HSBC Horror Stories

JF in Pennsylvania sent this report, which we publish in both of our blogs: “How household Financial gets their mortgage customers and makes money? As you probably already know HFC/Beneficial send out live checks in the mail to thousands across the USA monthly. These range from anywhere from 5k, 7k, 10k. They are at a very high interest rate of about 26.7% on average and have a closed end term a set payment and set term of 5 years for pay-off.

After the check is cashed depending on your zip code these are put into the closest HFC/Beneficial branches. My research has found that more checks are cashed in poorer areas and they target these people. This is the bread butter for an account executive and the only way for and acct executive to get paid on this account is what they call a conversion. The acct executive has a window of 30 days after a check is cashed to have what they call a guaranteed offer. They call everyday to you to tell you that they can give you a lower interest rate on this acct and can give 2k more on your initial advance and lower their payment.

What they do is lower the rate from 26.7% to 24% no matter what your credit score but they put the consumer into a revolving acct which has no set term and it does not reduce the principle balance. For Example: say you cashed a 7K check and had a $212 a month payment for 5 years. Now since you agreed to the guaranteed offer they take an application and pull your credit and know everything about you. After the application they tell the customer I can get your payment down to about $170 a month. At this point they just reeled in the fish and they set up an appointment called the “face to face” with the customer.

The customer must come to the branch to get this offer and be set up for the face to face presentation. When the customer comes in they hammer them with credit life disability & unemployment insurance on this loan and home & Auto Products. It is easy for them to sell these products because they say you are paying $212 a month but with the insurance your payment would be roughly $188 a month and you will be fully covered. It looks like a deal. Now the customer has $188 a month payment, which doesn’t pay down the account, and they are paying for worthless insurance.

HFC/Beneficial makes millions of dollars a month in convincing the customer to take this worthless insurance and it really is not an optional product for the customer. These ancillary products are driven from the top executives all the way down to the sales staff because this is the HFC/Beneficial cash cow. Now they run the paperwork. This new loan pays off the live check that was cashed, but now they have gotten you to sign loan documents, which protects HSBC.

One document includes the arbitration Rider. The arbitration rider is signed for all loans at HFC/Beneficial. They ask you to sign a credit authorization form to get a credit card at 0% for 6 months and then the rate goes to 24%. The account executive gets paid $10 for every loan they close the customer signs. At this point the account executive presents what they call a HOLP (homeowner loan proposal). This paperwork is all worked up and the presentation is nice and it basically shows how they can save you a month. HFC/Beneficial has only one thing to sell to their mortgage customers and that is called their worthless pay right rewards program on mortgages.

HFC/Beneficial jack up their rates and basically how they sell these deals is simple. They basically drop your rate .30 a year for the first 10 years with on time payments. For example a 10% rate after the first year would drop to 9.7% and the 10th year the rate should be 7% with on time payments. This looks good to the customer because they are thinking this great my rate is dropping not realizing that they probably started off 2% higher then could get somewhere else and they are probably not going to be in this mortgage in 10 years. HFC/Beneficial don’t really make their money on the servicing of these loans either because most of the first mortgage customers pay them off in the first couple of years.

HFC/Beneficial really make their money on the origination fees. In Pennsylvania the state maximum is 5% and HFC/Beneficial charges 5%. The customer never really can recoup the cost after they sign a mortgage with HFC/Beneficial. HFC/Beneficial also socks the consumer with a beautiful two year prepayment penalty.

Now how do they keep the customer? Well they back door them. What they do is put the 5% origination and put it on the back of the loan. For example say your house appraised for 200k. You are doing a loan at 90% of your home value of 180k. With the 5% origination and putting on the back of the loan when you get your 1st statement your balance is 189,900 which is 95% of your homes value. They act like this is a normal practice but this isn’t the only fee. You have appraisal, title, loan closer, etc. So on this 200k loan that probably saves the customer $300 a month but will end paying about 14k to 15k in total loan fees which the customer can’t absorb. Now they are at 95% and the customer can not get out of their loan to refinance because no lender is going to finance 95% unless you have awesome credit.

Your great executive will start calling you 90 days later to sell you a 2nd mortgage. HFC/Beneficial will then send another live check called a “side loan live check” to all current 1st mortgage customers. This time they drop the rate 26.7% to 22.98% (how nice). In short HFC/Beneficial are just equity sponges. It is very hard to get out of their grasp once you take a 1st mortgage from them. I hope this will help and stop at least one customer from being a victim.”