Dallas Real Estate: Let’s Say I Am A Wee Bit Late On My Mortgage Payment…
It happens to the best of us — like when I found last month’s bills under the seat of my car once… maybe thrice. My husband’s office manager was 3 weeks late on her mortgage payment — plumb forgot it. When she discovered this, she pronto wrote a check for the payment, then, to show she was not really a scofflaw, wrote out two more future-dated payments, put sticky note instructions on each one, popped them in the envelope and rushed them to her bank. She says that in the past, the bank has taken her post-dated checks and held them until the date due. And that’s what she thought was going to happen.
Yesterday, she learned that all three mortgage checks had been cashed, her mortgage now pre-paid, and her checking account severely overdrawn. Not only that, she was hit with $350 in bank fees. Her bank officer called her — (”I didn’t even know I had a bank officer,” says she) and said gosh, this is so weird, your account has never been overdrawn in 15 years!
I am researching her recourse on the bank’s actions. They have refunded half the fees. But they would not reverse the payments. My lawyer daughter tells me to always, always write your bank account number on the back of a check or else, if the bank credits it to another account accidentally, they may not be liable. But I wonder how far the instructions on a check go — future dating — and sticky notes? My son (financial advisor) says banks cannot cash checks bearing future dates. But for best results, I have advised getting that mortgage set up on an auto-draft because Texas is a non-judicial foreclosure state.
Which leads me to a theory — would love your opinion on this. When you pay a creditor on an auto-draft, you significantly decrease any collection expenses they may encounter. In fact, you all but eliminate them. I think that banks and mortgage companies should give us a discount if we sign up for auto-draft. Or at least go back to handing out free toaster ovens! Calling Sheila Bair…..
Awards | Archives | Reprints | Custom Publishing | Jobs | Advertiser's Index
The majority of mortgage companies use lock box systems to process payments. The entire process is automated and checks are not touched by humans until the end of the process where they are sent back to the bank or whatever they choose to do with them.
Banks are not supposed to be able to cash future-dated checks so she may have some recourse in having the overdraft fees reversed, checks returned unpaid, etc.
Overall, if you simply forget like that, just make the phone call, explain your forgetfulness, and get it paid pronto. Most banks are willing to reverse the late fee if you proactively contact them and are apologetic and acknowledge you made the mistake.
Frankly, I don’t know of any bank that would agree to take post-dated checks and hold them for future payment and as Vic mentioned, most use lock box payment systems, so someone who doesn’t know you is keying it into a system after the envelope is opened.
See UCC Sec 4-401(c): A bank may charge against the account of a customer a check that is otherwise properly payable from the account, even though payment was made before the date of the check, unless the customer has given notice to the bank of the postdating describing the check with reasonable certainty. (emphasis added)
If your friend didn’t give them sufficient notice that she was sending someone a postdated check (and it sounds like she didn’t), then the bank was free to charge it against her account.
See also what the Comptroller of the Currency has to say.
I seem to remember from studying for the bar that a check is payable on demand immediately when you write it.
The date on the check doesn’t have any impact unless the customer gives the bank a notice of the post-dating which describes the check with reasonable certainty.
But I think that’s still optional on the bank’s part – I don’t think they have any liability for this. To sum up: post-dating does nothing.
Of course Matt and Emily are correct; and its generally felt that its illegal (though, that term may be a bit over the line) to try and pass out post-dated checks. Obviously, there is no recourse and the checks were properly cashed.
On the other hand, if this was all done electronically — the payment would be initially accepted and the bank overdrawn, but then it would be rejected for insufficient funds. You still get hit with the overdraft, but you don’t end up owing your bank money you don’t have.
Why on earth people still use any form of paper is completely beyond me. Its much safer and less costly to the account holder to do these things electronically.
Additionally, you don’t “forget” payments — b/c you’ve set them up to be paid auto-magically….
I think the post-dating bit has been covered adequately.
Your other statement, “I think that banks and mortgage companies should give us a discount if we sign up for auto-draft.” Our lender gave us this option when we bought our house. We were able to knock a quarter point off just for using auto-draft. You may have to ask, but it should definitely be a part of the negotiations.
most banks do give a discount of some kind for auto-draft when you are initially setting up the loan. insurance companies do as well. i’m a banker and i know i do for my customers!