest firms that securitize mortgages go away.   So the big question is, who will actually come to the rescue of these two firms to keep the pyramid scheme of US banking up and running? 

Right now, you can hardly even track investors bailing out of these institutions with gps fleet tracking systems, let alone find someone daring enough to throw good money after so much bad money.

I recently established a new home equity loan. I signed up for the automatic withdrawal plan. My payment would be withdrawn from my checking account on a certain day of the month and I would save a quarter point on my interest rate. I also saved a quarter point for another reason as well.

The first payment due date rolled around and hit on a Saturday. My mortgage holder and bank, which happens to be Bank of America, did not process the payment on Saturday.

I phoned on Saturday to check on it and they could not contact the Home Equity Loan department. They were supposed to be at work, but no one answered the phone when other bank employees tried to hone them? Must have been a Saturday pool party at the bank . . .

I phoned back on Monday and they informed me that the payment could not be made on a weekend in their system. Translation: Someone somewhere in the bank had to process a batch file manually and that wouldn’t happen till Monday. Hence my payment would not show up until Monday at 7 PM.

Interest Charges on the Loan

That raises the potential for miscalculation and possibly abuse by the bank. They could conceivably charge me interest for the time from Saturday till Sunday and then Sunday to Monday.

Two days of interest on a Home Equity Loan. They do compound daily so over time that could add up. For a single incident, that means I would pay $19.73 if I had a loan of $40k at 9% interest (40,000 x .09 x 2 days / 365 days for the year).

If a Saturday payment occurs 2 times per year and I pay this loan for 20 years, that would total up to ($19.73 x 2 x 20) $789.04 plus the interest charged on this interest!

Bank of America Resolution

Bank of America informed me that they would back date the transaction from Monday to Saturday, and so I would not be charged the interest.

I won’t know if that is correct until this evening, but you can bet I will be paying attention!

You should check as well if you have an automatic withdrawal. An extra $500 – $1,000 over the life of your home equity loan is not insubstantial. You should check to insure that your bank is not over charging you and that they have provisions to back date appropriately.