If you've been getting strange calls from your mortgage lender demanding payment, don't be so quick to reach for your checkbook -- such calls could be nothing but efforts to get money before it's due. Or they could be outright frauds, a form of identity theft.
Let me explain:
I have a mortgage which is set up like this: Payment is due on the 1st of the month. However, there's a grace period. If the lender gets my payment by the 15th of the month there's no late fee. In addition, there's no credit ding. Why? Because only items which are at least 30 days late are included on credit reports.
In other words, this mortgage is exactly like millions of other mortgages, there's a due date and there's a built-in grace period. If payment is not received within the grace period then borrowers can be hit with a penalty, perhaps 5 percent of the payment amount.
A Contract Is Not A Contract
Now my lender is trying to modify my mortgage. Apparently a contract is not a contract when a lender doesn't like the terms of the deal. This seems odd since the lender underwrote my loan after looking at roughly 20,000 pieces of paper and because the mortgage is in the "lender's usual form" -- an expression which means the loan terms are written by the lender's lawyers to favor, well, the lender.
In the past few days, however, I have received several calls from individuals who say they are my lender. The drill goes like this: The phone rings. It's 8:30 at night. A pleasant automated voice says I should hold. For whom am I holding? Ah, that turns out to be an alleged "representative" of my bank.
"We see you haven't paid your mortgage yet," says a voice on the phone. "If you're having financial difficulties you may be eligible for help through the federal government."
"Nope," I say, "I'm fine."
"Well, your payment is due on the 1st and has not been received. We can charge your checking account with an electronic transfer right now for a $20 fee and you can avoid a late payment fee."
So what's wrong with this call?
First, I can avoid a late fee without help from my bank. I do this by making full and timely payments every month, without exception.
Second, why am I being called? My mortgage says I can make my payment as late as the 15th of the month without any fee or penalty. It's now the 12th.
Buried in the smooth script and the fake concern regarding my financial situation is a more troublesome issue: Someone I don't know has called me.
If I authorize them to electronically withdraw money from my checking account I must provide certain information I know and they don't. And once such information becomes free-range data, how can I be sure they won't empty the entire account? I don't actually know the caller. I hear what they're saying but I have no way of knowing if I'm being contacted by a lender or a con artist. It's not easy to tell the difference.
Assuming this is a call from my lender, the real effort here is to speed up my payment before it's actually required. If the lender can scare enough people to flush out more early payments it will then have a few days of extra cash on hand to earn some additional float dollars, money which can be used to fund executive bonuses or help credit card borrowers in need of financing at 29.99 percent.
I'm sure in some sense that any payment made after the 1st is "late" but it doesn't matter: my lender -- and probably your lender -- has agreed in writing not to take any action or charge any fee if my payment is received during the grace period. And after all, it was the lender who wrote the loan terms.
So check your loan documents. If you need help, speak with an attorney or legal clinic. Know your rights. If your mortgage allows a grace period then that's the deal. Always meet the terms of your mortgage with full and timely payments. And if your lender calls early to ask where's the payment, tell 'em where they can look for it.
(Peter G. Miller is the author of The Quick & Dirty Guide To Successful Mortgage Modifications. For more real estate news and commentary, visit OurBroker.com.)
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