After two hours on the phone with three different customer service representatives, we finally figured it out. My heart was beating hard. I was sweating weirdly. But I felt accomplished.
Our monthly mortgage payment was going up and we didn’t know why. This was double frustrating because we’d refinanced the mortgage given the low rates during the pandemic. We were saving about $200/month. Now the mortgage payment was going up a little bit more than that and I was pissed.
Not to mention that our mortgage got sold to Wells Fargo when we refinanced, which has a pretty bad reputation. We didn’t have much of a choice. Or at least I didn’t feel like we had a choice.
So I called Wells Fargo to figure this out. The reason I’m writing about it is because I’ve found that a really rich form of financial education–learning about how capitalism works–is using my own finances as a curriculum and getting customer service representatives to be my teachers (and interlocuters). I find if I ask questions and repeat what I’m hearing over and over again, I learn how some of these practices work. If I’m lucky I can catch supposed experts off guard, which happened in this case.
I try to be nice about this, since the customer service reps are just trying to get through the day and they don’t decide the policies or protocols. Their bosses do. And their job really sucks. But I’m on a quest to learn how capitalism works as an educator so I get into it.
Before I get into the details of this lesson, here’s how I ask the questions. When the person on the other end of the line says something that I don’t understand, I write it down in a notebook. When they finish talking I say, “I’m just interested in understanding this fully, when you say X, what do you mean exactly?” I listen to their answer. When they’re done I say, “Thanks. So if I’m hearing you correctly X is Y, right?” And I wait for them to confirm.
I do that at every step and make sure I’m following. Sometimes I’ll throw in a “Thanks for your patience with me, I’m just trying to learn since this is complicated” or “I just want to make sure I’m following because we rely on this money to get by,” etc.
I also trust my feelings. If things aren’t lining up correctly I ask the person to slow down and try to phrase a question that puts the pieces in order to find out where I’m missing something. I think I get this from having studied logic. One of the most important things I learned from logic is that there are load-bearing concepts, premises, assumptions, and terms and it’s important to understand what these are (like finding signal in noise) and then see how these fit together. Finance is like simple math problems the ruling class use to keep their relations of production in place, so I try to mobilize that way of thinking in these cases.
What happened with my mortgage is a case in point.
It’s A Wonderful Mortgage
We’re part of the lucky few who ‘own’ our home and can afford the taxes, mortgage, and maintenance of the house. I put own in scare quotes because we don’t really own it outright. The bank is our landlord until we can pay back the loan we took out to ‘buy’ the house. Plus we’re responsible for cutting the grass and fixing the leaky roof, etc. It’s better than renting since we’re ‘paying ourselves’, and if the price goes up on the house we can make money by selling it, but the whole homeownership thing is scammy and gets right to the heart of capitalism.
My favorite political theory professior in grad school once said that if we really wanted to understand capitalism we should–if we were able–try buying some property. He was right!
First of all, the 30-year low-interest mortgage shouldn’t exist. It’s a financial instrument from another planet. The only reason we have it in the US is because the ruling class was losing its grip on hegemony in the 1930s after the 1929 crash. The Russian Revolution was also pretty recent in everyone’s mind, Communists were getting more popular (with good reason) and capitalists were on their heels. They needed something that would appeal to a lot of people and make them feel better about capitalism.
At that time, and for a lot of the history of private property, people rented. That’s because owning property was difficult: if you could get a loan, you’d have to pay it off within ten years at a pretty high interest rate. Plus there weren’t a lot of guaranteed loans, so you took a big risk: there could be a run on the bank or a robbery and you’d lose everything. Plus property was pretty expensive relative to wages and savings.
Then comes the crash, the Great Depression, and the New Deal. FDR hooks up with a bunch of fringe economists, real estate people, and urban planners. They basically said, “What if we give people houses? There’d be no revolution then!” So they told people: you can take out a loan and pay it back over a really long period of time and with super low interest. The government would structure the whole market (read David M. P. Freund’s book on this) by guaranteeing the loans and funding all kinds of authorities, commissions, and public companies to get the deals done. It was an explsoive thing. Developers started building and people started buying. The suburbs were born! Cities got a shot in the arm! It was “A Wonderul Life.”
Although ‘people’ in this case was extremely racialized: not everyone ‘qualified’ for loans. As Freund details, the urban planners, economists, and real estate people were all white supremacists. Like racial-science style. For fifty years before the New Deal local governments zoned out certain races. The Supreme Court backed them up. By the time the New Deal came around redlining was intuitive, not every development would sell to nonwhite people, and nonwhites couldn’t get loans.
Okay, this is a long tanget. But it’s good to know about mortgages since school funding superexpropriation, the bad distribution of resources for schools, is rooted in this history. If there hadn’t been straight up white supremacy in mortgages before and during the New Deal maybe real estate wouldn’t be so segergated and then maybe school resources could be distributed better.
Of course, the real problem is private property. Property shouldn’t be private. It should be socially owned and governed, along with the credit distributed to all people to make sure they have good quality housing. I’m a market socialist on this stuff and think the Ilyrian economic model is probably a viable one for the US. I bet housing would be a good market to try. In any case, I approach personal finance from this perspective: the whole system is rotten and I want to understand so I can change it.
Back to me trying to figure out why my mortgage payment was higher. I’m on the phone with Wells Fargo. The guy is a little too nice. Kind of condescending. He’s talking to me like a kid. He tells me that an ‘escrow analysis’ was completed on our mortgage and found a shortage. To make sure we had enough in the escrow, we had to increase our monthly payment.
You have to pay taxes and insurance on a house when you have a mortgage (those taxes go right to the school district usually). The lender builds those into your monthly mortgage payments. It scoops out that amount each month to make sure you have enough to pay the insurance and taxes (I learned this is called ‘impounding’). When it impounds that money out of your payment it puts it in a little side account, called an ‘escrow’. The word goes back to the Old German scrot meaning scrap, shred, or cut off piece of something.
Every year they do an escrow analysis to make sure you have enough in there to afford taxes and insurance for the upcoming year. If you have a shortgage, then either your taxes or your insurance went up. The thing is, neither of ours did! Why the hell did our escrow go up?
Wherein I get an A
The condescending guy kept throwing numbers at me, talking about needing a certain minimum amount in the account and how our insurance went up. It was confusing but I kept asking him questions. This didn’t make sense. Our insurance went up a tiny bit, sure, but our taxes didn’t, so it wouldn’t make sense for the monthly payment to go up so much.
It got a little heated. I was trying to be nice but I got frustrated. He kept repeating the explanation and I kept saying I didn’t understand, that he wasn’t explaining it. The pieces didn’t add up. He said, “let me take a look at the escrow analysis.” He put me on hold. This was getting good. I was learning all kinds of things and also had him in a little corner.
He came back. He said I was right that things didn’t add up. He said it looked like the shortage was caused by the amount that was originally in escrow when we refinanced. It didn’t have enough. I said that didn’t make sense, since we basically just moved the loan from our old provider to Wells Fargo and nothing should have changed about the escrow. We went back and forth about this until he admitted that we had a ‘difference of opinion’ on the question. He said I disagreed with his explanation that the original escrow amount came to bear on the shortage in the escrow analysis.
I said it was a little disengenous to say I disagreed with his explanation because that assumed he was providing one. I asked to speak with a superior (I was feeling spicy). So I was on hold for a bit. Someone else came on. She sounded very tired and annoyed. I laid out my understanding of what was happening. Then she said something about an initial insurance payment–and the line dropped.
I got a little suspicious. Why would the line drop just as some new information was coming to light? I didn’t want to get too conspiratorial, so I called back. I got another customer service rep. She wasn’t as tired or condescending. I ran through my understanding of the situation, using specific amounts and definitions of all the key terms that I’d learned. I thought of it like an oral exam. She gave me the best response ever:
“Wow,” she said, “that’s the most detailed and comprehensive explanation of a personal situation I’ve ever heard.” I got an A!
Just as we were going to get into specifics the supervisor from before called me back. I thanked my teacher on the other end of the line, switched the call to the supervisor. She sounded tired still. But she said she found the problem: for some reason, my insurance company reimbursed us a month’s payment when we refinanced. There was a whole payment missing from the escrow. With that much missing, the escrow analysis came up short.
I verified this with the insurance company. It was true! They’d returned our money for some reason. Weird. But I’d learned about escrow analysis and proved that I did understand this gobbledeegook. If you ever want someone to help you figure out something like this, let me know! I think it’s fun.