Loans Answers

Mortgage payoff annoyance (I knew it)

Question: Okay, this is no big deal, but it is annoying, and I knew there’d be some crap like this.

I paid off my small mortgage this month (CitiMortgage). Last month’s statement stated that I had a principal balance of 1,280.97, with the usual regular payment of 413.97 due on Oct. 1, $7.87 of that being interest. So, I sent a check for 1,280.97 and they processed it on Oct. 4th. When they posted the payment, they stopped my account access to their Website (apparently their policy when balance paid off, for some reason).

I didn’t know that at the time and called to see what was going on. My call was received by their Indian call center, and I was told that my balance was zero. I figured I’d owe a little interest, so I asked twice if they were sure it was zero. I also asked if there were going to be any fees of any kind that I was going to be stuck with. Both guys I spoke with said no, that my balance was zero, and that I would be getting payoff letter in a few days.

Yesterday, I got a letter from CitiMortgage. First paragraph:

“CitiMortage recently received payoff funds, which was less than the amount required to pay your loan in full. However, CitiMortage advanced $18.65 on your behalf to pay the loan in full.”

They went on to say that although the loan is considered paid in full, they want to be reimbursed the $18.65. I then called and asked about the $18.65, and got India again. I believe the gist of what she said was that $8.65 was for interest, and $10 for some payoff fee of some sort. I’ve sent them the check. As I said, it’s not the money, but this is annoying. This was my first mortage, so I don’t know. Is this kind of strange?

Answer: Make sure that they remove the lien on your house! And that they send you a letter to that effect. Otherwise when you go to sell there may be complications as the title company has to ensure that the loan was paid off.

When I bought my house, the sellers had repaid a home equity loan but there was still a lien on their house. So instead of my mortgage lender paying them, they held the money in escrow for a week or so while they verified the house was indeed paid off.

I have Citibank credit cards and have not had problems with their call centers. But I understand that fewer issues might come up with mortgages than with credit cards so they’d possibly send the mortgage calls to a less-experienced crew, despite the fact that mortgages involve more money than credit cards.

I had to argue a bit when I repaid my mortgage early– and I had been an employee of the lender at the time I took out the mortgage (but not when I later paid it off, which was after the bank had been sold). As I recall they wanted to charge me fees to remove the lien and I told them to stuff it– their servicing center was in Buffalo which was under several feet of snow at the time, so I had to tell several people to stuff it before I managed to get a hold of someone qualified to stuff it.

But stuff it they did, and now the house is mine, mine, all mine.

Oh, yeah, when I tried to pay off my student loan early (this was a while ago) the lender used something called The Rule of 78s (a non-mathematical way of calculating ‘interest’ that made early payoff higher). It was in the contract that I’d signed when I was 17; the contract also said that there were no pre-payment penalties. I pointed out to them that The Rule of 78s itself was a prepayment penalty and had to threaten a class-action suit to get them to take my payoff.

It pays to know the rules and a few nasty legal terms.

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Filed under: Home Equity Loan