delay in clearing DD - con?

JonBiel

I am in the process of remortgaging and as there has been a slight delay our solicitors have had to requested a new redemption figure from Birmingham Midshires. As BM unhelpfully do not take the monthly repayment into account in their calculations we have had to wait till after this months Direct Debit payment has been made.

The DD left our account today, but BM have told our solicitors that it will not credit our mortgage account for 5 working days.

The FSO explain the direct debit system here:
Www.
financial-ombudsman.org.uk/publications/ombudsman-news/38/standing-orders-direct-debits-38.htm

Essentially funds debit our account and credit the lenders account on the same day.
So what is all this clearing nonsense about?

The mortgage conditions state:
6.15 Any payment will be credited to the borrower's mortgage account on the day it is received as cleared funds by the Lender.

What would be the cumulative effect of 5 working days delay on crediting payments? I can't get my head around it & it gets more complicated as interest is charged daily ie on non-working days, only Payments that fall on a Monday would credit in 5 days all others would have the weekend in addition. (Is Saturday a working day? Plus Bank-holidays ?) I'm sure the effect would compound over the term of a mortgage.

Any thoughts?

Thrugelmir

You could have rejected the direct debit via your bank and requested repayment of the funds.

As BM unhelpfully do not take the monthly repayment into account in their calculations we have had to wait till after this months Direct Debit payment has been made.

How can they quote a settlement figure which is lower than the balance you currently owe? A settlement figure is binding.

ACG

It may just not hit your mortgage account for 5 days.

I used to work for RBS around 6-7 years ago. If people made a pament to their credit card with a debit card it never hit the account until 2 working days later. However what they used to do was back date the payment by 2 days (therefore no extra interest and it shown on the date they called).

So it could well be that your DD hits their central account on day 1 but not your mortgage account until day 5 but then they back date it to ensure you are no worse off?

JonBiel

Thrugelmir - if I had canceled the direct debit then technically we would be defaulting on the mortgage not a position I want to be in so close to closing the account; but that is not really the point. We just need a real 'redemption figure'

They have not quoted a lower settlement figure, it is too high as it has not taken into account our monthly payments, in addition it was only valid for 7 days from the quoted date. So on the 10th of August I asked for a settlement figure for the 29th Sep. in order to have a figure to start the remortgage process with the broker. But BM said they could only include payments made to date. When it arrived the closing statement only included payments upto the 8th August. So September DD was not included so was too high not too low.

I am not sure if our solicitors requested or received a new settlement figure; as I said there has been a delay at their end, but what I doubt is that it would have included the October 8th DD. What I don't understand is what all the waiting for things in the post is all about. Surely solicitors and mortgage companies should have secure lines of communication to speed these things up, at the very least access to a calculator.

Anyway BM have told our solicitors that we have to wait 5 working days for my money to credit my mortgage account dispite the terms of mortgage saying it will credit the same day, before they can give an accurate new settlement figure.

ACG - I am slightly reassured that they may well have been backdating the credit of DD so that I am no worse off but forgive my lack of trust in banks to operate in the interest of their customers, and how would anyone ever know (VW springs into mind)? It also begs the question if they have a system that can cope with backdated payments and recalculate the interest accordingly why it can not figure out the settlement figure today or any date in the future including expected monthly payments, if that is what I request.

Thank you for you insights.

Jon B

dunstonh

Essentially funds debit our account and credit the lenders account on the same day.
So what is all this clearing nonsense about?

The direct debit can be bounced up to midday the day after. The notification for the bounce can take upto 5 days. So, the transaction is not classed as cleared until later. They cant be sure that you have stopped the direct debit or it will bounce for another reason.

Also, many building societies use a central account. These can be spotted when you have to quote a reference number in addition to the sort code and account number. These add extra days to the process.

In cases where there is payment made during after the redemption figures have been issued, its normal for you to make the payment and get it back later. It is probably a BM quirk or choice for them to wait.

JonBiel

Cheers guys, on reflection I am probably just venting my frustration at the delays in the process on here.

davidmcn

JonBiel wrote: »

What I don't understand is what all the waiting for things in the post is all about. Surely solicitors and mortgage companies should have secure lines of communication to speed these things up, at the very least access to a calculator.

Just to clarify, the solicitors need to ensure that they have enough funds to redeem your mortgage (otherwise they might end up having to pay any shortfall themselves) - so they want the figure confirmed in writing by the lender. Doesn't need to be by post (will often be by fax if urgent), the delay is usually in the lender producing the statement rather than it being in the post.

And bear in mind that if you are about to dump them, your existing lender won't be very excited about providing swift customer service.