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SmartMoney Magazine
'I Can't
Believe They Treat People Like This.'
Washington
Mutual, the nation's no. 1 mortgage lender, calls itself a customer-friendly
bank. Many customers beg to differ.
By Anne Kadet
October 17, 2002
TIM AND PENNY COOK HAD settled in for a quiet Friday
evening in their Seattle condo with their two-month-old son. "We were
new parents, and we were just looking forward to getting some sleep,"
Tim says of that March night.
Fat chance. Just before dinner they heard a knock at the
door. Penny answered, but there was no one there. Strange. Then she spotted a
notice tacked to the door. It was from a foreclosure company hired by their
mortgage lender, Washington Mutual. Penny snatched it and rushed inside.
"It's a notice of default!" she blurted to Tim. "They want to
foreclose on our house!"
Tim, a network engineer at Microsoft, was shocked. How
could this be? They had never missed a payment. They even had proof: canceled
checks showing that Washington Mutual had received and cashed each of their
payments before it was due. Still more frustrating, Tim had already faxed
those canceled checks to WaMu after late fees had started popping up on the
couple's statements. What was going on?
Penny could only imagine the worst. "I was beside
myself all weekend," she recalls. "I thought, 'We're going to be
kicked out on the street with our little baby.' It was devastating."
The Cooks contacted the bank's foreclosure department, which,
in turn, asked the couple to re-fax the seven canceled checks and wait 20
days for it to look into the problem. "Six weeks later," recalls
Tim, "they suddenly said they only had three of the checks we faxed, but
we were 'welcome' to provide the rest of the documentation."
The Cooks were running out of time. By then it was May,
and a notice in a local publication announced that their home was to be
auctioned off July 19. Just as frightening, their credit rating was getting
hammered. Bank of America froze their home equity line of credit. American
Express slashed their charge card limit in half. And with their credit in
tatters, the Cooks had to put off plans to buy a car and refinance their
mortgage. "We were getting all kinds of solicitations from people who
deal with bankruptcy and foreclosures," adds Penny. "It was
embarrassing."
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One
frustrated customer even refinanced his mortgage just to get away from
WaMU.
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Finally, the Cooks' lawyer, David Leen, petitioned the Washington
Superior Court to step in. He also called the local press. "The story in
the paper got WaMu's attention right away," Tim notes dryly. "They
suddenly found evidence of our payments and stopped the foreclosure
process." (In court documents, Washington Mutual claims the Cooks' bank
sent their automatic payments to the wrong Washington Mutual location.)
"It was shocking and insulting how they treated
us," says Tim, who with Penny is suing the bank for damaging their
credit historyÑa claim the bank denies. "Isn't one of their slogans The
Friend of the Family? That's kind of a tragic joke, isn't it?"
Actually, it has been a long time since Washington Mutual,
the nation's largest residential mortgage lender and the seventh-biggest
bank, used that motto. But its current marketing campaign hits the same note,
as billboards in subway stations and on the street boast of Customer Service
That Remembers It Serves Customers and More Human Interest.
With its popular free checking accounts, low mortgage
rates and cheery, khaki-clad tellers (WaMu fans can even purchase Action
Teller dolls at the branches), the Seattle-based bank lived up to its own
customer-friendly billing for years. Then came the binge. Nineteen months ago
Washington Mutual went on a massive buying spree, absorbing two big banks and
the mortgage arms of three others. In that time its loan-servicing portfolio
has quadrupled, to $744 billion. If you have a mortgage, there's now a
one-in-eight chance you send your payments to WaMu.
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Sidestepping
the Snafus
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You just found out
your mortgage is being bought by Washington Mutual or some other large
lender. Next stop: Glitch City? Here are some things you can do to make the
transfer smoother.
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Stick with paper checks until the dust settles. As it's integrating
accounts, your new bank is more likely to bungle electronic payments.
· If you
mistakenly send your payment to the old mortgage servicer, relax. You have
a 60-day grace period from when your loan was transferred. During that time,
you can't be charged a late fee or be reported to a credit bureau.
· If your new
mortgage servicer screws up your account, grit your teeth and pay what it
demands until you can get things sorted out. If you pay less, the lender
will likely return your entire check and ding you with late fees, or even
start foreclosure proceedings.
· You'll get
faster action on a complaint if you label your letter "Qualified
written request under Section 6 of the Real Estate Settlement Procedures
Act." The mortgage servicer then has 60 business days to fix the
problem or explain why not. Not satisfied with the response? Write to the
Department of Housing and Urban Development's RESPA Complaint Office at 451
Seventh St. S.W., Room 9146, Washington, DC 20410.
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But some customers who woke to find their loans gobbled by
Washington Mutual aren't exactly thrilled with their new customer-friendly
bank. They say their mortgage payments have been lost and their escrow
accounts bungled. The bank itself admits to paying property taxes late on
more than 55,000 loans last year. And trying to get such issues resolved can
be a nightmarish venture into the Twilight Zone, these customers say. The
bank's software hiccups and, suddenly, you're on Planet WaMu, a strange land
where records disappear, calls go unreturned, fax numbers change, and the
truth takes on Orwellian mutability.
Just ask Michele Bonser. When her Fleet mortgage was
bought by Washington Mutual in April 2001, the bank sent her a letter
demanding that she pay more into her escrow account every month for
homeowner's insurance. The problem? Bonser was already covered through State
Farm. And while the insurance agency faxed proof of her policy to WaMu more
than 10 times, the bank kept demanding late fees. "We started getting
calls from their collections department," says Bonser, of Wind Gap, Pa.
It wasn't until this July, after she complained to the Better Business
Bureau, that the bank got things squared away.
Though Washington Mutual won't comment on specific complaints,
it says such problems are largely a thing of the past. "During any kind
of acquisition, there will be glitches," says Gail Shelly, the bank's
senior vice president for quality service management. But for "the huge
number of loans we service, those glitches weren't that widespread." In
fact, she characterizes the customer service throughout the integration as
"very good."
Tell that to the frustrated customers whose horror stories
litter such Web sites as Complaints.com and eBusinessRate.com. At ratings
site PlanetFeedback.com, consumers give WaMu a D-plus, the second-lowest
grade awarded to a bank. Meanwhile, a J.D. Power survey found that only one
mortgage lender fared worse than WaMu in customer satisfaction: HomeSide
Lending, which Washington Mutual is in the process of buying. "WaMu is
the only lender that continually has customer-service issues," says
Nancy Deane, a home loan broker in Denver. "The bank has grown so fast
that customer service can't keep up."
Lawsuits, too, are cropping up, including two awaiting
class-action certification in California and Washington. "My firm was
involved in the Firestone-Ford litigation, and that was the biggest consumer
fraud case in the last decade," says Jenelle Welling, a San Francisco
attorney handling one of the suits. "But even in that case, I didn't get
nearly as many phone calls as I get with WaMu. It has really struck a chord.
People are pissed."
AS MARKETING MANAGER AT Fidelity Contract Services, a
Puyallup, Wash., firm that serves as a go-between for home owners and their
mortgage companies, Bryan Nuxoll is in a unique position to see what's
happening at Washington Mutual. It's his job to make sure clients' payments
get to their lenders. Last fall, following the bank's purchase of
Houston-based Bank United, Pittsburgh-based PNC Mortgage and Fleet's
Columbia, S.C.-based mortgage unit, things seemed to go haywire.
It began with a rash of mortgage payments to WaMu that
were lost, or returned without explanation. In some cases the bank couldn't
even tell Nuxoll where he was supposed to mail the checks. "It was
complete chaos," he says. "My customers were calling me on the
phone literally crying. They were older individuals, scared to death. WaMu
was telling them they were in default and in danger of getting their homes
repossessed."
He estimates he spent the equivalent of a month of
eight-hour days trying to get the payments to the right places. "I have
a four-inch file of correspondence from WaMu's quality services department.
We've been in business 18 years and work with mortgage companies across the
U.S. I've never seen a fiasco like this."
Washington Mutual has since networked all its mortgage
service centers so that a payment received at one center will be recorded at
all others. But while Nuxoll has noticed that the upgrade has cut down on
errors, some of his customers are still wrangling to get black marks deleted
from their credit history, and others are still being hit with late fees due
to glitches.
WaMu's record-keeping bungles haven't been limited to loan
payments, as Kathleen Harrington discovered. The Evergreen, Colo., woman got
a nasty surprise last fall when she and her husband decided to refinance
their mortgage. "There's a problem," her broker told her.
"Your taxes haven't been paid." Washington Mutual was supposed to
cover their taxes twice a year out of escrow, but her county tax office was
missing two payments. An alarmed Harrington called the office. "Your
house is scheduled for foreclosure auction Nov. 2," the clerk informed
her.
Harrington paid the $1,100 bill out of her own wallet. But
getting WaMu to pay her back was another story. "I wrote them three
regular letters, faxed them and wrote them by certified mail," she says.
She never got a response. And each time she called to follow up, "the
person had no idea what I was talking about. They said, 'No, it shows here
that we paid your taxes.'"
Finally, this summer, after filing a complaint with the
federal Office of Thrift Supervision, Harrington got her money back. "I
don't know if I've ever had a situation where I felt so totally
helpless," she says. "I can't believe they treat people like
this."
Such snafus have also created headaches for municipalities
such as Bridgewater Township, N.J., one of many caught in the backwash of the
bank's acquisitions. "We were sending out hundreds of delinquency
notices and were inundated with calls from residents trying to explain why
their payments were late. They were definitely upset, and it created an
enormous amount of work for us," says Darrow Murdock, the town's tax
collector. "I've never seen anything like it."
Many customers say their biggest frustration with WaMu is
not so much the occasional glitch, but the torturous process of trying to get
mistakes corrected. Time and time again, errors seem to blossom into marathon
customer-service struggles. Take the story of Philadelphia engineer Robert
Polsky. Last year, Fleet let him drop his private mortgage insurance just
before it sold his loan to PNC, which then sold it to WaMu. It wasn't until WaMu
started charging Polsky late fees that he discovered the new lender had
mistakenly reinstated the insurance requirement and was pulling $80 a month
from his account to fund it.
Polsky faxed proof of the removal to WaMu more than six
times over the course of nine months. Each time, customer-service reps told
him things were straightened out, then he'd get hit with another late fee.
"I was being directed to call and fax service centers in six different
states," says Polsky. "It was a big circle with everyone promising
to fix everything." Finally, this January, he refinanced his mortgage
just to get away from WaMu. "It was a horrid, nightmarish
experience."
MANY OF THE FOUL-UPS can be blamed on WaMu's struggles
to integrate the software of the banks it bought. But four former managers at
WaMu branches, many of which double as loan centers, have an additional
explanation: The bank's policies can actually discourage good service.
Managers get a monthly incentive bonus based on their
branch's performance. One of those measures: net income divided by the number
of employees. "The motive is to keep the branch profitable, but the
reality is that staffing is the biggest expense," says one former
manager who left WaMu for a community bank. "The easiest way to pad your
paycheck, then, is to reduce staffing, and a lot of managers do it. At my
branch, the officers and account managers were inundated with
customer-service issues on a daily basis. They intended well, but couldn't
keep up." Responds Bill Ehrlich, the bank's executive vice president of
corporate relations: "We've placed a lot of control into the hands of
our managers to decide what will best serve their particular market."
Another former branch manager says her staff got little
help from Washington Mutual in resolving complaints and dealing with systemic
computer errors. "With [previous banks I worked for], we'd call for
support and get the correct answer right away. With WaMu, you'd call support
and get several different people who all gave different answers," she
says. "Customer service was supposed to be the No. 1 priority. They used
to advertise that on TV. We'd watch those commercials and say, 'Yeah,
right!'"
Washington Mutual executives point out that the bank
revamped its customer-service practices this year. Its six mortgage call
centers are now open 24 hours a day, seven days a week. Reps have been
retrained to record details of each call, and every consumer is now given a
time frame (from 24 hours to 30 days) for his problem to be resolved. For the
month of August, the banks says, 96 percent of concerns were handled by the
promised deadline.
Reps also now have access to data maintained by other
departments, such as tax and collections. And the bank has hired a second
processing vendor to ensure that loan holders' property taxes are paid on
time.
But even if Washington Mutual is making progress, there's
no telling what could happen next. The bank has yet to transfer to its own
system the mortgages from its January acquisition of New York City-based Dime
Bancorp. And its planned purchase of Jacksonville, Fla.-based HomeSide,
announced in August, adds 1.4 million loans. The bank isn't through with its
growth spurt, either: It recently announced plans to expand in Denver and
Atlanta and intends to beef up in New York, too. Also, the HomeSide buy
raises the specter of yet another software conversion, as executives plan to
transfer the entire WaMu portfolio to HomeSide's system. "That is
something that can be done over a long period of time," says Ehrlich.
"We can control it."
That's little comfort to the Cooks and other consumers
still dealing with the fallout from past rounds of acquisitions. "They
made their business decisions based on things that had nothing to do with
customer service," says Penny Cook. "They knew the customer would
suffer and went ahead anyway. To me, that's not customer-oriented at
all."
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