Struggling Lenders Carry Nasty Side Effects

September 11, 2007 No Comments »

As more mortgage lenders go belly-up, associated problems are beginning to rear their ugly heads.

Such was the case when First Magnus Financial closed down, leaving employees without paychecks and healthcare, prompting ex-employees to launch the “Sue First Magnus Financial Corp” website.

First Magnus left employees high and dry, and in some cases sick, though the former CEO was permitted to hold onto one of his private jets and a three person crew for the sole purpose of flying around the country to shut down operations and liquidate assets.

In another instance, mortgage brokers have been openly slamming Apex Financial Group (DBA Aapex Mortgage) on internet message boards for failing to pay out commissions on funded loans.

The net branch has already received cease and desist orders in several states, and some brokers feel they may just have to cut their losses.

But it’s not only the employees who are feeling the brunt of the mortgage crisis.

A dozen Maryland homeowners recently found out their property taxes had not been paid after American Home Mortgage shut down.

The property tax checks subsequently bounced, causing confusion and frustration for the twelve homeowners involved.

“What that has caused for the property owners, is that we now show non-payment of the taxes on their account. And these taxes are due and payable the county,” explained Lori Decker, the Director of the Treasury for Frederick County.

The homeowners are now being told to pay their taxes or risk incurring interest on overdue balances, despite the fact that the defunct lender is clearly the one to blame.

Frederick County Commissioner Charles Jenkins says, “These folks have played by the rules that have been set up, and it’s just terribly unfortunate for them.”

Even more homeowners are confused as to how to handle their mortgage, and where to send mortgage payments now that their previous lenders have closed shop.

Yes the loan must still be paid, but it will likely be sold or transferred to a new servicing company, an added risk to the borrower as they could fall victim to fraud.

There are plenty of scams out there where an impostor will pretend to be the new servicer, sending out fake documents with the hope that payments will be sent to them.

That’s why it is imperative to confirm the legitimacy of the new servicer before sending any payments.

It is federal law for a company that is relinquishing the servicing of a mortgage to another firm to notify the borrower of the name of that successor, including their physical address, toll-free phone number, and a specific date for when the transfer is effective.

Just make sure you don’t miss payments while trying to sort out the changes, as you’ll likely be slapped with a mortgage late in the process, making it that much more difficult to refinance in the future.

And last but not least, who could forget the Countrywide bankruptcy fears which caused depositors to line up in droves to withdraw funds from the bank?

A friend of mine living in Germany recently phoned me to tell me he was coming to the states, and that he’d be pulling his $100,000 plus account from the disgraced lender the minute he arrived.

The mortgage bust will have far-reaching consequences, and this is but a taste.

Update: American Home Mortgage Investment Corp. bounced 564 property tax checks in Maryland.

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