CitiMortgage’s Mafia-like “protection” scheme
I got an email today alerting me that my mortgage payment was past due. No, I haven’t fallen into arrears due to my own irresponsibility and interest-only bad loan. I was trying to pay off my debt faster, actually. Here’s the story.
My mortgage is with CitiMortgage (subsidiary of CitiBank, which is running into a bit of trouble these days and apparently taking it out on me). A few weeks ago, I got this letter in the mail about how CitiMortgage offers a BiWeekly Advantage Plan that lets you pay off your loan faster (they love the MidCaps there, don’t they?).
In a nutshell, you pay half your mortgage payment at the beginning of the month, and the second half in the middle. This adds up to about one extra payment per year, which helps reduce your overall compounding interest — they note that “a homeowner with a $100,000 balance, on a 30 year loan at 6% could save $24,138.65 in interest and pay off 5 years; 5 months sooner.” I live in California. My mortgage is a LOT more than $100,000. This ain’t chump change to me. But then I read where CitiMortgage charges a one-time fee of $375 to set up this “service,” and charges $1.50 for each payment. Because even though I thought I could just start sending two payments a month, CitiMortgage helpfully notes:
“Some homeowners try to make extra principal payments themselves, but most aren’t able to keep a consistent schedule. Let The BiWeekly Advantage (SM) Plan do the work for you.”
Yeah. But see, hubby pointed out that it’s not super hard to keep a “consistent schedule” if you’re using online billpay. So, we just changed our billpay schedule and said, “to heck with you and your fees, we’re no dummies!” About a month and a half went by … which is when we got the letter saying our mortgage was past due.
It appears that Citi has been applying our payments to principal only–not to the interest due. So, half the payments don’t count as payments, just “extra” principal payments. And when we called them and said, “we’re just trying to make bi-weekly payments,” they said, “we can’t apply the payments to your interest unless you call us every time you send an extra payment.” And hey! Guess what they tried to sell us? The $375 BiWeekly Advantage (SM) Plan with $1.50 draft charge per payment!
When hubby pointed out that it hardly seems fair that we either have to pay to send extra payments or call every time we send one to make sure it’s properly credited, he got the customer service equivalent of a big “who cares” shrug.
It seems to me that In These Troubled Times (drink!) CitiBank ought to welcome anyone who wants to aggressively pay their mortgage, and not try to soak them for a little extra cash by ensuring that aggressive payment is such a hassle that it’s hardly worth the long-term interest savings. This feels like an old-fashioned protection scheme (“you throw us a little payola and we make sure your payments are properly processed”) at best and seems to come close to extortion at worst. I know times are tough at Citi, but you know what you’ll probably need to get through them? Customers. Interest rates are falling and I’ve got good credit, CitiMortgage. Keep this crap up and I’ll refinance my way right out of your failing ass.
Wow Molly, that sucks! I hope more people blog this about this. Maybe if there’s enough exposure a change will come about.
-Seré
You should call them every payment you make and cause them to spend their money taking the time to talk on the phone with you.
That way they get less money in interest from you, and they incur the extra cost, which shouldn’t even exist.
When I got my mortgage, they initially wanted to charge me something like $250 to set up online bill payment. I held out, fighting through the antiquated check-writing process. After four years, they blinked. Free online payment now. I win. Hold out, Molly. I think if you just add 1/13 of your mortgage payment and check the additional principal box, you will get the same effect. I guess it will cost you $.42 a month for the stamp. Grr.
I have the opposite problem, or maybe the same problem in reverse (?). If I’m occasionally of the mind that I want to make an extra payment amount towards my principal above and beyond my normal payment, and the extra amount is more than a required payment amount, they assume that I’m paying next month’s bill early. Even if I tell the bill pay people to put a not on there saying “for principal only”. Jerky mortgage company. I’m helping you to not go bankrupt, but you can’t help me out?
If you’re going to refinance, watch out for the new mortgage company selling the mortgage back to CitiMortgage or to a company that has worse policies than Citi. A month after my parents closed on our house, the mortgage was sold to CitiMortgage. Now I feel that I must warn my dad about Citi and inform him on how he should go about paying off the mortgage early.
~Raj
They’re building a special ring in hell just for Citigroup management. Keeping them from screwing you can be a fulltime job. Since I already have a fulltime job & didn’t devote the effort required, thanks to them my creditscore’s cratered & I’m an economic pariah. (Short vers – I always paid promptly until they closed my acct because it was on a list of TJX compromised numbers, sent notice to outdated address & by the time I figured out what was going on I was many thousands in penalties behind). After months of back & forth they sold my acct to debt recovery. It was a fubar of the highest order. Upside is no one will want to steal my identity because it’s toxic. Citibank is evil. I’ve heard horror stories about Providian (read or watch “Maxed out”) but Citi’s behavior seems equally reprehensible. And THESE are the scumbags our tax dollars are bailing out! In the immortal words of Charlie Brown: “AUGGGGHHHHH!”
We have had BOTH of the payment issues described above. My wife runs a business that generally results in a big payment at the end of the year- which we have often used to pay down mortgage principle. This one-time payment or extra payments causes their system no end of problems and inevitably results in being a negative for us.
What you are seeing is simply another example of “resistance” in the money flow system at least as seen from the perspective of the little guy. Have you ever tried to wire money? Our business gets many large payments from overseas sources and it is typical for that money to be out of the senders accounts and not in ours for many, many days. It is being held in someone else’s accounts deliberately to provide an interest flow. They will make excuses about the legal time to transact but let’s be frank- the transaction happened in about 10 milliseconds. Otherwise there would be no such thing as overnight interbank lending. They use old-fashioned laws to excuse their near-fraudulent behavior.
My position is that if we are going to buy $700B of ownership in these institutions then I think we are owed complete, total transparency. I think we ought to know exactly where money is flowing. Just like we have an ostensibly open stock exchange. Everyone behaves as if the public would panic if they had complete knowledge- I say bullshit. Bernanke refuses to reveal where moneys from the TARP are being distributed. They are afraid people will act on that knowledge. So the market is only free for a few people. The public is far more rational than the leaders give them credit for. Based on history they are far more prudent than these bankers and CEO’s are. These men, used to acting without supervision or review, insulated from practical realities by their huge compensations have made some of the stupidest decisions I’ve ever seen.
Long before they enter that new ring of hell I want the justice department to start some investigations into their corporate governance behavior. These guys need to have the fear of God placed on them. My personal experience with them is that they are far from the best and brightest. That is actually an exception. They are favorites and insiders willing to act as slaves and bow to their superiors. They become indoctrinated into a stratified culture of authority that is only tenuously connected to rational thought. I’ve not met a one of them that is innovative, open-minded and not knee-jerk reactive. Perhaps we need to create a situation where the environment favors the talented and not just a high-level drone.
Hit them where it hurts. Refinance at another bank that doesn’t charge crappy fees. I’ve had a bi-weekly mortgage for years and my bank gave me a 1/8th off of the interest rate for signing up for automatic payments (and they love charging crappy fees for almost everything they do for you). Be the ultimate consumer and take your business elsewhere. I said good day to you Mr. Greedy Citibank!
In my day job I work with people who have gotten the sharp end of “these troubled times” and Citi is about the worst to deal with. I would say that if you have a decent rate I would put that extra coin into savings till I could ride out 6-12 months expenses with no income and then start investing instead of helping out Citi because the game with thm is rigged to screw you as they really do not want you to pay out early. Your problem is that you are using logic and common sense to deal with a mortgage company. And your dad a lawyer too…you should know better.
Citibank’s goin down! I say refinance on their ass.
Isn’t it ironic how these companies have encouraged people to being irresponsible over the last 10 years (those of us who actually pay their loans on time or our credit cards off each month are considered “deadbeats” in the creditors world). And now their little house of cards is tumbling down around them and so now they are mooching off the only paying customers they have left while holding out their hands to the feds claiming the apocalypse is coming if they don’t get their bailout.
These banks have made their beds and now they have to lay in them.
Wow i can’t believe this
You should check out Citibanks loans in Australia there far more flexible an offer few extra payments, made Citbank could learn from their little cousins down under
http://www.citibank.com.au/AUGCB/APPS/portal/loadPage.do?tabId=Mortgages&path=/info/det/mortgages_residential_basic.htm
Getting to this kinda late…I’ve added a $100 principle bonus to every mortgage payment I’ve made. Every payment – for twenty years. Contrary to Citicorps’ self-serving propaganda, it’s not at all hard to do this; you just make it a habit. After all, you always pay the mortgage anyway, and, especially here in CA, $100 more is just not that big a deal. Do it. You’ll be glad. Anyway, why listen to them…If Citi is so smart, why are they in so much trouble?
All I can say is I’m glad you realized what is going on. We were “driven” into a mortgage by what I call sheer ignorance and we are intelligent people. I think this is part of the reason I became a realtor. Though I’m not a lender – I educate my clients in the fact that they need to ask a lot of questions of their lender (and of me as well). I rather an educated client vs one that gets put into the wrong mortgage or the wrong home – that’s part of the reason we are in the mess we are in (but I won’t go there).
Our horrible loan and story (not dissimilar to yours) was with World Savings (later Wachovia). Each time I would call them to get us out of our mess they would tell me if you want to refinance that’s ok or if you want to get out of the loan it will cost you so much because of the three year pre-payment penalty.
It was a nightmare and we had to watch every statement despite the fact we had autopay and the biweekly plan. Even when we paid off the principal sometimes in lump sum our mortgage payments didn’t go down. Which also annoyed me – we commited to the amount due no matter what.
In many ways the fault was ours – we didn’t read all the fine print – we trusted the lender (who was someone we knew and thought highly of – wrong!). I now have a list of questions I recommend clients to ask lenders – partly out of my own horrible experience.
Unfortunately we are skepital lenders now and when we did refinance we ‘grilled’ our new mortgage officer. Bless her she deserves a medal for what we put her through but we weren’t the first or the last to go through this type of loan.
She put us in a more traditional loan – 30 year fixed and in one of the two major banks in the area. No more funny banks for me!
Or maybe I really did inherit some money in Nigeria or was that Belgium from some far distant relative I have never heard of! That’s kind of how some of these mortgages are looking now, don’t you think?
(I’m an Aussie now living in the US – and for the record Australian mortages are very different to here – so unfortunately you really can’t compare the two countries – but on the other hand like the Americans the Australians have been lending to people who can ill afford a to buy and they too will see a rise in foreclosures and bank owned property).
Make sure your credit score was not impacted. One missed mortgage payment can be devastating and dog you for decades.
One more story that makes me glad for closing down my Citibank accounts a few years back (which I had for nearly 25 years).