My Own Private Mortgage Hell

There's been a lot of talk lately about the mortgage crisis, a topic on which I am wholly unqualified to comment. Let me tell you instead about the rage-inducing customer service experiences I keep having with my mortgage lender, whose name I shall not broadcast for fear of being sued. Everything I am about to say is true, but this Ohio-based financial institution that was founded in 1858 has more in-house lawyers than I do.

I refinanced my adjustable-rate mortgage last year into a fixed-rate version with a lower interest rate. Yay!, right? Kinda. I soon learned that my new mortgage came with an online banking system that seems to have been designed by someone with a very limited imagination...or a sick sense of humor.

Here's what happened (and continues to happen). The month after I got my shiny new mortgage, I sent a small additional payment to the bank through an electronic funds transfer from my primary bank. As instructed by the mortgage bank's online help (yes, I did actually RTFM), I noted "PRINCIPAL PAYMENT" in the memo line.

About two weeks later (two weeks!), I got a letter in the mail from the mortgage bank informing me that I had made a payment on my mortgage (thanks, guys!), but they didn't know what to do with it (...really?). The letter stated that I needed to inform them in writing of my wishes, whether to hold the excess payment until my next monthly payment was due or apply it to the principal.

I guess they didn't see the memo (line).

I called Customer Service and asked if I really had to send them back a physical letter, or if I could just tell them my wishes and have them note it on my account for all future additional payments. The Customer Service rep said the latter was fine. So I let my wishes be known. The rep informed me that it would take up to five business days for the payment to be processed as a principal payment. "But you've had the money for two weeks!" I protested. "Why will it take you so long to actually apply it to my account?" The response was the Customer Service equivalent of "I don't make the rules..."

Several days later I got a letter in the mail stating that my additional payment had been applied to the principal on my mortgage. The letter also helpfully informed me that if I wished to contact Customer Service, I could give them instructions on how to apply future excess payments. Hmm. The letter also apologized for "any inconvenience this may have caused." (Gotta love the "may have.")

The next month, I made an additional payment and went online to verify it was applied correctly. It was not. It was listed as an "Unapplied Credit." (As in, sits in a pool earning interest for the bank until your next mortgage payment is due, at which time it is applied to your balance.) I sent the bank an email message via their web site and asked them to apply it to the principal balance immediately, and reminded them that I had called the previous month to indicate that that was my preference for all excess payments. I received an apologetic response and was assured it would be adjusted and applied to the principal. I got the same form letter in the mail a few days later.

Later, rinse, repeat, about 10 times (what can I say? I like to chip away at that ginormous balance, if only just a few bucks at a time.) After a few more months of apologetic but ultimately unhelpful service from the bank, I was able to determine the root cause of the problem. It is interesting to note that I reached this determination not with any direct assistance of the Customer Service department, but by comparing multiple, disparate responses from Customer Service that were all partially incorrect in their own unique way.

As it turns out, there are multiple points of failure here.

1. The bank's system processes all payments (by physical check or electronic transfer) without human intervention, so writing "PRINCIPAL PAYMENT" on your check is useless. (Online Help fail!)


2. The bank's processing system is not smart enough to associate incoming payments with information (such as payment allocation directives) in a customer's account profile, unless the payment is coming from a checking account held by that same bank. (Interoperability fail!)


3. Their Customer Service system is not sophisticated enough to recognize the need for escalation after a customer has reported the same issue more than, say, a dozen times in less than a year. I have a stack of identically worded letters from this bank, and each time I get one, it makes me angrier than the last. (Customer Service fail!)

I could go on. About, say, the fact that the Online Customer Service team really needs to look into spellcheck. (Seriously, sir or madam: I've already spelled "principal" correctly for you in my bi-weekly emails requesting that you process my payment as a principal reduction. Don't write back and tell me you've applied my payment to the "principle" on my mortgage.) But that would be splitting hairs.

Do you have a tale of spectacular Customer Service failure? Do you hate your bank, too? Leave your story in the comments.

Photo credit: AMagill