Indeed, it has become common for a single bank to take on servicing obligations for loans made by many other banks. Unfortunately, it now appears that many of OM's mortgage adjustments were misprocessed. These variations apparently overwhelmed OM's computer software, which is capable of handling only a few servicing variations. These errors, however, mostly cancel each other out. While some mortgages are misprocessed, on average OM collects the right amount of revenue and makes no net profit on the errors.
Individual errors are usually ten to twenty dollars per month per customer up or down.
In 1986, OM's manager, Joy Cray, after consulting with BOE's mortgage servicing vice president, Bob Baum, decided simply to use OM's existing program for all loans. OM therefore mailed out periodic adjustment notices to its servicing customers, as required by Truth in Lending regulations, telling them what their new rate was. Everyone paid these bills without question. The errors affected about 5,000 OM customers in each of the New England states. There was no problem until early this year.