|David I. Ginsburg, is president and founder of
Loantech. He's a nationally known mortgage expert who is quoted frequently
in the national media and has appeared on ABC's Good Morning America, CBS, NBC
and CNN. Mr. Ginsburg has testified before the Federal Reserve Board and was
invited to testify before a Congressional Committee studying mortgage errors. He
has advised thousands of consumers and financial professionals over the past 20
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 don’t 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
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.
I’ve been conducting mortgage audits since
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
ArmCheck™ 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.