About a year ago we at the Blog notified you that CitiMortgage and other mortgage servicing companies may have been charging so-called “Property Inspection Fees” in violation of the law. Indeed, several class action lawsuits against Citi and other mortgage servicing companies are currently proceeding in federal court in California.
But those lawsuits don’t focus on you – the high-rise condominium owner. Is your condo above the first floor in a secure building? Would property inspectors be able to get to your floor without your permission? If you answered yes and then no, then the so-called property inspection fees on your monthly statement may be improper.
Here’s how it works. You miss a few payments, go into default, and suddenly you have a monthly mortgage statement littered not only with late fees, but also a variety of new charges for “default services” including property inspections. Codes like INVO may appear on your paperwork or in your mortgage records.
In several class actions, homeowners say that inspection fees are being tacked onto their statements automatically when they are late on payments. The mortgage companies allegedly program their computers to order the inspections after an account becomes a certain number of days past due. There is no human review or assessment of the account before the inspections are ordered, according to these lawsuits. And the inspections continue on an automated basis, sometimes as often as monthly.
The property inspection fees are typically small – in the range of $10 to $15. But since they are often charged monthly, they can add up.
Homeowners must pay these fees in order to save their homes from foreclosure. Mortgage companies typically won’t reinstate a loan and halt the foreclosure process until all of the fees are paid, or even added to the balance of the loan.
But if you live in a condominium tower with good security, the inspections may be completely worthless and it may be illegal for your mortgage servicer to charge you for them.
That’s because the inspector couldn’t actually make a visual inspection of your property. In general, default-related property inspections work like this. After your loan account becomes delinquent by a pre-set number of days, the automated computer system orders the property inspection. The inspection is done by a third party contractor – the mortgage companies do not train and maintain their own staff of inspectors. Once the inspection is ordered, an inspector drives or walks by your home to determine whether anyone is living there. Exterior photos may be taken, but the inspector generally does not enter your home. Finally, the inspector sends a report to the mortgage company, which may or may not review it.
If the inspector cannot get beyond your security gate or security desk – and cannot look through your windows because your property is above the first floor – then the inspector cannot actually inspect your property. If the inspection is not actually performed, you probably shouldn’t be charged for it.
Have you been charged for worthless property inspections? As we at the Blog noted last year, property inspection fees may not be clearly identified on your statement. They may show up with a vague description such as “Delinquency Expenses” or “Default Fees,” leaving you scratching your head about where they came from. If you obtain a copy of your account payment record you may see codes like “INVO.”
Inspection fees for incomplete inspections may be illegal under the laws of your state. If you live in a secure high-rise tower and have paid property inspection fees to CitiMortgage or others, it might pay to investigate or talk with a lawyer.