Thursday, August 18, 2022
J.P. had been paying his mortgage on time for 15 years. In all that time, he never thought for one moment that there was a problem with the payments. J.P., like many people, simply assumed that the bank knew how to do the math. He also assumed that the bank valued his patronage. Little did he know that he was overpaying the bank thousands of dollars!
You can be sure that if he was underpaying the bank, they'd find that mistake. But when it comes to mistakes in the bank's favor, you can bet that you won't be receiving any letters.
Luckily for J.P., he was able to recover his money--a refund of $38,000--after getting a mortgage audit. Not surprisingly, banks donít tell people about this important service for consumers.
First, you should know that adjustable rate mortgages (ARMs) involve changing index values and computer calculations that invite human and software errors. You probably took your lender's figures at face value. But The Wall Street Journal, MONEY, Forbes, Newsweek and other leading publications have been warning consumers that miscalculations occur in up to one-half of all such mortgages. In addition, mortgage overcharges average anywhere from $800 to over $2,000 and often exceed $5,000!
You may have been overcharged if your lender selected the wrong index value, rounded the figures incorrectly, or improperly credited extra principal payments. You should be especially concerned if your original lender sold the loan or is now out of business, if the loan has a rider/addendum, or if the balance seems too high.
It is important to note that you can even claim a refund on an ARM you've already paid off! Either way, you will get peace of mind knowing whether or not you have been charged the correct rates and payments by your lender.
Many people have recently refinanced their homes, switching from adjustable-rate loans to fixed-rate loans. But the good news is, that if you were overpaying on your old ARM, you can still claim a refund.
Iíve been conducting mortgage audits since founding Loantech in 1985, because after talking with hundreds of homeowners, I realized that because of the complexities of such loans, it was nearly impossible for borrowers to audit their own loans. Also, because there was no source of objective information for homeowners who had questions about their mortgages, I felt many homeowners across the country would benefit from an independent mortgage audit service, and I was determined to offer such a service.
Another case I personally handled was Mr. and Mrs. Stuart R. of Potomac, MD. They had been arguing with their lender for over two years about the calculations of their loan payments. They felt that their payments were higher than expected, but were not getting any response from their lender. Then they contacted me and things began to happen. I performed an ArmCheckô mortgage audit for them, and it revealed several significant mistakes the lender made and that they had overpaid $5,300 on their loan over a period of five years! The couple sent a copy of the report to their lender, and within ten days received a check for $5,379.36. As the saying goes, that check was in the mail and they were happy it was!
It is extremely difficult, but not impossible, for homeowners to audit their own loan. To audit a mortgage, the homeowner must be familiar with the precise definitions and complex calculations as described in the mortgage note. This includes the structure of the loan as it relates to the future schedule of new rate and payment calculations, and it also identifies the specific historical interest rate index--such as the prime rate or U.S. Treasury securities adjusted to a constant maturity of one year, which is added to a predetermined margin amount, rounded correctly and then plugged into a complex formula that determines the new rates and payments, which are often subject to limits or other limitations or caps. Furthermore, this new rate determines the new payment amount which in turn will affect the gradual pay down of the loan--or amortization, which directly affects the correct balance remaining after each monthly payment.
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