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March 25, 2008

Mortgage companies scamming customers

With all these toxic mortgages around and mortgage companies holding bad paper they leveraged to the hilt to buy, there seems to be a new scam they're running to squeeze borrowers. Today I caught Wells Fargo trying to run one on me.

It goes like this:

You notify the borrower's insurance company that the value of the house has "gone up" and the insurance value needs to be increased accordingly...thus increasing the escrow amount the borrower has to pay each month...and increasing the amount that the mortgage company gets to float. They don't give a shit that trying to squeeze a few more dollars of float costs the customer potentially thousands of dollars a year more.

In my case it worked out like this:

There's only $20K left owing on this mortgage, so in reality Wells Fargo would be more than covered by the value of the lot alone even if the joint were flattened by a hurricane and only slab left. Just the lot with dirt work and workable slab would sell for around $35-40K these days.

Even in today's depressed market this house would sell in the $250K range.

I had the joint insured for about $130K because I know that's what I could build it for from scratch acting as my own GC. Remember, replacement cost != sale price. Sale price is affected by market factors, neighborhood, etc. Replacement cost factors in only materials and labor.

So these fucking scumbags at Wells Fargo told the insurance company to pump the value up to $200K and that added close to $2000 to the insurance premium (and dramatically increases amount they'll be floating in the escrow account).

All this on a property they've only got a $20K interest left in that in no way qualifies as one of these toxic mortgages people are walking away from. They're fucking over the people who ARE paying them to grab a few extra dollars of interest float.

Check your mortgage statements carefully folks. If they did it to me, they'll be trying to do it to everyone. The insurance company was more than willing to lower the insured value of the joint back in line with a replacement cost for me when I called.

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posted by Purp at 07:28 PM

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