Do you have warm feelings about your mortgage servicer?
If you have a mortgage, you have a servicer. It’s the company you send your monthly payments to. If you’re like me, you’re cool with your servicer as long as it doesn’t screw something up. Unfortunately, mortgage servicers mess up a lot. And there’s not much you can do about it.
You make the payments, so you’re the mortgage servicer’s customer, right? Wrong.
The servicer’s customer is the business entity that owns the mortgage. The loan’s owner hires the servicer to divvy up payments to investors, insurance companies and tax authorities. You don’t have any say in who your servicer is. You aren’t the customer; therefore, service stinks.
So I have an idea: Let’s allow homeowners to choose their mortgage servicers.
Servicers get lots of complaints
In the last 12 months, the Consumer Financial Protection Bureau has received more than 16,000 complaints about mortgage servicing. It’s one of the most common complaint categories, along with debt collection and credit reporting. There are far fewer complaints when it comes to shopping for a mortgage.
Typical mortgage servicing complaints include:
■ Taxes are paid to the wrong municipality.
■ Extra payments are not put toward principal.
■ On-time payments are counted as late.
I’ve been lucky. I haven’t had problems with my mortgage servicer. But I remember what happened to my mom.
Arguing with polite robots
Mom’s problems with a mortgage servicer happened in 2000, long before the Consumer Financial Protection Bureau existed. She turned 65 that October and became eligible for reduced property tax retroactive to the beginning of the year.
She was due an $800 refund from the county. So she called the mortgage servicer and asked it to recalculate her monthly payment to reflect the lower tax bill and to collect and give her the refund.
But the servicer didn’t do it. In fact, her monthly payments went up, not down. When she called the servicer, the customer-service representative didn’t help her. Mom tried again the next day and got the same response. “They are impeccably polite, but it’s like talking to a well-trained robot,” she told me back then.
The servicer didn’t have a website in those days, but Mom did some search-engine sleuthing and found a newsletter item about a charity ball that included the name and phone extension of an executive at the company. Once she breached the executive suite by phone, her case was flagged as a “president’s file” and was resolved promptly.
When servicers compete, you win
Why not introduce competition by letting homeowners select their mortgage servicers? This would vastly complicate the servicing industry, and I’ll be labeled as naive and unrealistic for making the suggestion. But if a beer truck can navigate 120 miles of Interstate 25 without a driver at the wheel, the geniuses in Silicon Valley can figure out how to make mortgage servicers compete for our business.
My main worry is that we would end up with a stratified system like the one we find in airplane boarding areas. Imagine calling the mortgage servicing company and hearing a recording telling you that holders of certain credit cards, first-class customers (who paid extra) and borrowers with credit scores above 800 will get through to a customer service rep first and that you’ll just have to wait.
Loan how-to: Avoid new credit
Typically, about four to six weeks elapse between the time you’re approved for a mortgage and the day you close on it. Here’s one strong rule to follow during that time: When you’re in the middle of getting a mortgage, don’t apply for new credit, and don’t charge up your credit cards. Wait until after you close on the mortgage.
Here’s why: When the mortgage lender assesses your creditworthiness, it looks at your overall indebtedness. Generally speaking, the lender wants all of your debt payments — mortgage, auto and student loans, minimum credit card payments, child support and so on — to total less than 36 percent of your monthly income before taxes. That’s a rule of thumb, and there are plenty of exceptions. The point is that the mortgage lender won’t approve the loan if you’re too deep in debt.
A day or two before closing, the lender will check your credit report. If you bought a car or furniture on credit, or applied for a credit card, or charged up your cards to buy kitchen appliances, the lender might have to redo the approval process. That could introduce a delay or even result in a loan disapproval.
My advice: Wait until after you close before buying furniture, appliances and tools on credit.