A pair of Texas firms that collected bi-weekly mortgage payments from borrowers and were supposed to forward them on to the servicers have been forced into receivership.
Bi-weekly payment plans are nothing new and have been used successfully for years by borrowers to more quickly pay down their home loans.
Instead of making one payment per month, or 12 payments per year, bi-weekly plans result in 26 payments per year. In addition to making part of the monthly payment early, the plan effectively adds another full month’s payment each year.
For borrowers who are paid every two weeks, bi-weekly payments are conveniently synchronized with their paycheck dates.
While borrowers can make bi-weekly payments themselves, some companies promote services that handle such payment schedules.
House Savings Investment LLC and AA House Savings Financial Inc. were two such companies.
Both Houston-based firms were owned by Luis Mariaca, and House Savings was licensed by the Texas Department of Banking.
Promoting their services as accelerated mortgage payments that reduce the loan term, sales representatives of the companies targeted Hispanic borrowers.
Problem was that they weren’t actually passing on all of the payments, the banking department said in a news release.
An investigation by the banking department found that millions of dollars had not been forwarded to mortgage servicers, according to the announcement.
In addition, AA House was charged with violating the Texas Finance Code because it failed to register and obtain a license as a money services business as required by law.
The Texas Attorney General’s office filed an enforcement action on July 26 in Travis County District Court on behalf of the state banking department, and a permanent injunction was obtained barring House Savings and AA House Savings from operating the bi-weekly program.
In addition, the court appointed a permanent receiver for the firms.
Over the next two months, the companies’ receiver will continue regular withdrawals from borrowers’ bank accounts for mortgage payments, after which time borrowers will be required to retake control of their own mortgage payments.
