I’ve got a quick story for you about a demanding bank that holds a small residential loan of ours and wanted to see if their practices are more common than I had initially thought.
We were able to refinance a mobile home and land property in November 2013 with a local credit union. This was a $28k mortgage with an 80% LTV, 6% interest rate, and 8 year term, which are fantastic terms for these types of properties in our area.
Everything closed smoothly.
We didn’t hear from them again until October 2014, when we received a letter that asked for annual financial statements.
It seemed odd that the bank would ask for financial statements on such a small residential property, but the mortgage documents clearly stated that these annual statements were required to be sent out and that failure to do so could result in the bank declaring the note to be in default. They could then require the loan to be paid in full or foreclose on the property if payment wasn’t received.
Obviously this seems like an extreme scenario on a loan that’s in good standing. Very few banks will call a mortgage due upon the transfer of the property so long as the note is in good standing. It’s even less believable they would call it due for missing financial statements.
As it turns out, we had already sent financial statements for the year in trying to get another property refinanced. After reminding the bank of this, the matter was resolved for the year.
Related: Confessions of an Ex-Banker: How to Get Your Next Loan Approved, Guaranteed.
However, we received another letter in November 2014 that our insurance deductible was above the required $500 limit.
When it comes to insurance for our rental properties, we prefer to go the high-deductible route with lower premiums and then only plan to file claims when catastrophic damage occurs. Mobile home insurance tends to be much more expensive than its site-built counterpart. The difference in the annual premium between our current deductible ($2,500) and the $500 deductible was $350.
This amount is not gigantic by any means, as the property still cash flows, but as long as we have sufficient coverage on the home, why would the bank care? We had the same insurance policy when we closed on the refinance in November 2013, and nothing was said about our deductible.
After combing through the mortgage documents, it was clear that the only insurance requirement was having enough coverage. The deductible was never mentioned.
Related: The Investor’s Complete Guide to Filling Out a Successful Loan Application
We emailed the banker who had sent the letter and asked her to show us the maximum deductible requirement in the signed mortgage documents.
She never was able to find the documentation, and after getting her manager involved, they decided to drop the issue. The last email from the bank said that they were basically doing us a favor by ignoring the deductible issue and that if we are able to secure any new mortgages through this bank, we’ll be required to have the lower deductible insurance.
Despite my complaining, I’ll probably still work with this bank again due to the cheap money to be lent and the fact that very few banks in my area will lend on mobile homes.
Have you had any similar experiences with overbearing banks?
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