By Broderick Perkins
Just as today's information technology helps you search for the best mortgage, lenders more and more often resort to similar sleuthing technology to track you as you fall behind on your monthly payments.
That's not because the lender is in the market to foreclose on homes. Lenders want to write profitable mortgages and would much rather see you see your financial obligation through to the end -- by making all your payments on time each month.
Keeping tabs on you begins with your application and the lender documenting and verifying the information you provide about yourself. Should you fall behind on your payments, the lender needs somewhere to begin the process of finding you, getting you into debt counseling and protecting its investment.
Watching you early
While upgrading systems to overcome potential Y2K (for Year 2000) problems, some lenders took the opportunity to put into place new software that watches you more closely as you make each monthly payment.
San Jose, CA help-system software engineer Tran Nguyen has always logged online with software to check the balance of her loan against her printed statement. For years, the two bottom lines matched.
Recently, she noticed a difference of a dollar or so, apparently in the lender's favor, or so it appeared. Her mortgage payment was always due on the first of the month and over due on the 16th, like so many other mortgages. And she'd always made sure her mortgage payment arrived well before the 16th and didn't think it was a late payment.
"I have been mailing my payments so they arrive between the 10th and the 14th. When I called my lender, the lender said if my payment doesn't arrive by the first of the month, I have to pay interest each day until they receive it," she lamented.
"It looks like it's only a buck a month, but at 6.5 percent over 30 years, this amounts to about $1,000. They are basically taking away the 15-day grace period," she said.
The Y2K bug may have bitten Nguyen, in a way she wasn't expecting.
"Lender's have always calculated interest due based on a first-of-the-month payment plan. Most loan services never had the computer programs to calculate daily interest and effectively gave you a free days interest every other month," explains Michael Ryan, a broker and CEO of Flat Fee Funding, also in San Jose.
"What you are witnessing is the result of new software, perhaps spawned by Year 2000 upgrades that have the extra computing power to figure and collect interest on a daily basis. As for the 15-day grace period? It has always only applied to the late fee, not the interest," Ryan added.
Picking up your trail
Information technology with even more probing computing power comes into play at the other end of the "late" pay spectrum and the borrower is nearing foreclosure.
"To minimize losses from foreclosures, investors want their services to make a full-blown effort to get borrowers back on track," according to Jericho Trianna, director of Freddie Mac's Nonperforming Loans Department.
Trianna, who wrote "Skip-Tracers Intensify Search for Missing Borrowers," in the December issue of Secondary Mortgage Markets, says electronic skip-tracing techniques got a boost in 1998 when Freddie Mac expanded its loss-mitigation activities to include the Customer Assistance Reachout Effort (CARE) program.
If you, ahem, disappear, a high-tech shamus will leave no cyber stone unturned.
The digital detective agency corroborates your last known location with the same address-sifting software created for the dogged U.S. Postal service. A "smart" search engine cross references the address with a phone number using a national directory-assistance search. The engine can be programmed to comb other data banks that contain social security numbers and street addresses to make a match with that number.
Once found you'll be hauled off to debt counseling.
"If successful, the case is immediately transferred to the appropriate loss-mitigation specialist, who then works to engage the home owner in proactive foreclosure-prevention strategies," writes Trianna.
In English, that means the computerized sleuthing is designed to help you save your home.
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