Can mortgage loan processor limit size of excess payment against principal?

[mrblint]

Jurisdiction

Pennsylvania

The bank that issued my mortgage has outsourced loan processing to another company. I have been paying the monthly payment to this new company for about a year now, after paying the original bank for over five years. I have been using my bank's bill-pay service. The mortgage had no prepayment penalty.

Can the loan processor impose limits on the amount that I wish to pay towards principal if I send them a personal check in excess of the required monthly payment, assuming my payment is not more than the amount outstanding?

I mailed them via USPS a personal check for an amount in excess of $10,000, using the coupon on their monthly loan statement, specifying that the excess payment should be applied against principal. There's a slot on the coupon labeled "Additional Principal". But customer service at the loan processing company told me, via web chat, that their rules prohibit personal checks in excess of $10,000, and that this limit was a "standard banking regulation". My choices are to wire them the money or send them a certified check.

I would prefer to use a personal check and have a paper record of the transaction.

 

[Zigner]

The bank that issued my mortgage has outsourced loan processing to another company. I have been paying the monthly payment to this new company for about a year now, after paying the original bank for over five years. I have been using my bank's bill-pay service. The mortgage had no prepayment penalty.

Can the loan processor impose limits on the amount that I wish to pay towards principal if I send them a personal check in excess of the required monthly payment, assuming my payment is not more than the amount outstanding?

I mailed them via USPS a personal check for an amount in excess of $10,000, using the coupon on their monthly loan statement, specifying that the excess payment should be applied against principal. There's a slot on the coupon labeled "Additional Principal". But customer service at the loan processing company told me, via web chat, that their rules prohibit personal checks in excess of $10,000, and that this limit was a "standard banking regulation". My choices are to wire them the money or send them a certified check.

I would prefer to use a personal check and have a paper record of the transaction.

Certified checks and wire transfers both produce a "paper record".

 

[adjusterjack]

Can the loan processor impose limits on the amount that I wish to pay towards principal if I send them a personal check in excess of the required monthly payment, assuming my payment is not more than the amount outstanding?

Obviously they CAN do it because they ARE doing it.

Send them $5000 one month and $5000 the next month. Or $9000 and $1000 or any other combination.

It's that simple.

 

[Zigner]

As a note, the processor is NOT limiting the amount you can pay towards the principal balance.

 

[hrforme]

agree that they are just limiting how you make that payment, not limiting the payment itself. Heck, you can probably send 2 separate checks in 2 separate payments for $5k and also be fine.

 

[army judge]

Heck, you can probably send 2 separate checks in 2 separate payments for $5k and also be fine.

I'm going out on a limb here, but my guess is that if someone sent a creditor their normal payment each month, and an additional 25 checks each totaling another $5,000 too, the creditor would process and apply the funds eagerly!

 

[adjusterjack]

Mortgage lenders don't like large pre-payments because they lose a lot of the interest earnings when the balance is significantly reduced. That's why many mortgage loans are written with pre-payment penalties.

 

[Zigner]

Mortgage lenders don't like large pre-payments because they lose a lot of the interest earnings when the balance is significantly reduced. That's why many mortgage loans are written with pre-payment penalties.

While true, the OP states that his mortgage has no prepayment penalty.

 

[cynthiag]

I imagine that the banking regulation that they are referring to is the Bank Secrecy Act, which states that transactions of $10,000 or more by cash or check must be reported to the IRS. It was put into place because large amounts of money changing hands could potentially indicate illegal activity.

And you have to be careful about splitting up larger transactions, for instance like someone said do separate payments of $9,000 and $1,000, because if you do them close enough together it can appear that you are structuring your transactions to work around the required reporting, which can end up looking suspicious and trigger even further scrutiny into your financial activities.

The BSA has been in effect for banks for many years, but as of 2012, other mortgage lenders have been required to follow the same rules, and the penalties to a lender for violating the rules can be pretty severe, including potential criminal penalties.