BoA strikes again...Accelerated mortgage payments

flatbutt · 07-19-2010, 11:22 AM

Guys...I've finished paying off my truck and am throwing that extra money at my mortgage principle. But BoA is using it as an extra payment and splitting it between principle and interest! WTF? I figure I need to write to the bank but should I include my state AG as well? What do you think?

cgarr · cgarr's Garage

Back in the day when I had a mortgage I could make payments on just principle anytime as long as I also make the monthly payment too. Did you indicate that's where is was to be applied?

flatbutt · 07-19-2010, 11:33 AM

Yes I did. I tried to get an explanation over the phone but no one is answering.

masraum · 07-19-2010, 11:35 AM

I would check with them. If I make extra payments to my credit union, I can check a box to apply the payment as I see fit. Could you just not be aware of something that you need to do to make sure the extra is applied as principle only?

< edit > Sorry, I got distracted while typing. Looks like you've addressed this already. < /edit >

Noah930 · Noah930's Garage

When you "overpay" your monthly mortgage note, what do you indicate that they should do with the overpayment? Do you indicate that the extra funds should go to paying down the principle? What do you write on the memo line of your check? Is there some box to fill out on the payment ticket stub?

Porsche-O-Phile · Porsche-O-Phile's Garage

+1

Whenever you overpay anything, you should indicate that "acceptance of funds in excess of the minimum amount due constitutes agreement that such funds shall be applied to Principal balance"

I use this all the time for various bills. Never had a problem.

Taz's Master · 07-19-2010, 11:54 AM

I don't know how the loan was set up, nor if everything is and always has been current, but I thought a mortgage was set up so that each month you paid off all the accumulated interest, and a portion of the principal. If that is the case, isn't the bank basically charging for interest that has not accumulated? I mean a $100,000 loan at 12% in the first month accumulates $1000 of interest, if the payment is set at $2000, and he sends in $4000, there is only $1000 worth of interest to take out of the payment, where would the interest BoA is taking out of the overpayment be coming from?

Jeff Higgins · 07-19-2010, 11:57 AM

Quote:

Originally Posted by Porsche-O-Phile

+1

Whenever you overpay anything, you should indicate that "acceptance of funds in excess of the minimum amount due constitutes agreement that such funds shall be applied to Principal balance"

I use this all the time for various bills. Never had a problem.

Exactly. I go even one step further and add "acceptance of funds in excess of the minimum amount due constitutes agreement that such funds shall be applied immediately to Principal balance".

Some creditors will sit on extra payment checks until the end of the year, fiscal year, or whatever. I also write one check, including both the payment due and the overpayment.

Zeke · 07-19-2010, 12:14 PM

What is the ratio of interest taken from the overpayment amount?

VincentVega · 07-19-2010, 12:35 PM

I use their online payment and it's not an issue for additional principal. Are you doing this online?

Christien · Christien's Garage

Quote:

Originally Posted by Taz's Master

I don't know how the loan was set up, nor if everything is and always has been current, but I thought a mortgage was set up so that each month you paid off all the accumulated interest, and a portion of the principal. If that is the case, isn't the bank basically charging for interest that has not accumulated? I mean a $100,000 loan at 12% in the first month accumulates $1000 of interest, if the payment is set at $2000, and he sends in $4000, there is only $1000 worth of interest to take out of the payment, where would the interest BoA is taking out of the overpayment be coming from?

I can't possibly for the life of me see how this could be incorrect. You agree to pay interest on the outstanding balance at an agreed-upon rate, at an agreed-upon interval, and that interest is charged at an agreed-upon interval. Anything paid above and beyond that interest during that interval MUST be applied to principal. Unless there's some kind of really sneaky clause in the mortgage contract (which you or your lawyer absolutely should have noticed - no excuse for not reading it in full) then to do otherwise would be illegal - basically theft.

steve911 · steve911's Garage

Good for you using excess $$ to reduce debt.

You don't say whether you have filled out a form or are just sending in a check with a notation on it as to how it should be applied.
I'd recommend filling out a form and/or sending the bank a letter with specific instructions as to how the payment should be applied. You might also walk into a branch if there is one nearby - a live human can help cut through the bureacracy.
Can you log on to your account through their website? If so, I would also send them a message through the website directing them to apply the $$ directly to principal and not as an additional payment.
The written word is much better than a phone conversation - you have a record that you can then go back to if necessary.

Zeke · 07-19-2010, 02:40 PM

Apparently BofA is not the only one:
Wells Fargo Mortgage Review | Rip-off Report #478439

Another interesting thread:
online bill pay to make additional principal pmt? - Mortgages -Lenders, loans, financing, rates, foreclosures, short-sales, brokers, credit score, deed, lien, refinancing, borrowers - Page 3 - City-Data Forum

EarlyPorsche · 07-19-2010, 07:28 PM

This could sound like an idiotic question but if I have a $200 credit card minimum payment and I pay $400, will they take the balance off my principle or mixed?

rattlsnak · rattlsnak's Garage

i had the same problem with Key Bank. after several phone calls and talking to two managers, they could not understand the difference!!! what they would do, is apply the overage to next months payment. I said NO, i want to pay the extra to PRINCIPAL. I swear i almost came through the phone. They just didnt get it. i was paying it online, but finally they said the only way they could do that is if i send in two seperate checks wtih the statement.

Rick Lee · Rick Lee's Garage

Uh oh. My wife just made the second payment on our house and we have BoA. We pay extra each month too. I need to make sure it's being properly applied.

McLovin · 07-19-2010, 08:55 PM

Read the loan agreement that you signed to see if the extra payments are being properly applied, per your agreement.

Rick Lee · Rick Lee's Garage

I wouldn't trust that language at all, especially since it was made with the first servicer before BoA bought the loan.

McLovin · 07-19-2010, 09:08 PM

My post was addressed to the original poster. He figures he needs to "write to the bank" and maybe to the state AG, I'm suggesting that he read and understand his contact first, so he can demonstrate exactly how B of A is breaching the contract in the way it is applying the payments.

Although for you, I don't really understand your comment. How could you not "trust" the language of a contract you signed? It doesn't seem like "trust" factors in. That language is what governs the relationship between you and BofA.

I guess I would understand it if you said you don't "trust BofA to abide by the language of the contract." i.e., you don't trust bofa. Maybe that's what you meant.

Rick Lee · Rick Lee's Garage

No, I mean trust but verify. Sure, they're bound by the terms of the original loan. But I knew the loan was going to be sold before we made the first payment, so it was really gonna come down to how to make doubly sure the overpayment was correctly applied.