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March 13, 2007

Aurora Loan Services - How Lehman Brothers Rips Off Homeowners

posted by MR WAVETHEORY at 3/13/2007 12:50:00 PM
Not a day goes by when you don't hear of another Accredited Home Lenders Holding Co. (LEND) or New Century Financial Corporation (REIT) (NEWC) blowup. You know the mortgage industry is having a tough time when they resort to questionable billing practices to make money. I learned this first hand with Auroral Loan Services (aka Lehman Brothers LEH). Aurora Loan Services stopped sending me mortgage statements electronically last year and I wasn't receiving statements by mail either. However, due to the convenience of auto pay, I was comfortably paying my bills every month automatically. Then, out of the blue, I got a call from them. I unexpectedly found that the tax rate on my home went up. Not a big problem, only a few hundred bucks right? Wrong.

Because of this little change in taxes, Aurora Loan Services took my payment and held it "in suspense." Let me translate that for you. They held my payment and basically sat on it for 2 months - collecting interest on it - instead of paying down my principal and interest. Not only did they get the interest on my money, they also charged me 2 late fees (because they hadn't "received the payment")! Is this outrageous or what?

Being a techie, I checked Google for Auroral Loan Services hoping to get to their website. Instead I found a link to a RipoffReport on Aurora Loan Services. When I clicked through, I saw 85 consumer complaints filed against Aurora Loan Services on RipoffReport.com for the same thing that happened to me all related to "dishonest billing practices"!

So, what did they do with my money? And how are they getting away with it?
After they "discovered" that they had been sitting on my money for 2 months, Aurora applied my payment entirely to paying down the principal on my mortgage. And guess what that means? It means they didn't apply the payment to the regular payment of interest + principal. That meant I would have to make an extra payment because the payment hadn't been made!

Not a problem right? Wrong. What happens if I don't do it? Late fees start kicking in! It's a snowball effect and it all started when they forgot that I had paid!

Why does Aurora Loan Services force homeowners to accelerate payments?

Simple. All mortgage lenders today want to get paid faster because they see risk in the mortgage market. Unlike Accredit Home Lending and New Century Financial, they want to get paid sooner rather than later on their loans - and everyone knows that a dollar today is worth more than a dollar tomorrow.

What is the financial impact of applying my mortgage payment entirely to principal?
Easy. On every mortgage payment, there is a principal payment and a interest payment. In the early years of a mortgage, most of the payment is applied to interest rather than principal. That means if you say owed someone $1000 per month, $300 of that would go to principal and $700 would go to interest. Since most of the money is going to interest, the lender isn't getting paid back their principal in the early years. It's only in the later years that this turns the other way around.

So what happened here? Auroral Loan Services applied my payment for my mortgage entirely to the principal. Basically the lender was asking me to accelerate my payment of my mortgage back to them - without rewriting the contract. Instead of paying say $300 to principal and $700 to interest, they were trying to take the entire amount of $1000 for principal. Accelerating the principal payment gets the lender paid quicker than the term of the loan that was agreed upon and they were attempting to change the term of the loan.

Serious fraud?
Doing this to home owners one at a time is the reason why they've been able to get away with this dishonest practice. It's completely wrong. If you go to the bank to borrow money, you sign a contract and that contract stipulates everything from the interest, term, and payment amount. Changing it after the ink is dry is akin to tearing up the contract and rewriting it.

If you are a financial type, you know why Aurora Loan Services is doing this. Mortgage servicing companies serve thousands or tens of thousands of home loans and mortgages. Getting an extra payment from each loan would reduce the duration of their loan portfolio quite dramatically. (Duration = riskiness). An extra payment here or there isn't much, but on the scale they are doing it, I'd say many consumers are being squeezed. This constitutes a real serious fraud in the mortgage lending industry that is being perpetrated by one of the largest lenders in America. Aurora may sound like a small name, but they are owned by Lehman Brothers. It's understandable why Lehman doesn't use their own name to operate this business. After all, what kind of public company would want their name to be listed on Ripoff Report.com?

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30 Comments:

Blogger rcheek123 said...

Your logic, while it may make sense at face value, is incorrect. They have to follow the amortization schedule of the loan. They likely accidentally posted the payment out of suspense to principle. They can easily reverse this, at your request, and apply it as a payment. Either way, it is in their interest to apply as a payment and not as additional princ. They likely do not "own" the paper on the loan, but rather service it for an investor. That investor buys that long term debt for a given return, called interest. To reduce the principal value of the loan doesn't really do Aurora any good.

6:37 PM  
Blogger Attorney James S. Franchek said...

I am a lawyer and we are just about to go to trial against Aurora in Boston, MA. for failing to properly service my client’s home mortgage and pay the escrowed insurance premiums in 2002. My client had a water damage claim and the insurance company disclaimed coverage due to the fact that Aurora allegedly did not pay the escrowed premium when due. They have testified that they never had any other problems with home mortgage insurance before. Would you please email or call me about any issues you had or are aware of that involved Aurora and/or any Lehman Brothers Company? Anything would be much appreciated.



Very truly yours,

James S. Franchek

12:26 PM  
Blogger volswagn said...

Aurora did a little different trick with me. They decided that they wanted more in escrow for my account and decided that they always wanted at least an $800 buffer in my account so that when my taxes or insurance are paid, they will still have $800 left in the account at all times. I guess they're entitled to it, but said all of a sudden, "we need $4000 more from you this year to make sure this $800 happens." So for a year, my mortgage+escrow went up from $1100 a month to $1500 per month. Most of the year now they're getting a nice chunk of interest from my account. And they wonder why people are suddenly having a hard time making their mortgage payments? It's because of crafty devils like ALS.

Now I hear BNC, which bought ALS, is being closed down by Lehman. I wonder what that means for us?

5:37 PM  
Blogger alice Shane said...

Thanks for your commentary about Aurora. My mortgage broker just sent me information and forms relating to them. I'm now wondering if I should quite simply reject this particular lender.

10:01 PM  
Blogger William said...

I have had numerous complaints against ALS as well. I have been ignored, been hung up on, cheated, had charges force-placed on my loan, had my loan escrowed when it was not an escrow account, my checks kept past the due date, then charged late fees, and on and on. Not to mention no satisfaction with their customer service.
I became so angry, I did a web search, made some phone calls and finally found where to file complaints. I then proceeded to do so. Although the complaint process took some finagling to find email addresses, and no one answered the telephones, after leaving email and voice messages, I did receive both return emails and telephone calls. Of course, I had to email the director before I actually had people jumping around to respond! I copied and pasted many of the complaints I found online. It would appear in speaking to them that very few people have actually called the governing agency and filed complaints! The agency in charge of overseeing Savings and Loan institutions, including Aurora, is Office of Thrift Supervision, an arm of the Treasury Department. I would suggest everyone with a complaint send an email or two directly to them. Their website is www.ots.treas.gov and everyone to contact is listed there. I would start with the ombudsman and your regional director.
Best Regards

9:37 AM  
Blogger William said...

I have had numerous complaints against ALS as well. I have been ignored, been hung up on, cheated, had charges force-placed on my loan, had my loan escrowed when it was not an escrow account, my checks kept past the due date, then charged late fees, and on and on. Not to mention no satisfaction with their customer service.
I became so angry, I did a web search, made some phone calls and finally found where to file complaints. I then proceeded to do so. Although the complaint process took some finagling to find email addresses, and no one answered the telephones, after leaving email and voice messages, I did receive both return emails and telephone calls. Of course, I had to email the director before I actually had people jumping around to respond! I copied and pasted many of the complaints I found online. It would appear in speaking to them that very few people have actually called the governing agency and filed complaints! The agency in charge of overseeing Savings and Loan institutions, including Aurora, is Office of Thrift Supervision, an arm of the Treasury Department. I would suggest everyone with a complaint send an email or two directly to them. Their website is www.ots.treas.gov and everyone to contact is listed there. I would start with the ombudsman and your regional director.
Best Regards

9:39 AM  
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7:13 PM  
Blogger M Viddy said...

If you think they screwed you by posting your payment entirely to principal, think again. They did you a grand favor by doing so. Lets say your payment is 1000. Normally, lets suppose 700 of it is interest, while 300 is principal. The equity in your home grows 300 per payment (your value) while Aurora would make 700 in interest income (not your value). In your proposed complaint, you claim all of the 1000 went towards principal. This not only increased your stake in your home (your value), it also causes the interest you will pay on an ongoing basis to shrink a small amount. Over time, this small amount may add up to something substantial. In the end, all the money that goes towards interest is lost, so you want as much of your payment as possible to go towards paying principal. All you get is the value in your home (principal). Get educated on the process and the fundamentals before you spout this nonsense.

10:35 PM  
Blogger ted said...

Grow up and face the fact that you probably should have never been given a mortgage. The frenzy to give out mortgages because of rising home values just burst in your face. Don't blame the mortgage company, if you had any sense, you would have read before you signed the dotted line. It is in black and white. You were probably marginal as to if you should have gotten the loan and now it had bitten back. Look in the mirror and take some responsiblity for yourself and quit blaming anyone else. No one forced your hand to the pen. I am sure your neighbors hate the fact that your affecting their investment.

2:22 PM  
Blogger Suzannah said...

Aurora Loan Services and Lehman brothers bank closed on our loan even though the home did not have a certificate of occupancy, and a fraudulent mortgage contract. We found this out about a year after we moved into the home. The two story structure had started to fail. We had a structural engineer and the county inspectors come out. The county said that the house was sub-standard and that it was built worse than the projects. We had to add 17 piers under the home to correct the problem. When we called the Aurora and Lehman brothers to let them know about the fraudulent contracts and the no "c.o" they stated that we signed something saying that we were going to live in it and that is all they needed. They did not need anything from the county stating that it was livable. So, basically, we spent $309,900 on house that is falling apart, and the realtors that handled the fraudulent contract and the builder just got away scott free. We have tried to find legal representation, and for some reason, nothing has happened. It's been 2 years since we have started this process. Don't get a mortgage through them! They will rip you off!

5:00 PM  
Blogger 2fst68 said...

Aurora home loans held my payment up to make me late as well and they charged me for homeowners insurance even though I paid for 1 year at closing, the have let my escrow account go in the red three times, they have charged me for additional flood insurance and they have charged me for additional home owners insurance. This is not a good lender. Steer clear of them!

8:34 PM  
Blogger Suzannah said...

They changed the locks on our home without notifying us. Took off the deadbolts. Not realizing crack heads live behind us. Sent us one letter that they were foreclosing. Never heard anything from them again. They currently have the house listed at over 105K less than they originally loaned us.

10:04 AM  
Blogger jezrich23 said...

Hi !

I sympathize with what Aurora Loans Services did to you. I wanna refer to you the site i have found where consumers got to post their comments and reviews about certain companies like Aurora Loans Services. You can check it out, i bet you'll be interested with it.

Regards,

7:48 PM  
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11:26 PM  
Blogger Sally said...

Attorney James S Franchek
We have an ALS loan, never late,, ever! tried to get a loan mod again total compliance, never late. our app was rejected and they report us 90 day late and crashed our number please contact me if I can help your cause bbradymn@msn.com

1:27 PM  
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Blogger Kaz said...

This is amazing. Thanks for taking the TARP money and bending the american people over. I have had problems with Aurora Loan as well. Check out my blog "The Dumb Fireman". I'm documenting my "loan modification" trials and tribulations....

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