State Records Show Complaint Historiesof Mass Lenders

By Steve Marantz

"The good and the bad"

An angry borrower calls the State Division of Banks' Consumer AssistanceOffice complaining that a lender, Margaretten and Company, Inc., has notrefunded his tax escrow payment one month after closing a loan. The Officemoves into action, informs the company of the complaint, and prepares aformal letter of inquiry. The borrower receives a refund check from Margarettenthe day the Office mails its letter.

A frustrated loan applicant calls the Office complaining that when herapplication to Salem Five Cents Savings Banks for a state-subsidized loanwas 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 applicationfee be refunded.

A confused borrower calls the Office questioning higher-than-expectedescrow charges by Fleet Funding Corp. The Office investigates and discoversthat a delay in crediting closing funds resulted in an increase in tax andinsurance charges. The borrower drops a potential complaint.

Mortgage borrowing is a complex, technical process that requires clearcommunication and honesty by borrower and lender. Sometimes communicationand 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 mediationfrom the Division of Banks.

"The fact that they even have a consumer complaint department isa 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 theirprocedures, but just the fact that they exist speaks well of the Divisionof Banks.''

About 700 complaints came into the Office in 1994 relating to mortgageborrowing, down slightly from 1993, according to state records. Most complaintsare against licensed mortgage lenders and brokers.

About 40 percent of all complaints are deemed valid by the Office, 1994records show. Of these complaints, slightly more than half are resolvedwith a high degree of cooperation by the lenders. One in five are resolvedwith a moderate degree of cooperation by the lender. One in eight are unresolveddue to a lack of cooperation by either the lender or borrower. One in eightrequire 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 degreeof cooperation. One in ten are unresolved due to lack of cooperation bythe lender or borrower. One in five require consumer education.

The remaining 28 percent of incoming complaints are referred elsewherewithin the Division of Banks, or to the Attorney General's Office, or aredropped due to lack of jurisdiction.

"We tend to give the consumer the benefit of the doubt, if we feelthe lender did not respond quickly or coherently enough,'' states ThomasJ. Curry, State Banking Commissioner.

The Office of Consumer Assistance lacks punitive powers, thus relieson persuasion to resolve valid complaints, Curry says. However, the Officeacts as an "early warning signal'' for state examiners who have thepower 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 involvingfees, 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 forescrow payments. Company provides account history proving accuracy. Consumerwishes to pay extra into escrow account and company agrees to discuss extrapayment with limitation.

· Consumer says Fleet Funding Corp. led her to believe she wouldeasily qualify for loan, and then turned her down. Fleet returns applicationfee after inquiry from Office.

· Consumer, pre-approved, applies to Plymouth Mortgage and isrejected. 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 afterapplication denied. Plymouth informs consumer fee is not refundable.

· Consumer claims Abacus Financial promised a rate lock, and forcedhim to sign a blank document. Abacus denies all claims. No documentationto support claims.

· Consumer seeking refinancing claims Assurance Mortgage usedold appraisal done prior to renovations. Assurance claims new appraisalwas used by refi. Denied due to comparable values in neighborhood.

· Consumer claims Jobe Financial refused to allow him to lockin, and that the company failed to give him a good faith estimate. Companyproduces documents showing good faith estimate signed by consumer, and thata rate lock was agreed upon.

"The bad"

· Consumer complains about $15 fax fee charged by Powder HouseMortgage on a no-points no-closing costs loan. Company refunds fee.

· Consumer complains that Medallion Mortgage did not make Augustor 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 MortgageServices is wrong. Company acknowledges mistake prior to contact by Office,and explains situation to borrower.

· Consumer complains that Fleet Funding increased escrow paymentneedlessly. She demonstrates required cash cushions. Fleet lowers escrowpayment after review.

· Consumer alleges a private mortgage insurance overage in hisescrow account with Shawmut Mortgage. Shawmut apologizes and credits escrowaccount.

· Consumer complains about late notice on taxes. American ResidentialMortgage is late on tax payment, pays late fee, and corrects credit report.

· Consumer qualifies for an abatement of $413 and is not creditedby Rockland Trusts tax service company. Rockland Trust refunds the moneyto consumer.

· Consumer alleges Fleet Funding, in accepting his transferredloan, did not set up adequate escrow account. Penalties and interest assessedon unpaid taxes. Fleet picks up extra costs.

· Consumer complains that New Bedford Institutions for Savingsovercharging on escrow account. Upon receipt of complaint, New Bedford refundsoverage.

· Consumer complains about starting balance of escrow accountwith Margaretten and Company, as well as a late-payment interest chargefrom the town. Company corrects by depositing settlement funds. Paymentcheck is lost in mail so the company replaces it and absorbs the interestcost.

Company Histories Available

Consumers are encouraged to call the office and ask for the complainthistory of a specific lender, states Christine Snow, director of the Office.Large lenders will have more complaints on file, but they may not be disproportionateconsidering 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. TheOffice does not have jurisdiction over national banks, federally-charteredsavings and loans, as well as local companies which are not subsidiariesof their holding companies. Fleet Funding is monitored, but BancBoston Mortgageand Shawmut Mortgage (since April 1994) are not.

To contact the Massachusetts Consumer Assistance Office call 617/727-2102 (x-349).