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State Records Show Complaint Histories of Mass Lenders
By Steve Marantz
"The good and the bad"
An angry borrower calls the State Division of Banks' Consumer Assistance Office complaining that a lender, Margaretten and Company, Inc., has not refunded his tax escrow payment one month after closing a loan. The Office moves into action, informs the company of the complaint, and prepares a formal letter of inquiry. The borrower receives a refund check from Margaretten the day the Office mails its letter.
A frustrated loan applicant calls the Office complaining that when her application to Salem Five Cents Savings Banks for a state-subsidized loan was rejected, the lender failed to refer her to a similar federal program. The Office sends a letter to Salem Five requesting that the woman's application fee be refunded.
A confused borrower calls the Office questioning higher-than-expected escrow charges by Fleet Funding Corp. The Office investigates and discovers that a delay in crediting closing funds resulted in an increase in tax and insurance charges. The borrower drops a potential complaint.
Mortgage borrowing is a complex, technical process that requires clear communication and honesty by borrower and lender. Sometimes communication and honesty break down, leaving one party - usually the borrower - unhappy. At that point the Office of Consumer Assistance can become involved in 1994, in excess of $356,727 in fees were returned to consumers after mediation from the Division of Banks.
"The fact that they even have a consumer complaint department is a positive thing - not every state has on office for these types of complaints,'' states Susan Zuber, Director of the Massachusetts Mortgage Bankers Association. "We refer some of the calls we get to them. I'm not aware of their procedures, but just the fact that they exist speaks well of the Division of Banks.''
About 700 complaints came into the Office in 1994 relating to mortgage borrowing, down slightly from 1993, according to state records. Most complaints are against licensed mortgage lenders and brokers.
About 40 percent of all complaints are deemed valid by the Office, 1994 records show. Of these complaints, slightly more than half are resolved with a high degree of cooperation by the lenders. One in five are resolved with a moderate degree of cooperation by the lender. One in eight are unresolved due to a lack of cooperation by either the lender or borrower. One in eight require consumer education. About one percent of complaints require litigation.
About 32 percent of incoming complaints are deemed invalid. Of those, three of five are resolved with lenders showing a high or moderate degree of cooperation. One in ten are unresolved due to lack of cooperation by the lender or borrower. One in five require consumer education.
The remaining 28 percent of incoming complaints are referred elsewhere within the Division of Banks, or to the Attorney General's Office, or are dropped due to lack of jurisdiction.
"We tend to give the consumer the benefit of the doubt, if we feel the lender did not respond quickly or coherently enough,'' states Thomas J. Curry, State Banking Commissioner.
The Office of Consumer Assistance lacks punitive powers, thus relies on persuasion to resolve valid complaints, Curry says. However, the Office acts as an "early warning signal'' for state examiners who have the power to suspend or revoke licenses of lenders.
Complaints involve delayed processing resulting in rising interest rates, or a failure to honor a "lock-in'' rate, or myriad issues involving fees, escrow funds, and credit denial.
Following are actual complaints filed in 1994, taken from Office records:
"The good"
· Consumer believes Graystone Mortgage is not crediting him for escrow payments. Company provides account history proving accuracy. Consumer wishes to pay extra into escrow account and company agrees to discuss extra payment with limitation.
· Consumer says Fleet Funding Corp. led her to believe she would easily qualify for loan, and then turned her down. Fleet returns application fee after inquiry from Office.
· Consumer, pre-approved, applies to Plymouth Mortgage and is rejected. Consumer had income comprised of salary plus irregular commissions, which made her debt/income ratio too high. Company refunds application fee.
· Consumer complains about a $996 escrow charge by Citizens Bank. Company responds that charge is necessary for adequate escrow buffer.
· Consumer wants appraisal fee back from Plymouth Mortgage after application denied. Plymouth informs consumer fee is not refundable.
· Consumer claims Abacus Financial promised a rate lock, and forced him to sign a blank document. Abacus denies all claims. No documentation to support claims.
· Consumer seeking refinancing claims Assurance Mortgage used old appraisal done prior to renovations. Assurance claims new appraisal was used by refi. Denied due to comparable values in neighborhood.
· Consumer claims Jobe Financial refused to allow him to lock in, and that the company failed to give him a good faith estimate. Company produces documents showing good faith estimate signed by consumer, and that a rate lock was agreed upon.
"The bad"
· Consumer complains about $15 fax fee charged by Powder House Mortgage on a no-points no-closing costs loan. Company refunds fee.
· Consumer complains that Medallion Mortgage did not make August or November tax payments. Company provides cancelled check from August payment, and reissues new check for November payment.
· Consumer charges that escrow analysis by Source One Mortgage Services is wrong. Company acknowledges mistake prior to contact by Office, and explains situation to borrower.
· Consumer complains that Fleet Funding increased escrow payment needlessly. She demonstrates required cash cushions. Fleet lowers escrow payment after review.
· Consumer alleges a private mortgage insurance overage in his escrow account with Shawmut Mortgage. Shawmut apologizes and credits escrow account.
· Consumer complains about late notice on taxes. American Residential Mortgage is late on tax payment, pays late fee, and corrects credit report.
· Consumer qualifies for an abatement of $413 and is not credited by Rockland Trusts tax service company. Rockland Trust refunds the money to consumer.
· Consumer alleges Fleet Funding, in accepting his transferred loan, did not set up adequate escrow account. Penalties and interest assessed on unpaid taxes. Fleet picks up extra costs.
· Consumer complains that New Bedford Institutions for Savings overcharging on escrow account. Upon receipt of complaint, New Bedford refunds overage.
· Consumer complains about starting balance of escrow account with Margaretten and Company, as well as a late-payment interest charge from the town. Company corrects by depositing settlement funds. Payment check is lost in mail so the company replaces it and absorbs the interest cost.
Company Histories Available
Consumers are encouraged to call the office and ask for the complaint history of a specific lender, states Christine Snow, director of the Office. Large lenders will have more complaints on file, but they may not be disproportionate considering that lender's higher volume of loans.
"If someone wants to be complete they can ask for the summaries,'' says Snow.
Snow points out that not all lenders are monitored by her office. The Office does not have jurisdiction over national banks, federally-chartered savings and loans, as well as local companies which are not subsidiaries of their holding companies. Fleet Funding is monitored, but BancBoston Mortgage and Shawmut Mortgage (since April 1994) are not.
To contact the Massachusetts Consumer Assistance Office call 617/727- 2102 (x-349).