WatchEasy money
Wells Fargo mortgage customers may have seen a pitch with their monthly bill for the bank's Preferred Payment Plan. It allows you to speed up payments by breaking them into weekly or biweekly allotments.
But there's a catch. The mailer says that "partial payments will not be applied to your mortgage until the full payment is received." What's that mean?
It means Wells will hold your money in a custodial account until you reach the full monthly amount. While it's in the account, Wells can do whatever it wants with it, such as invest the cash in an interest-bearing fund. And it gets to keep any gains.
It turns out the bank also cuts itself in for an “internal credit” of one-hundredth of a percent of any cash in the custodial account.
So let's say you owe $1,000 a month on your mortgage and decide to break it into two monthly payments of $500 each. The first $500 would be up for grabs by Wells until the next payment comes in. The bank would also claim 5 cents for that internal credit.
That might not sound like much, but Wells is the country's largest servicer of residential mortgages, handling about a third of all home loans.
The bank won't say how many customers have signed up for its Preferred Payment Plan, but it's likely we're talking about millions of dollars in “internal credits” and investment gains.
“This is a good thing for customers who may want a tool to help them manage monthly mortgage expenditures,” said Diana Rodriguez, a Wells Fargo spokeswoman.
A pretty good thing also for Wells.