Cheddarblog

The Swiss_Mouse recently received a mailing from his mortgage company, Regions Mortgage. This mailing touted that he could enroll in a program to accelerate his mortgage payoff saving thousands of dollars and saving years of mortgage payments.

All this seemed rather familiar to the Swiss_Mouse, but he couldn’t quite put his little finger on what it was. However the offer seemed intriguing. The mailer stated that for a monthly fee of $5 extra on top of his current mortgage, he could make payments equal to 1/2 his current payment every two weeks instead of once a month. The Swiss_Mouse thought about if for a few days, but could never figure out why this offer was familiar. He thought he had gotten it once before, but why hadn’t he taken up Regions Mortgage on their offer. But what was there to lose? Just an extra $5 a month. The Swiss_Mouse decided to call.

Trouble began right away. As the representative began to give their scripted delivery, the Swiss_Mouse interrupted them. He had a few questions. This threw the representative completely off. They stammered and mumbled and then begged to get back on script (”Puzzling,” thought the Swiss_Mouse). When they finished, the Swiss_Mouse then asked some questions and with each answer, he started to remember why this ripoff was so familiar.

First off, it wasn’t just $5 a month extra. That was just the monthly fee. There was something like a $300 “processing” fee charged up front. YES it was there on the mailer, in incredibly small print, buried in the legalese on the back. “OK,” thought the Swiss_Mouse, “this still isn’t too bad a deal.”

But then the the deal killer rose up. The representative asked about the Swiss_Mouse’s paycheck schedule. When the Swiss_Mouse responded “On the 15th and last day of each month”, the representative declared that she would need to “recalculate” what his payments would be. The recalculation added hundreds of dollars to the amount. And it dawned on the Swiss_Mouse what was going on. The scam was that they were collecting one extra payment over the 12 months of the year and then making 1 extra payment at the end of the year. A 13th mortgage payment! (Something the Swiss_Mouse always tries to do anyway.)

When the Swiss_Mouse questioned more, it was revealed that yes they were collecting the extra money and NOT APPLYING IT every month. They were actually “HOLDING” the money for all those months. In effect, Regions Mortgage was going to make money:

1. Off the initial processing fee!
2. Off the $5 a month fee!
3. Off getting a free “loan” from the mortgage payer for 11 months!

“WHOA!” The Swiss_Mouse was taken aback, but then recovering immediately asked if instead of going to all this trouble, could he just set it up to have 1/2 his mortgage payment to be made every 2 weeks, he’d even pay the processing fees! This would still save a lot of interest over the life of the load. The representative responed: “No.”

So the Swiss_Mouse ended the call and immediately warned his co-workers of this ripoff. One co-worker even thought he had a friend who told him how he was “saving” money with this program.

In conclusion, save the processing fees. The Swiss_Mouse recommends just budgeting and extra mortgage payment during the year and then sending it in monthly as a principal payment or save it up to make one full extra payment at the end of the year.

Don’t give the bank a loan of your cheddar and then pay them for it!