My wife and I recently bought a home, with a nightmare of a path from signing the contract to closing the sale. I’ll spare you the details, but it involved hailstorms, insurance companies, building contractors, a pending divorce (the sellers, not us), numerous banks, a tax consultant, the IRS, and MERS. Suffice it to say that much sleep was lost.

As if I hadn’t been persuaded earlier, the entire process convinced me of the need for a strong Consumer Financial Protection Bureau and someone strong-willed and committed to protecting consumers to run it, like Elizabeth Warren.

The crowning piece of evidence that demonstrated this need was in one single paragraph of the deed of trust presented to us at the closing (emphasis added):

15.       Notices. All notices given by Borrower or Lender in connection with this Security Instrument must be in writing.  Any notice to Borrower in connection with this Security Instrument shall be deemed to have been given to Borrower when mailed by first class mail or when actually delivered to Borrower’s notice address if sent by other means. Notice to any one Borrower shall constitute notice to all Borrowers unless Applicable Law expressly requires otherwise.  The notice address shall be the Property Address unless Borrower has designated a substitute notice address by notice to Lender.  Borrower shall promptly notify Lender of Borrower’s change of address.  If Lender specifies a procedure for reporting Borrower’s change of address, then Borrower shall only report a change of address through that specified procedure.  There may be only one designated notice address under this Security Instrument at any one time. Any notice to Lender shall be given by delivering it or by mailing it by first class mail to Lender’s address stated herein unless Lender has designated another address by notice to Borrower.  Any notice in connection with this Security Instrument shall not be deemed to have been given to Lender until actually received by Lender. If any notice required by this Security Instrument is also required under Applicable Law, the Applicable Law requirement will satisfy the corresponding requirement under this Security Instrument.

Note the difference between those two bolded sentences. Giving notice from the Lender’s point of view means sending information (whether it is received is another question), but for the borrower it means the information has to be received. “Sending is fine for me but not for thee,” says the bank.

Sadly, it’s not just this one bank. It’s the way the system is set up.

At the closing, I think I scared the very nice person who handled our file and did a lot to help get us through the mess described at the top of the post. You see, I had read through the closing documents ahead of time, and arrived at her office with lots of questions scribbled in red ink in the margins. Including a big red circle around this paragraph 15.

“Why the difference?” I asked her. “Why does ‘notice’ mean one thing for the bank and another for us?”

“It’s a standard deed of trust,” she replied.

“Yes, I would imagine it is. But that doesn’t answer my question: why the asymmetry? Shouldn’t ‘notice’ mean the same thing for all the parties?”

“This is the way it’s always been,” she stammered. Knowing this is one of my least favorite phrases, Mrs. Dr. Peterr gave me a warning kick under the table. The closer went on, and pointed to the fine print at the bottom of each page. “This is a uniform deed, used on almost every single family residential property sale in the state.” The fine print read “MISSOURI-Single Family-Fannie Mae/Freddie Mac UNIFORM INSTRUMENT WITH MERS”.

“That’s nice,” I said, defensively moving my leg away from Mrs. Dr. Peterr. “But that still doesn’t make it right, does it? All this means is that changing banks for our loan won’t change the terms of the deed. All this means is that things are stacked to favor all the banks, no matter which one we choose for our loan.”

I paused, then turned to our lender and continued. “Look, I’ll sign the deed. We want to buy the house. But I don’t have to like the way the system is set up to protect your industry’s interests at my expense. By the terms of this standard uniform deed of trust, you can use a first class stamp to send us something, but I have to use registered mail. By the terms of paragraph 15, you can require me to report my change of address by carving it onto two stone tablets at the top of a mountain. We’re borrowing your money, so you get to make the rules. I get that. But if you want to know why people are angry with banks, that paragraph 15 sums it up.”

For those who are interested, here are the Fannie Mae/Freddie Mac Uniform Instruments. I have not been able to confirm this, but I have no doubt that they were written by banks and rubber stamped by the Department of Housing and Urban Development.

It’s the Wall Street version of the Golden Rule: Those who have the gold make the rules.

It’s also Reason 549 why we need a strong CFPB with a firm and Elizabeth Warren to head it up. Rules are needed, but they need to be fair.


photo “Bit By Bit” h/t to Steven Lilley aka sk8geek. I sure hope the sculptor wasn’t working on a change of address form.