Mortgage Payoff Attempt (RANT)

[Pappy]

My mortgage with CitiMortgage is nearly paid off. Letting my bank make this month's payment there would be about $250 left. I went on line this morning to get a payoff amount and was going to make a payment for the final amount.

After getting a quote good for tomorrow I called to see the best way to fill out the single payment form. The options were to either put in the entire amount as additional principle or check the box to make the monthly payment early and add the balance as additional.

NOPE!

They won't accept a final payment online as a single payment. The options are to either mail them a check ($19.99 for Express Mail) or have my bank send a wire transfer to the mortgage company. I don't think the credit union would charge me to do the wire transfer but the mortgage company charges $15.00 to accept and process it. Either way it cost me more than the interest for another month.

After more than a few choice words about their methods to milk more money out of their customers, I hung up. As soon as the payment posts for this month I will make them prep another payoff statement and send them a check with delivery confirmation.

Can't believe a company makes it this hard to pay them money!

[BadeMillsap]

Interesting Don, my son also has his mortgage with Citi and just yesterday called them about paying off only to discover EXACTLY what you reported. We foolishly thought there would be somewhere locally we could walk in and hand them a check... Silly us... Express mail with delivery receipt it must be... Sigh...


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[aiyou]

Having previously worked for a mortgage servicer, and having recently sold my home, it is my understanding that servicers will typically assess a fee to generate a payoff quote.

Having them generate another payoff quote may incur yet additional fees.

Different servicers may have different policies...

I've not worked for Citi, nor have I had a mortgage serviced by them, so I can't advise on their specific policies..just raising the possibility.

Rob

[woodturner]

They won't accept a final payment online as a single payment.

Yes, a lender needs time guaranteed and guaranteed funds to accept a final payoff, so they can't do it online. It can be confusing and strange for those who don't deal with it all the time and the legal requirements can seem like arbitrary policies from the lender.

Since you know the approximate amount, why not just make an additional principal payment online, but short it a few dollars. If your payoff quote was $250 for example, pay $240 in additional principal online. Sounds like you have autopay, so when they process the final payment they will figure out the few dollars still due and process that amount.

[atgcpaul]

First off, congrats on nearly paying off your mortgage! I wish that were the case here. My mortgage is handled by Citi, too. Kind of nuts that I couldn't walk into the branch down the street and hand them a check, but have to mail it in!

[JimD]

I would do about what woodturner said but I would overpay by $10. They have to return it to you. It might take a month but if it's only $10 I wouldn't consider that significant.

I am sure the lender has a bunch of work to do associated with paying off the loan but it comes under the category of not my problem. Last time I did it I got a cashiers check from Schwab, I think the fee was $15, and walked in an paid it. I walked out with a statement saying it had been paid off. It cost a few dollars but I wanted it done. I owed a lot more than $250 (I had sold another house so I was using the proceeds to pay off the one we live in).

[cwsmith]

I absolutely refuse to do any kind of banking, loans, whatever remotely. Internet transactions are totally out of the question, as I prefer to work directly with a bank or bank branch or credit union. Perhaps that is pretty difficult in today's environment of mergers, etc.

Citi bank is notorious I think. I know I won't deal with them or with Chase, as I've had past experience being cheated by both with credit card contracts in which they offered certain benefits that they later reneged on. In the case of Citi, they cheated us out of almost $300 in "points", which they devalued.

One of the lessons I learned when I was 26 and we took out our first mortgage, was to have the lending bank provide us with an Amortization schedule for the term of the mortgage we had taken. (An Amortization Schedule will list every payment over the course of the loan, and provide the exact amount of Principle and Interest for each month.)

In the very early months of a mortgage, most all of the money paid is 'Interest', with only a small percentage actually going toward the 'Principle'. Each month the numbers change with the Interest payment dropping and the Princilple payment increasing. With our particular mortgage you couldn't make any early payments for the first two years, but after that we would make a our monthly payment AND also a payment or two of the 'Principle' for the following months. Doing this as regularly as we could, we shaved almost five years off the back of our mortgage. We did that for both of our first two houses, and it saved us tremendously.

A good part of that is that the bank knows you're on top of the issue and thus they don't try to pull anything over on you. Of course I have no idea what's possible in today's market. Banks have gotten to be such money grubbers that I don't like to deal with them in any way, shape, or form. About the only thing we deal with a bank today is with our checking and credit card accounts... and for that we deal directly with people in the local office.

CWS

[woodturner]

A good part of that is that the bank knows you're on top of the issue and thus they don't try to pull anything over on you.

I wish it were that simple. I always calculated my own amortization schedule, so I knew it was correct. Of the six or so mortgages I have had, not one had the interest calculated correctly at closing, and not one calculated the payoff correctly. Cendant was the worst - took something like a year and the threat of litigation (they blew off the regulators orders and fines) to finally get that resolved.

The scary part is that in each case they said no one had ever questioned it before. Several class action cases arose as a result, but most people who paid off a mortgage in the last 30 years or so paid the wrong amount, there were basic errors in their calculations that no one had ever questioned. The amounts were only a few hundred dollars per mortgage, but I think most people would rather not pay the bank a $400 "bonus".

Unfortunately, the bank knowing you are "on top of it" seems to have been insufficient for at least the last 30 years or so.

[cwsmith]

I completely agree that it's not simple by any means. Almost any company in the money business is going to be a challenge and for that reason we've preferred to minimize our use of such concerns as much as possible. Perhaps the advantage we had is that in both of our mortgages we dealt with locally owned banks, first one being the Binghamton Savings Bank, and the second a Community Bank in the Corning area. In the first case we actually did have a conflict with the numbers on the final payoff. In that case their numbers were higher than than ours... and they were wrong. We actually sat down with the Mortgage VP present and when we exclaimed that their numbers were in error (and my wife was quite insistent), the VP sent the guy back out to re-figure them. We waited almost a half-hour, and when he came back the total had been corrected and matched ours.

While I would have just paid the amount presented, my wife is a real stickler for numbers and in our household she handles the money. (Just give me a monthly allowance and I'm happy!) Even today, she knows every penny owed, spent, etc. We keep every receipt, even if it's only pocket change, and ever bill is reconciled against receipts. She also keeps impeccable records going back years. I have to admit, she sometimes drives me crazy, trying to reconcile even a penny's difference in credit or checkbook balances. I've very rarely ever found her to be wrong, even though she doesn't use either a calculator or computer. I will run her numbers on the very rare occasions she can't find the error; and when those happens, it's most always because the bank has transposed a number.

(With almost everything in our life, we prefer to deal with people and institutions that know us by first name. Doing business of any kind is just better if you can do it on a personal level. It just makes me feel a lot more comfortable when I can see the person I'm dealing with.)

We've only had two mortgages in our lifetime and only three car loans, all paid off early; so no great amount of experience on our part. Dealing with remote, faceless lenders is just too disconcerting! I'm far more comfortable with eye-contact and a handshake.

CWS

[atgcpaul]

OK, I need an accounting lesson because I have become much too reliant on "the machine" to manage my money.

So I am aware of amortization tables but things get screwy (or maybe not) when the escrow amount changes because property taxes go up/down and maybe I pay more than is required each month (because I didn't update my monthly payment despite the new lower escrow amount. Hope all that makes sense.

Not including fluctuations in the escrow amount, the amortization table should stay the same. But if you pay a little more each month, it's always adjusting, right? So is there a formula in Excel or a website that will help me figure out when that payoff date is if I don't trust what the bank is showing me?

[cwsmith]

Frankly, I've never looked at the transaction as IF the mortgage payment schedule was "always adjusting"... perhaps I've looked at it as being more simple than it is. Basically I just look at it as simple math: you take a loan for a period of time (20 or 30 years) and they set the interest rate (I would never do an adjustable rate mortgage, although I understand that some people have no choice in the matter). From that you get the Amortization schedule... and each month that you pay the principle ahead, is simply a month on the back end that you won't have to pay.

For example, lets say you take a Mortgage for 30 years... that's 360 monthly payments! So on the 25th payment, I owe them $800 for my normal monthly payment. The 'principle' for payment number 26 is say $125... so I pay that too... stating clearly that I'm paying next month's principle (I note that on my check actually). So next month I still make my normal $800 payment (actually that would be payment # 27, and I again pay an extra "principle" payment for the following month (maybe now that is $128)... so in two months I've paid monthly payments 25, 26, 27, and 28. Those extra months payments are actually coming off the tail end of the length of the mortgage, so now you're two months shorter than you would be.

The escrow accounting is always different, even though you may have it included in your mortgage. Though your monthly mortgage bill may change every year, the "escrow" should be clearly stated and separately accounted for every time the bank makes such changes; and, you should ensure that you get some kind of statement from whatever the taxing authority is just to ensure that your lender is being honest with you. So, while the escrow amount will change, and thus your monthly payment, it should have no effect on your mortgage's "principle/interest" payment amounts.

CWS

[Pappy]

I handle my own taxes and insurance so there isn't an escrow account. according to the CitiMortgage site I can go into a branch to make the final payment but the locator at the Citibank site only searches 50 miles and there are no branches in the area, only ATM locations.

Did get an email for a customer survey on the phone call. I WILL fill this one out!

[woodturner]

Perhaps the advantage we had is that in both of our mortgages we dealt with locally owned banks

I suspect that is a huge advantage - nearly all of my dealings were with big national firms. The one exception was a local savings bank, and I think that was the only one that was correct and no hassle throughout the process. I had forgotten about that experience until you mentioned local banks.

I wish I had learned that lesson then :-(

[woodturner]

So I am aware of amortization tables but things get screwy (or maybe not) when the escrow amount changes because property taxes go up/down and maybe I pay more than is required each month (because I didn't update my monthly payment despite the new lower escrow amount.

Escrow is separate - an amortization table calculates principal and interest. Your payment slips or statement should show escrow separately - but I think it is better not to escrow and pay the taxes, etc. yourself. For example, banks usually will pay the taxes when due - so you miss the early payment discount.

There are amortization calculators online, but it's simple to calculate in a spreadsheet:
1. Enter principal balance in cell A2
2. Enter interest rate in cell B2
3. Enter monthly payment in cell C2
4. Enter +(A2*B2/12) in cell D2 - that is your interest for one month
5. Enter +A2-D2 in cell E2 - that is the principal for the month
6. Enter A2-E2 in cell A3 - that is the new principal balance
7. Copy cells B2 through E2 to B3 through E3
8. Copy cells A3 through E3 to as many rows as needed - for example, rows 4 through 362 for a 30 year mortgage
9. Manually adjust the last payment to make the final balance zero.

[cwsmith]

I'm not sure if a mortgage holder always gets a choice on whether or not there will be an escrow account. On my first mortgage, the bank handled the taxes thru an escrow account and on my second house I paid the taxes directly. Perhaps it was a matter of being established with a mortgage history, but I really don't know.


CWS