Geordstuff

In mid-April 2009 GMAC Mortgage suspended my credit privileges on my Home Equity line of credit (HELOC). I had mistakenly underpaid a bill by a small amount, and had not caught it before the 45-day grace period expired. GMAC Mortgage sent me a letter the very first day they possibly could suspend my credit, telling me that credit privileges had been permanently revoked and apologizing for “any inconvenience”. Good thing I wasn’t counting on that money to, say, cover a tuition payment that month.

I paid the bill and the late fee, and called the customer service number and asked for reinstatement. Every representative and supervisor I spoke to over the next several days said the same thing: Federal Law allowed them to revoke the line, and that it was not possible to reinstate it. One customer service rep was relatively non-defensive and human about it, and offered a rationale why the no-reinstatement policy existed. “If it was revoked for something we got wrong, for instance a too-low valuation of your home, we could reinstate it if you sent us documentation proving that your house was worth more than we thought. With a late payment, though, it’s just a fact and you can’t change that.” She also offered a fax number and mailing address where I could file a written appeal, while cautioning me that 99% of requests are not fulfilled.

By contrast, the supervisor I spoke with was extremely defensive, and stated categorically that there was no way I could have my credit reinstated without going through the entire application process again, and this only after paying my bill on time for “two or three months, or two or three years.” He also mentioned that it would be more likely to be reinstated if the economy improved, which is a red flag that the policy is not a reasonable response to an isolated, minor infraction, but instead a systematic tactic to reduce credit exposure in this economy, and that they are counting on poor customer education to remove customer protection.

Meanwhile my wife did some research and discovered a paper published by the Office of Thrift Supervision (OTS), Home Equity Line Of Credit Account Management Guidance, which says in very plain language that the law and official commentary are clear: all home equity line suspensions are meant to be temporary, and credit must be reinstated immediately when the conditions leading to suspension cease to exist.

With some help and encouragement from the OTS, I wrote a letter to GMAC Mortgage quoting the official comments on FDIC Regulation Z, which govern home equity line banking. Today, about 2 weeks later, we received notice that the line has been reinstated. So it does pay to be a squeaky wheel.

Here is the exact quote from my letter that I believe did the trick, and that I would recommend you use in your own letter if you ever need to write one:

“According to FDIC Regulation Z, lenders have the right to suspend credit for any breach of contract. They also have the responsibility to reinstate credit promptly. The official commentary states, according to e-CFR Title 12 Part 226 Subpart E, Paragraph 5b(f)(3)(vi), comment 2:

Temporary nature of suspension or reduction. Creditors are permitted to prohibit additional extensions of credit or reduce the credit limit only while one of the designated circumstances exist. When the circumstance justifying the creditor’s action ceases to exist, credit privileges must be reinstated, assuming that no other circumstances permitting such action exists at that time.

“Furthermore, in comment 4 of the same section:

Reinstatement of credit privileges. Creditors are responsible for ensuring that credit privieges are restored as soon as reasonably possible after the condition that permitted the creditor’s action ceases to exist…

“I paid the late amount plus the late fee as quickly as I could after learning of the oversight. Thus the ‘condition that permitted the creditors action’ has ceased to exist.”

I will update with status on my complaint to the FDIC against GMAC Mortgage for their obstructionist, and possibly illegal, policy of refusing to acknowledge, during phone conversations, the possibility of reinstating credit that has been suspended. If there is a policy that this kind of credit reinstatement is only possible as a result of written request, then it is equal to a denial of consumer protection to consistently give the impression while on the phone that there is no recourse.

If you get stonewalled by the supervisor or service rep, ask for a fax or address where you can send a written request for reinstatement so that you can lay out your legal argument in writing chapter and verse. Get your account up to date, and then blast away.

Dear Homeowners Association Board:

I’d like to install power generating panels on my roof. There’s no way to do that under the current bylaws. Please alter the bylaws for the sake of our bills, our eceonomy, and our planet, such that I can install solar collecting panels in sight of the street (since that’s where the sun shines) and power my house and sell excess power to the grid. I’ll happily contribute 10% of the power earnings to the HOA in return.

Thanks for considering my proposal,
Geordie Keitt

Don’t fret about creeping socialism in America. Capitalism is alive and well and doing its thing: finding a niche, exploiting it, growing, creating an entrenched system that funnels every available dollar to its masters, and finally toppling under its own weight. The economist who described this process best is Joseph Schumpeter, who coined the term “creative destruction” to describe the kinds of disruptions to established economic forces in the face of new inventions, e.g. the hand weaving houses and their thousands of ladies thrown out of work when the power loom was invented.

Today creative destruction is not happening as a result of new inventions that offer better return on capital. It’s the result of finally reaching rock-bottom in the efforts to strip-mine the middle class by offering endless consumption on credit. The next economy will be “less consumptive” and “less credit-y”, that’s for sure, but as for what it will be, well, we’re all going to have to figure that out together.

I know nothing about mortage banking, but seems to me…

When all these awful adjustable-rate loans came up for adjustment, why did they all get adjusted? Did they HAVE to get adjusted? It seems like the process became mechanized and the loan holders simply recalulated the rates and sent out the higher monthly bills without making a single conscious choice about what it meant to the homeowner. When it became clear that the adjusted rates were more than the homeowner could afford, no one said, Whoops, my bad, let’s put things back where they were so that you can stay in your house and keep some money coming in.

It is far too late for this idea to take effect now, but what might have happened in August or September of 2008 if banks had been told they had a the option either to raise the rate and risk foreclosure, or leave the rate where it was and keep a billpaying owner in the home for another few years? And what if the bailout money was originally spent getting homeowners back into their homes at their original rates and mortgages?

Credit to Matt Lepold of New York City for the idea.

Post on 3.5 Blondes about a new game I made up, “Princess Wars“.

I intend to keep pressure on my Congressmen to support Obama in whatever he asks, especially in regards to peacemaking, ethics, infrastucture, and the deficit.

and came back with a whole bunch of blog posts on the Software Tasting site, particularly in the Testing In Principle series. Go and look!

Earlier in the month we drove to Grosse Pointe, MI to attend the wedding (I always mis-spell that “weeding” on first try. Odd) of Liam Whitesell and Erica Helland, who had asked Lucy to be her flower girl. It was a beautiful wedding and we brought back some pix. Also Sarah went up on the Hill to lay some MS knowledge on the staffers up in there.

Now up on Software Tasting, the first in a series of posts on the relationship I found between t’ai chi chuan and the discipline of Rapid Software Testing. This one is about the principle of Relaxation.

My new post on 3.5 Blondes has pix of my cousin Katya’s wedding in St. Croix USVI in February 2008. It was the culmination of a world tour of parties and fetes in their honor. It was a little shocking for my mother to have the wedding outside, overseen by a computer store owner, the bride and groom in sneakers, drinking during the ceremony, giving each other the finger (the ring finger) while they put on each other’s rings, make vows and generally have a blast. I think she got over it though.