Countrywide Says "Our Investors Require" Us To Rip You Off

Matt writes:

I hate Countrywide. What is my beef? I have several beefs.
1. When you call customer service, woe is thee who needs to be transferred. About 50% of the time, my call gets dropped.
2. When they aren’t busy dropping your call, they spend the rest of the time trying to pitch you into another Countrywide loan or product.
3. PMI [Ed. A type of insurance a borrower pays to the lender to protect the lender in case the borrower defaults. It is typically required when putting down less than 20%]. Because this was our first home loan, and it was considered a “jumbo” (I hate that term), they required us to have PMI (despite having put down 20%). During the summer of 2005, we were nearing the magic 80/20 Loan-to-Value ratio, which I believed to be sufficient to have them remove our PMI…

So I paid a whopping $300 to have an appraisal done. Based on the outcome of that appraisal, and our principal balance at the time, we were right at the 80% mark. When the appraiser was done, he asked what our balance was, and he said that we should be OK getting the PMI dropped. Not so fast. After Countrywide got the appraisal report, they told me that their investors (they use that term all the time) required LTV of 75% in order to drop PMI. So, after spending $300, I was not able to have the PMI Dropped. Never mind that that all my research on PMI said 80% was the standard ratio.

After that — I had become gun shy to spend any more money to get my PMI dropped, despite the fact that our LTV ratio would continue to drop south of 80% (even if our home’s valued remained the same).

Fast forward to January 2008, and I get a nice little form letter from Countrywide stating that our LTV is 80% or lower (sound familiar?), and that I can request to have my PMI removed. Hmmm. It was at 80% in 2005, they must have a really cool time machine or something. Oh wait, they told me in 2005 that they needed LTV to be at 75% because of their investor requirements. So which is it, Coutrywide???? 75% or 80%?

Not being one to look a gift horse in the mouth, I called them back and told them I was quite interested in having our PMI dropped. And yes, my called got dropped as it was transferred from the main call center to the PMI department. So, after finally getting to through to the mystical Wizard of PMI, I formally requested to remove PMI. Their rep looked up some quick figures, our spotless payment history, and said our LTV was looking good. “FINALLY!” I thought to myself.

Wrong again — I just got yet another letter indicating they want me to fork over $130 for a “COV” or Certificate of Value. If I use the two and a half year old figure of our home’s appraisal and divide it into our current principal value, I’m actually below 75%. I’ll go out on a limb and say an appraisal today will be somewhat more than it was in 2005 (despite the down market).

So yes, I have a beef or two or three with Countrywide. I know in the grand scheme, I’m talking chump change, but the contradicted themselves, and hide behind the “our investors require” line way too much.

Sounds about par for the course for Countrywide. Let’s find all the fees and insurances that exist for home mortgages, and then charge them to customers who they shouldn’t apply to. Result? More money! Oh, it’s legit and official though, because “our investors require” it. What do you say to that?

(Photo: Meghann Marco)

Comments

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  1. Nothing surprising there. Countrywide sucks on the scale of Best Buy, and then some. Worse, if they buy your loan from the originator, you’re stuck with them.

    Worst website, going, as well. Setting up an automatic payment is a hugely cumbersome process, that takes at least a month to get rolling, and any changes or alterations have to be submitted at least two weeks in advance of the payment date. Idiots.

  2. justbychance says:

    It sucks! For the house that my wife and I just bought, we not only have to have the LTV at 79.8% (Who comes upw it this stuff), but we have to have the loan for at least 5 years.

    When I called them up, they said they have that clause to account for any sudden jumps in appreciation. The funny part is that we got a deal and our home is 15% less than homes next to us but even if I get someone out to show that it’s already worth more I have to pay PMI until 2013.

    I’m counting down the months.

  3. yetiwisdom says:

    Back when Countrywide was servicing our mortgage (2002-2004) we really liked their service. We refi’d over to Flagstar which was a total nightmare before Chase bought it out – and we all know how Chase is. Did Countrywide’s CS collapse along with their subprime mortgages?

  4. glorpy says:

    Countrywide is technically correct. The Homeowner’s Protection Act of 1998 requires that PMI be dropped automatically for loans originated since July 29, 1999 if the CLV (current loan to value) ratio is 78%, but only for non-high-risk loans. At 80%, you are entitled to have it removed, but only on request.

    Unfortunately, according to frbsf.org, “As of January 1, 2000, mortgages in amounts of $252,700 or less are considered conforming loans. For non-conforming mortgages, the lender may designate mortgage loans as ‘high risk.'”

  5. shadow735 says:

    “Well your investors must be real big Pusies if they require a PMI on a LTV of 80% or less”
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    Hah hah that statement seems pretty funny considering how many loans are in default and on the way(or already there) to foreclosure in the housing market. Still think investors are pussies for wanting insurance?
    I am surprised that once your loan reached 80% they didnt request a new aprraisal after all with home prices dropping due to all the foreclosures and defaults the value of your house could raise your LTV. That all depends on your principle to current appraisal value.

  6. sirwired says:

    Man, am I ever glad I got my mortgage from my friendly Credit Union. (Pentagon FCU… and as a random side-note, anybody can join; all it takes (if you don’t qualify otherwise) is a one-time $5 to join the National Military Families Assoc., even if you don’t even know anybody in the military.)

    PenFed’s stated policy is to rarely, if ever, sell their mortgages, which means I will never have to deal with Countrywide. With the last mortgage I got, despite their stated intention not to sell, dumped it before the first payment was due. (Turned out to be not a bad thing, as they botched the transfer and paid my insurance twice… when I tried to give the excess payment back, I got “the computer is never wrong”.)

    The drawback is that they do not do sub-prime, over-80% first mortgages (although they will do an 80/15/5… don’t know about 80/20), or any of those crazy option-ARMs that got so many banks in trouble.

    As an added plus, there was no origination fee, and they covered almost all of the closing costs (Atty., appraisal, etc.) All this was at a rate that other places could at best, match. (And they didn’t cover most of the closing costs.)

    SirWired

  7. shadow735 says:

    @sirwired: thats not a draw back for them, it just mean that the CU will be giving loans to people that can think, budget thier fininced and that make informed and well researched financial decisions inside thier means.

  8. Frank Grimes says:

    That’s ridiculous. In 2004 I was able to drop the PMI from my Wamu mortgage with a simple phone call and an appraisal with an appraiser they specified. It took one call and they even set the appraisal up for me and lo and behold it was dropped once I mailed the final appraisal to them.

    In the future, you can also look at a hybrid loan like the 80/10/10 that we did for our second home. We could have scraped up the 20% deposit but instead chose to do just 10% down, 80% traditional mortgage (in our case a 5/1 arm), and the second 10% is a second mortgage. In this scenario you pay a little more at closing for the second mortgage but no PMI and the interest on the second mortgage is a bit higher but fully tax deductible.

  9. copious28 says:

    Read the sue in small claims court article on consumerist. Set your amount to a reasonable level and have the necessary documentation ready. Maybe you can get your PMI back from now back to 2005.

  10. Radoman says:

    Hi all. I am a Countrywide customer tryin to get PMI removed as well.

    This was explained to me like so: If you originate your loan with a 20% down payment, ta da, no PMI. If you put down say 10%, your Loan to Value ratio has to reach 75% before PMI will be removed.

    In other words 80% LTV initially is acceptable to start your loan with no PMI, but you must reach 75% LTV if your intitial down payment was less than 20% to have PMI removed.

    I love Countrywide. They gave a great rate (exactly what my score qualified for according to myfico.com, bankrate.com) for a fair price and I have had Zero problems with customer service.

    I am however quite concerned at only being able to use a Countrywide approved 3rd party appraiser. This seems like a HUGE conflict of interest. I’m sure they need to estimate high to make Countrywides portfolio look good, but I feel uneasy that a low estimate will keep me paying them PMI. I would much rather choose my own appraiser.

  11. OKJeff says:

    On my last loan with PMI (2004-2007), Every year the lender would send a letter explaining what criteria you needed to meet to be eligible for having PMI removed. In fact i’m pretty sure the letter said that they were federally required to send the letter by the The Homeowner’s Protection Act.

  12. mac-phisto says:

    check your state laws – connecticut & a handful of other states have stiff penalties for companies that continue to collect payments into PMI on loan balances below 80% LTV. also, if you booked your loan after the homeowner’s protection act of 1998 went into effect, the lender is required to automatically cancel your PMI when your balance reaches 78% LTV.

  13. Radoman says:

    Also Note: They told me you have 120 days to make up the difference to get to 75% loan to value ratio, if for some reason you should come up short.

    Example: They say you need to get to $200,000 to have PMI removed, but your appraisal comes in at $199,000. You have 120 days from the date of the appraisal to put an extra $1,000 on your principal and have PMI removed.

  14. jesuismoi says:

    Not only did CountryWide do the same thing to me (don’t have them anymore, thank God), but they also did NOT include PMI on the tax statements they sent out this year.

    We paid PMI, but it’s not listed on the tax statement. Luckily I had printed out my complete payment history and how it was applied.

    Countrywide clients be aware of this– it was $400 off my taxes once I added this up!

  15. Leiterfluid says:

    @glorpy: I would imagine that since his loan was a “Jumbo Loan” (his words), it qualifies as high-risk.

  16. mzs says:

    When we tried to drop the PMI on our first house it turned-out to be such a hassle we simply refinanced with another company because of the trouble they were to deal with.

  17. dragonpup says:

    Rather than going with PMI, some lenders offer what is called a ‘Soft Second’ if you put less than 20% down. Basically, it is a second much smaller loan along with the primary. You will pay pretty much the same thing as if you had PMI, except the interest off the Soft Second is deductible, so you pay less when you factor in taxes in April.

  18. evilinkblot says:

    This sounds so familiar, I had the same issue with Countrywide. I got the LTV to 80% just fine (never mind that the LTV was not based off the appraisal when I bought it), then “oh wait we need 75%”……was a giant hassle. F Countrywide. I laugh at their financial issues.

  19. Radoman says:

    Okay, so I just got off the phone with Countrywide 5 minutes ago. They had claimed, in writing, (twice) that you need 75% LTV to have PMI removed.

    When I mentioned the words “Consumerist” and “Homeowners Protection Act”, I was informed that the law is in fact correct. You only need an 80% loan-to-value ratio to have PMI removed. It seems as though the original poster might want to give them a call back and mention these things.

    Wow! BIG THANKS to the original poster, and to Consumerist! You guys just saved me a bundle this morning!!

    The internets, let me show you them. :)

  20. tinmanx says:

    My dad had countrywide for his car insurance a while back, when my sister turned 18 they doubled his rate. I called to ask why and they just said it was their new policy. He promptly switched.

  21. mwwilk says:

    Hey everybody — lots of opinions on this, which is cool. I swallowed my pride and sent in the $130 fee for them to send out one of their “Valuation Specialists” to generate a CoV. Hopefully, that will be the end of it. If I had to pick one thing that irks me the most, is that I was at 80% LTV when I appraised my house in July 2005. Two and a half years later, they send me a letter that says 80% is sufficient, but at the time of the original appraisal, they refused to drop PMI.

    But I figured $130 would be worth since it should *emphasized* get my PMI dropped.

    It won’t matter much anyway, I’m selling my house in Chicago and building a home in another state where the cost of living is significantly more reasonable. I’m tired of living in Cook County, where they dream up new ways to tax me every other week.

    So, if anybody wants a nice town home on the North Side of Chicago, I can hook you up.

    Oh, and I won’t be financing my new home with Countrywide, needless to say. I’ll be glad to not have to deal with them any more.

  22. RagingBoehner says:

    @Leiterfluid: “Jumbo” just means above the GSE conforming loan limit (was 417,000, now higher depending on where you live under the stimulus package)

  23. mwwilk says:

    Well, my loan was definitely not 417K — far from it — so perhaps it wasn’t a Jumbo after all.

    I looked up the full text of the Homeowners Protection Act of 1998, still sifting through the section about PMI.

  24. stauffac says:

    I’m going through a similar issue right now with GMAC mortgage. I purchased a house and put 10% down, and based on what I’ve paid into the mortgage over the last 3 years and the minor appreciation I’ve seen on the home, I should now be at about 78% LTV. So I called to request they drop my PMI, and was told that I had to be at 70% LTV, based on the original purchase price of the home, and that appreciation of the property wouldn’t be considered.

    They sent me a confirmation of our conversation letter indicating that I either had to hit 70% LTV of the original purchase price or have a new appraisal and be at 70% LTV based on the new appraisal. I pulled my copy of the signed mortgage paperwork and found my PMI agreement indicating I had to be at 80% LTV. And there’s nothing on the PMI agreement that indicates the lender can change the terms of the PMI agreement on a whim.

    Can a mortgage company really change the terms or their PMI without notifying me, or is this a case of a lazy customer service rep not bothering to pull my actual file and communicate the correct set of terms?

  25. mac-phisto says:

    @stauffac: this is the case of a mortgage company trying to pocket insurance premiums & is the exact reason why the federal government passed a law concerning it.

    it is true that appreciation is not normally considered for the purpose of this equation (unless you get an appraisal done that proves the value is there), but if you have hit 80% LTV using the original balance of the loan, they should be dropping your PMI payments.

    if & when that’s the case, take out your original docs, use the knowledge you picked up here & have them drop the PMI. they’re stealing your money, plain & simple.

  26. Radoman says:

    It seems to me it’s just one of those things… Like when something is on sale at the grocery store, but it comes up a different (higher) price at the counter.. If you don’t notice, the store’s not gonna tell you.

    It will cost Countrywide money to make sure the CSRs are better educated about the facts, and they’ve probably gained a little liquidity based on the misconception of the imaginary 75% LTV number.

    But isn’t the PMI company a 3rd party? Seems as though they’d be the ones making money on this.

    If you pay your loan off faster, that’s money in your pocket. Countrywide isn’t making more money by having you pay off your loan quicker. I’m just not sure I see this as some type of profit making venture. It just doesn’t seem to add up….

  27. mac-phisto says:

    @Radoman: if they don’t own the insurance company outright or a stake in it, then they receive a “reimbursement” for active policies. that is standard practice for loan insurance & it is used as a method to generate revenue – ask any loan officer.

  28. sue_me says:

    $417k is like, 20% of the value of most condos here in Manhattan. No, you pay that in, like, HOA fees and parking.

  29. sue_me says:

    How is it riskier to loan someone who makes $1mil a year after taxes $3mil to buy a condo in Manhattan valued at $4mil and is unlikely to depreciate vs. loaning someone who makes $30k before taxes $350k to buy a shack in the middle of nowhere?

  30. Anonymous says:

    I’m a realtor. I have client who’ve call COUNTRYWIDE concerning thier mortgage late or short problems.They have been yelled at,told that they soon will be in the street,go to church and beg to pay thier mortgage, and many other disgracefull things to make an already stressfull situation even worse.I beleive this is done to scare homeowners.

  31. Anonymous says:

    Countrywide has prolonged the process of getting PMI deleted for me for six weeks now. I inquired on Feb 18 th 09- they sent me two letters. One on Feb 25th and one on Feb 27th. The one for the 25th, I received at the beginning of March. It said I needed to have a loan to value of 75 percent and I would have to pay $415 for an appraisal to get PMI dropped. I called them and they said whoops, you only require an 80 percent loan to value and a certificate of value costing $130. They sent me a letter dated on the 27th of Feb stating this much. The letter told me to send the $130 to a group called Valuation Services and that they would schedule the COV for me. Well, it turns out that Valuation Services was not the proper organization to address my cashier’s check to. Land Safe received my cashier’s check on March 16th 2009 and sent it back to my bank. Land Safe did not call me and tell me anything-even though I had enclosed all of my contact numbers. They sent it to my bank, even though they had my address. My bank called me one afternoon and informed me that a financial instrument I had purchased was returned–THIS is how I found out that the process was not moving forward. I called Countrywide and asked them what was going on? Of course they did not even know who Valuation Services is. They verified that my letter said address the check to Valuation Services and did not know who they were. Countrywide then gave me a number to Land Safe to make a credit card payment directly to Land Safe and get the process moving. It took me two days to get in contact with someone at Land Safe. It was the 26th of March 2009 and they accepted my payment and a guy came and took pictures of my condo on the 28th of March. The COV was submitted back to Countrywide on the 30th of March 2009. I called them on the 31st of March and they said that they had my COV submitted but had not looked at it. Countrywide told me to call back in one or two business days. I called them back today and Countrywide tried to tell me that they still had not yet reviewed my Certificate of Value. I said no way! They have delayed me and distracted me for too long on this!! Then I spoke with a manager-after the first rep transfered me to some guy named Rodger’s voicemail (I called back). The manager then informed me that this process takes between one or two months. I had not heard this before-infact all of the other agents had said that this was a really straight forward process. The manager I spoke with today claimed that “the investor” will then review my submission and make a determination. So-basicly, I have been working to get this process done, only now to find out that it is not straight forward and after all this work, that I will NOW receive “consideration” from their INVESTOR! I have documented all of this and I am sending a draft of names and dates as well as interactions to my congressman, REP. Doug Lamborn. If anyone reads this and finds they are dealing with the same misdirection and deception, PLEASE SPEAK UP and DO NOT ALLOW this organization to continue doing “business” this way. My issue is still unresolved. IF Countrywide resolves it, I am still sending a letter to my congressman. I do not interact financially with many organizations. When I do engage in a financial relationship with an organization and this kind of scenario plays out-I will not let it stand and neither should you. Countrywide has not used any good faith in resolving the issues that they have initiated, in fact, they have behaved deceitfully in almost every interaction I have had with them. Do not allow this organization to push you around. Be professional with them at all times. Write your congressperson to let them know. Best of luck and keep your chin up.

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