It was a Monday morning and I get a call from one my clients in France. A couple of years ago, he has bought a nice condo in a new building in South Florida.
He only financed about half of the value ($150,000) with one of the largest US banks at a fixed rate.
He is not complaining about the huge drop in the value of his property due to the terrible market. He pays in time his mortgage and the property taxes that the bank withdraws every month from his account. For the time being, he is renting his apartment since he can't travel. One day, he will eventually spend his vacations in Florida. I assist him in the rental , even though the rent hardly covers his taxes and condominium fees.
He calls me a week ago. All of a sudden, the bank is charging him about $550 more PER MONTH. He just noticed it from his statements, when he observed the dwindling balances. They have already charged him the extra amount for three months and he just found out.
I go through his file and find that the loan has a fixed interest rate for thirty years. So it can't be a rate adjustment. He pays directly his condominium fees, so I also discard a possible increase in these charges. Mystery!
I advise him to call the bank from France. I get another call from him the next day.
It appears that the bank claims to have sent him a couple of notices that they needed an update of his flood insurance policy and since he did not respond, they proceeded to contract a flood insurance which cost is what they were charging him on top of his usual monthly payment. He never received them, perhaps because he changed address in France a year ago.
$ 550 per month is about $ 6,600 per year, for Flood Insurance. The bank claimed that they had an insurance company issue a new flood policy covering any loss due to a flood in this new building.
The building policy actually covers this risk and it was exhibited when my client took the mortgage loan with this bank, and it was provided by the condominium association, as it is the usual procedure.
Apparently, the bank wants the condo association to provide them every year with the proof of renewal of the flood insurance.
Are they so careful with their stockholders' money? Are they so, but so attentive to every little detail that could avoid any loss to their bank?
Sure. So conscientious that the whole country's economy was almost busted by the mortgage crisis that these same great banks caused. So conscientious that billion after billion they lost most of their investors' money in "subprime" loans.
They are so diligent that, of all the delinquent borrowers, one of their few clients religiously paying his mortgage is suspected of negligence and summarily hit with this incredible charge.
I proceeded to call my own insurance agent to find out what it would cost for a similar condo to be insured against flood. He represents one of the largest insurance companies in the US. He quoted me an approximate cost of
$200 A YEAR.
Now, which is that company that the Bank chose to issue a flood insurance costing his customer 33 times as much as the normal premium?
Do I have a reason to suspect collusion and bad faith? Do I have a reason to be indignant as was my French customer?
In good mood he told me that French banks are not much better.
Of course he called the bank, and solved the problem. In a few minutes, the condo association faxed the bank their flood policy and the "problem" was cleared. I hope the bank will refund my client the abusive charges.
But the bottom line is that this kind of thing shouldn't happen in the first place.
Why? Why do we have to fight every day against these giants who are the beneficiaries of our business. These enormous corporations who get Federal money at unbelievably low rates, and pay ridiculously low interests to their depositors, only to lend it back to them, often at usury rates.
I asked my insurance agent if he knew an insurance company who would charge a $6500 premium to insure a small condominium. All I got was a hearty laugh and his suggestion that if I find out what insurer the bank is using to "protect his clients" please find him a job there; they must be making an awful amount of profit.
What a joke!
Henry B. Nathan is a Florida Licensed Real Estate Agent.