In 2003, I purchased a townhouse in Ankeny, which is a northern “suburb” of Des Moines, Iowa.
I made a 20% down payment on my townhouse, which, in the United States, means that I didn’t need to purchase private mortgage insurance, and I secured a 7/23 adjustable-rate mortgage, which means I would have a fixed interest rate for the first seven years of a thirty year mortgage that would thereafter adjust on an annual basis.
I also purchased a homeowners insurance policy.
With the initial interest rate on my current loan due to expire at the end of this year, my current mortgage company began sending me letters of notification.
One of the letters informed me that I had never secured the appropriate amount of insurance for my townhouse and, as it was my responsibility to protect their financial best interests, that if I did not remedy this situation, then I was at risk of foreclosure.
I ignored this letter because, as I previously explained, I had secured the appropriate amount of insurance.
A follow-up letter informed me that, out of the glowing kindness of their hearts (and apparently with a passing consideration of the fact that I have never been late with a single mortgage payment in seven years), they would not foreclose on me and would not be evicting me from my townhouse. (How very nice of them, eh? )
Instead, they would secure the appropriate amount of insurance for my townhouse through their insurance company—and send me the bill for $2,000 USD a month for the premiums (my actual homeowners insurance costs only $200 USD a year).
Therefore, I decided to take all of the letters from my current mortgage company and go see my insurance agent—who was able to resolve the problem within a few hours.
Apparently, despite the fact that I had secured, and had continued to pay for, the appropriate amount of insurance for my townhouse, my current mortgage company had no record of me ever having any insurance.
Even though you would have thought this would have caused them concern far sooner (after all, it was my responsibility to protect their financial best interests), apparently The Seven Year Glitch finally became an itch that had to be scratched because my mortgage was flagged for a pending interest rate adjustment (and you know that the adjustment isn’t going to make my payment amount decrease).
The root cause of the problem was that, in a practice that is very common in the United States, my mortgage was sold (and without me having any say in the matter) by my original lender within the first few months after I purchased my townhouse.
Therefore, my current mortgage company had to integrate my acquired data into their systems. Since my billing data seemed to have been successfully integrated (not only was I receiving my mortgage bills from the new lender, but my property taxes were being paid via my new lender as well), I just assumed that everything was fine.
After all, the recent (and threatening) letters were the only non-billing correspondence I had received from my current mortgage company in seven years.
But one critical piece of data got lost in the acquisition—my insurance information.
As I said, my insurance agent was able to resolve the problem within a few hours.
Then a few days later, I received another letter from my current mortgage company.
This letter quite cheerily informed me that I should contact their insurance company if I needed any further assistance from them.
They would be happy to explain their many excellent insurance products that I would be sure to find more than competitive my with current insurance provider.
(Apparently, that $2,000 USD a month insurance policy wasn’t the only product that they offered in their extensive portfolio.)
I can’t help but wonder if it will take them another seven years to realize that they are soon to be no longer my mortgage company.
Please Share Your DQ-IRL Story
Please share your DQ-IRL story by posting a comment below.
Alternatively, post it on your own blog, then let us all know about it via a comment, a trackback, or if you use Twitter, then please share it via the #DQ-IRL hashtag.