I bought my house in May/June 2009. At the time, I was finishing up a 4-year enlistment and had no job lined up for afterwards. My wife had a career but had recently quit to stay home with our children. I tried to get a conventional loan, even (at the suggestion of our mortgage officer) writing a letter directly to the underwriters explaining the education level and skill sets of my wife and I, basically pleading that we were a “good bet.” However, we were rejected. We did, however, qualify for an FHA loan with a co-signer, a slightly higher interest rate, and mandatory PMI even though we put down 20% (we were only required to put down 3% but we put down the full 20 anyway). We were told we couldn’t get a non-resident co-signer on a conventional loan.
Fast forward 3 years and we refinance (with a different bank) to take advantage of the even more insane interest rates, remove the co-signer, and switch to a conventional loan so we could stop paying PMI. Fast forward 5 months to yesterday afternoon, and I find a FedExed letter from the bank I had my original mortgage from. It stated that they conducted a review of my recently closed mortgage and they’d determined that I would have qualified for a conventional loan after all. Accompanying the letter was a rather hefty rebate check for a) every dime of PMI I’d paid, b) the extra interest I’d paid, and c) the extra closing costs associated with the FHA loan.
The only catch appears to be that by cashing the check, I’m giving up the right to sue them for their “error.”
Free money makes me happy, but I can’t really understand this. I applied for a conventional loan and was rejected, which must happen all the time. I was free to go to a different bank, but I didn’t; I instead opted for a more expensive mortgage contract that I entered into knowing exactly what I was getting.
Is this normal? What are they thinking? The amount of the check represents about 20 to 25% of the total revenue they made off of me over the 3 year period.
Was there a lawsuit? Some sort of class action, or orders from the feds? Unusual for a bank to give/refund money from the goodness of their cold black hearts.
This is probably a good bet. Someone else is suing them and they’re trying to head off a class action suit.
The bank is definitely covering its behind. I would guess that disqualifying someone who is qualified for a regular loan in order to steer them toward a more expensive loan is either illeagal or something that they can be sued over.
Many things may have prompted the bank to do this now. As mentioned, there may be a class action law suit in the works. Their lawyers may have warned them that they would be open for such a suit. Another bank may have been fined by a regulatory agency and ordered to give back the difference to all affected customers and they’re wanting to avoid a possible fine by giving back the money before they can be audited. Or they could have had a change in management and the new guy(s) said, “crap, do you know how wrong this was? Do you want to get sued or fined?”
If you’re suspicious, you might want to check, possibly with a lawyer, to see if they would have to pay you more if charged or sued. But the amount they sent may be all that they’re obliged to give you, with the CYA language just being an ingrained habit. And in a lawsuit, you have to pay the lawyer.
Interesting, thanks guys. I found this:
http://dealbook.nytimes.com/2012/10/09/u-s-sues-wells-fargo-alleging-mortgage-deceit/
My loan wasn’t in the time period described, and I didn’t default, but maybe I wasn’t actually eligible for an FHA loan and they want it off their books or something. In any case, I like money and I have no interest in suing, so I’m going to whistle and walk away.
I think that’s the wisest and best choice.
I once had an ARM whose rate was climbing and seemed much too high. At the time, rates were volatile and it was hard to compute what the payments should have been, but I did a crude calculation over the several-year life of the loan, and it seemed I was paying much too much.
My loan papers said the interest rate would be .5% above a certain fed index, and no matter what the index was, they were charging me considerably more.
Complaints to the loan department got nowhere, just clerks who impatiently told me that “of course, it’s tied to the index, and of course you will pay more than that.” No amount of explaining moved them.
But I must have made enough ruckus that I got a phone call out of the blue, and seated around the speaker phone were all the VPs of the bank. One explained that I had been correct, they were charging me 5% over the index, not .5% that they had signed for.
Apparently some clerk put a decimal point in the wrong place and no one caught it until years later when I complained. The bank had intended it to be 5% all along.
It was a happy outcome for me. The VPs agreed to refund all the overpayments at once and give me the “special” rate for the rest of the loan’s lifetime.
So there is justice in the world.