Mortgage payoff logistics and large ACH transfer

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tiburblium
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Joined: Thu Apr 11, 2019 4:28 pm

Mortgage payoff logistics and large ACH transfer

Post by tiburblium » Tue May 19, 2020 6:02 pm

Hi Bogleheads,

I am preparing to payoff my mortgage next month, mortgage is held at my bank at which I also have a checking account. I spoke to the bank to find out what the process is and this is the plan as I understood it:

- I request a payoff statement
- I send an ACH transfer from my brokerage account to my checking account at the bank
- Once ACH transfer clears, I call their "payment processing department" who will take payment from my checking account

I already pay my own taxes and insurance, there is no escrow account.

I guess that seems simple enough, am I missing anything?

I have transferred money between these accounts before (checking <-> brokerage), however I've never made an ACH transfer so large, it will be $260,000. The receiving institution (the bank) mentioned that processing time should be 2-3 days, but are there any other risks of the money being blocked or stuck for long periods of time?

runner3081
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Re: Mortgage payoff logistics and large ACH transfer

Post by runner3081 » Tue May 19, 2020 6:21 pm

tiburblium wrote:
Tue May 19, 2020 6:02 pm
Hi Bogleheads,

I am preparing to payoff my mortgage next month, mortgage is held at my bank at which I also have a checking account. I spoke to the bank to find out what the process is and this is the plan as I understood it:

- I request a payoff statement
- I send an ACH transfer from my brokerage account to my checking account at the bank
- Once ACH transfer clears, I call their "payment processing department" who will take payment from my checking account

I already pay my own taxes and insurance, there is no escrow account.

I guess that seems simple enough, am I missing anything?

I have transferred money between these accounts before (checking <-> brokerage), however I've never made an ACH transfer so large, it will be $260,000. The receiving institution (the bank) mentioned that processing time should be 2-3 days, but are there any other risks of the money being blocked or stuck for long periods of time?
Hmm, most banks require a wire transfer for payoff.

Any reason to not just do that from the current account? It costs a few bucks, but cuts out a step.

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cockersx3
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Re: Mortgage payoff logistics and large ACH transfer

Post by cockersx3 » Tue May 19, 2020 6:52 pm

runner3081 wrote:
Tue May 19, 2020 6:21 pm
tiburblium wrote:
Tue May 19, 2020 6:02 pm
Hi Bogleheads,

I am preparing to payoff my mortgage next month, mortgage is held at my bank at which I also have a checking account. I spoke to the bank to find out what the process is and this is the plan as I understood it:

- I request a payoff statement
- I send an ACH transfer from my brokerage account to my checking account at the bank
- Once ACH transfer clears, I call their "payment processing department" who will take payment from my checking account

I already pay my own taxes and insurance, there is no escrow account.

I guess that seems simple enough, am I missing anything?

I have transferred money between these accounts before (checking <-> brokerage), however I've never made an ACH transfer so large, it will be $260,000. The receiving institution (the bank) mentioned that processing time should be 2-3 days, but are there any other risks of the money being blocked or stuck for long periods of time?
Hmm, most banks require a wire transfer for payoff.

Any reason to not just do that from the current account? It costs a few bucks, but cuts out a step.
Yes, that was my question as well. Wire transfer from the brokerage could be done the same day, no need to wait.

Also, I thought there was a limit on the max size for an ACH transfer? When we paid off our mortgage, we used the same website that we normally used to submit our monthly payment. I actually had to do multiple ACH transfers (each for $99,999, with a smaller final one) since their system would not accept a 6-figure payment in a single stroke. (Of course, this could have just been a limitation at my bank.)

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8foot7
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Re: Mortgage payoff logistics and large ACH transfer

Post by 8foot7 » Tue May 19, 2020 7:14 pm

The ACH system limit for non-same day transactions is one cent below 100 million dollars. Some banks may have individual limits that are smaller.

stoptothink
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Re: Mortgage payoff logistics and large ACH transfer

Post by stoptothink » Tue May 19, 2020 7:18 pm

Just did it last week. We wired the money, otherwise I don't have any advice other than to call MULTIPLE times to make sure it is actually being done. It took me 4 times on the phone, with 4 separate representatives, and one of them listening to a recording of a previous call to finally get it done. It still did not go through correctly (they put a portion of the payment towards June's mortgage, and took out extra escrow for taxes and insurance for June even though I was paying off on May 12th), but I am so glad to be done with that company. Par for the course considering they overdrew my bank account by randomly taking out an extra payment in the middle of a month - twice - when I had automatic payments scheduled for 1st of the month since the day we took the mortgage out. My prayers are with you if Flagstar is carrying your mortgage.

livesoft
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Re: Mortgage payoff logistics and large ACH transfer

Post by livesoft » Tue May 19, 2020 7:20 pm

When we paid off my mortgage my bank was Wells Fargo and the mortgage processor was Wells Fargo Mortgage which is a different business. Our bank wired money to Wells Fargo Mortgage while I was sitting in the bank. Done.

Basically, treat your checking account even if at the same bank as different from your mortgage processor. Your funds will have to clear in your checking account, so do not be surprised if they sit there for a couple of days. How you get money to your checking account is up to you.

Also, a mortgage pay-off number is calculated "to the day" that the the payoff is made, so have that calculation done to be valid on the day that money is wired to your mortgage processor. Yes, I know you said your mortgage processor was your bank, but be careful: Even if they have the same name, they may not be the same. And if money is wired to your mortgage processor, then you may have to pay a wire fee. We did not have to pay a wire fee.
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123
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Re: Mortgage payoff logistics and large ACH transfer

Post by 123 » Wed May 20, 2020 12:55 am

Do a wire from your brokerage. If there's a fee for the wire pay the fee. When a wire arrives at a bank account it is instant "Good Funds" which can be immediately utilizied. There are processing cycles with ACH that can take a couple of days in most banks for "settlement" to occurr.
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Topic Author
tiburblium
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Re: Mortgage payoff logistics and large ACH transfer

Post by tiburblium » Wed May 20, 2020 8:11 pm

Thank you all for the feedback, I will be doing a wire from the brokerage account (good suggestion!)

:sharebeer

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Watty
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Re: Mortgage payoff logistics and large ACH transfer

Post by Watty » Thu May 21, 2020 12:05 am

tiburblium wrote:
Tue May 19, 2020 6:02 pm
are there any other risks of the money being blocked or stuck for long periods of time?
There is a scam where you get an email with detailed instructions on how to wire the money, but it is a bogus email and you are wiring the money to the scammers account. This happen more when a house is being bought and a title company or lawyers office email has been compromised.

Be very sure that you have the right instructions.
tiburblium wrote:
Tue May 19, 2020 6:02 pm
it will be $260,000.
If you can write a check on the brokerage account and if you are not in a hurry then another option is to just make your normal mortgage payment with an additional $255K(?) going towards principal. That would leave you a small balance left that could just be paid off with a small check, ACH, or wire transfer.

If the bank where you have your checking account at is the same place the mortgage is then you could just deposit the $260k check into your checking account and wait for it to clear to pay off the mortgage

One advantage of this is that to send a large wire transfer or ACH your brokerage will likely make you jump through a lot of hoops for security and that is the way that it should be.
tiburblium wrote:
Tue May 19, 2020 6:02 pm
I guess that seems simple enough, am I missing anything?
Once the mortgage is paid off in addition to making sure the taxes and insurance get paid you should;

1) Contact your home insurance company to take the mortgage company off of your policy. You may be able to increase your deductible it that make sense for you.

2) It will take a few months for the paperwork to clear but you should get a notice that the mortgage lien was released. Be sure to save that. Also be sure to check with the county or whoever tracks liens in your area to make sure that the lien was actually removed. Occasionally there is a glitch where that does not happen and it is much easier to fix now then a long time from now when the lender may have gone through multiple mergers. There was a thread just a few days ago where someone had run into this. You may be able to check for this on the counties web site, you can in my area.

wfrobinette
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Re: Mortgage payoff logistics and large ACH transfer

Post by wfrobinette » Thu May 21, 2020 2:38 pm

Watty wrote:
Thu May 21, 2020 12:05 am
tiburblium wrote:
Tue May 19, 2020 6:02 pm
are there any other risks of the money being blocked or stuck for long periods of time?
There is a scam where you get an email with detailed instructions on how to wire the money, but it is a bogus email and you are wiring the money to the scammers account. This happen more when a house is being bought and a title company or lawyers office email has been compromised.

Be very sure that you have the right instructions.
tiburblium wrote:
Tue May 19, 2020 6:02 pm
it will be $260,000.
If you can write a check on the brokerage account and if you are not in a hurry then another option is to just make your normal mortgage payment with an additional $255K(?) going towards principal. That would leave you a small balance left that could just be paid off with a small check, ACH, or wire transfer.

If the bank where you have your checking account at is the same place the mortgage is then you could just deposit the $260k check into your checking account and wait for it to clear to pay off the mortgage

One advantage of this is that to send a large wire transfer or ACH your brokerage will likely make you jump through a lot of hoops for security and that is the way that it should be.
tiburblium wrote:
Tue May 19, 2020 6:02 pm
I guess that seems simple enough, am I missing anything?
Once the mortgage is paid off in addition to making sure the taxes and insurance get paid you should;

1) Contact your home insurance company to take the mortgage company off of your policy. You may be able to increase your deductible it that make sense for you.

2) It will take a few months for the paperwork to clear but you should get a notice that the mortgage lien was released. Be sure to save that. Also be sure to check with the county or whoever tracks liens in your area to make sure that the lien was actually removed. Occasionally there is a glitch where that does not happen and it is much easier to fix now then a long time from now when the lender may have gone through multiple mergers. There was a thread just a few days ago where someone had run into this. You may be able to check for this on the counties web site, you can in my area.
I almost got nailed by the scam. Scammers had all the graphics everything. Thankfully, they were too stupid to put the right info to make it easy to send the wire. They were missing info so I called the title company to get it. Boy did I feel dumb.

aristotelian
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Re: Mortgage payoff logistics and large ACH transfer

Post by aristotelian » Fri May 22, 2020 7:23 am

I don't know why anyone is saying it has to be wir.e. My MIL just called to get a payoff number and paid with personal check sent via certified mail. When we paid ours off I did a bunch of ACH transfers to get the amount down to a small amount, then paid in the branch. I don't remember if it was personal check or bank check but it was a minimal amount.

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BrandonBogle
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Re: Mortgage payoff logistics and large ACH transfer

Post by BrandonBogle » Fri May 22, 2020 8:54 am

aristotelian wrote:
Fri May 22, 2020 7:23 am
I don't know why anyone is saying it has to be wir.e. My MIL just called to get a payoff number and paid with personal check sent via certified mail. When we paid ours off I did a bunch of ACH transfers to get the amount down to a small amount, then paid in the branch. I don't remember if it was personal check or bank check but it was a minimal amount.
Time. Paying by other means mean more days of paid interest waiting for the funds to clear. And typically lenders want it with guaranteed funds (cash in person, wire, or certified check). For instance, my loan wants a wire for payoff over $2,500. That said, if a sent a check, I don’t know if they would reject it or simple wait a week or so to ensure the check clears?

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whodidntante
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Re: Mortgage payoff logistics and large ACH transfer

Post by whodidntante » Fri May 22, 2020 10:35 am

While you've gotten reasonable advice, I don't really understand your specific concern. If an ACH transfer fails somehow, the money will be returned to the account it was pushed from, or if pulling, it will just never leave the account. The only time this happened to me was when I pushed 15k to Citibank account that I had opened the day before. It was returned the next day with a memo "no such account." If you want to minimize hold times, push funds instead of pulling them. The burden of validating an ACH transaction is on the originator, not the receiver, so generally funds pushed will not be subject to a hold.

Wires can be rejected too, so that doesn't insulate you from delays. One thing I'll caution you is to be absolutely certain you follow wire instructions from a trusted source where you initiated contact, since wire transfers are not generally reversible. And that's exactly why the transaction is considered complete on arrival and low risk for the person receiving the wire transfer. If someone manages to trick you with bad information, the money is gone forever. You should independently verify any wire instruction "updates" that are given to you where someone else contacted you.

I don't think a bank would be concerned at all about fraud risk on a mortgage payoff. Worst case, they reverse the transaction and restore your mortgage to it's full glory, with a nice little returned payment fee added. I have prepaid my mortgage will all sorts of weird transactions, and they didn't blink.

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BrandonBogle
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Re: Mortgage payoff logistics and large ACH transfer

Post by BrandonBogle » Fri May 22, 2020 10:48 am

ACH can be clawed back very easily in the first 72 hours, and fairly easily in the first 14 days. After that, it isn’t very hard, but it’s the same process as claiming a fraudulent check when you see your statement. But that first window can have reversals very simply - exception on tax payments. The IRS uses a different ACH flag making the “easy” reversal only 24 hours and then falling back to fraud otherwise.

That said, I concur that an ACH should be doable, but it is unlikely that the old lender would issue a lien release/satisfaction of mortgage until they are sure the funds are not being reversed, even in a push ACH vs. pull.

Personally, my only mortgage payoffs have been from refinancing or selling the house, in which case the settlement attorney is doing the payoff and they do so by wire anyways.

Topic Author
tiburblium
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Re: Mortgage payoff logistics and large ACH transfer

Post by tiburblium » Mon May 25, 2020 10:29 am

Thank you all, I appreciate the feedback. I am going to request the the payoff statement on Tuesday and will just do an ACH push transfer to my checking account held with that bank.

Wire fraud stories are pretty scary, I spent some time reading some cases of people being swindled... I have performed wire transfers in the past for large sums of money (house downpayments) and never really considered the risks at the time.

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BrandonBogle
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Re: Mortgage payoff logistics and large ACH transfer

Post by BrandonBogle » Mon May 25, 2020 10:36 am

You need to do what you are ultimately comfortable with. Just keep in mind that there isn’t a concern if you call the settlement agent directly and verify the wiring instructions verbally. Regardless, a few days of interest is worth the peace of mind if you are concerned.

MarginalUtility
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Re: Mortgage payoff logistics and large ACH transfer

Post by MarginalUtility » Mon May 25, 2020 11:54 am

I recently paid off my mortgage debt via an ACH pull from my credit union to my loan servicer. The servicer identified the payoff amount during a phone call and I authorized the ACH pull for that day. The funds did not leave my credit union account until the next business day (three days later), but the servicer did not charge me any additional interest.

I asked the servicer for the timing of my receipt of written confirmation of (a) the payoff of the mortgage debt, and (b) the recording of the payoff in my county's land records. The servicer allowed itself 20 days for (a) and 90 days for (b). The written confirmation of the payoff arrived on time.

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