Problems With No Cost Refinancing
by Manny from San Marcos, California, USA
Ask Kate about problems with No Cost Refinancing: Kate, Can you explain how my lender began with a no cost mortgage refinance and surprised me by asking for a few thousand dollars right before closing? I'm trying to get a FHA Short Refinance because I owe too much on my mortgage. I went to my mortgage company about 6 months ago to refinance and they suggested FHA Short Refinance.
The lender told me it was a good deal because they'd pay all of my fees, pay off my 2nd mortgage and even write off part of my loan. I thought, how could I go wrong with this.
I was still suspicious but got a good faith estimate and really nothing looked fishy.
After a few months the appraisal was done and I felt pleasantly surprised that it went okay. Then they told me I was approved but needed to wait on closing because so many people wanted this loan.
I'll try to make this short but about 2 months later, I got a phone call telling me the refinance was ready to sign and someone would be calling for an appointment.
I was waiting and waiting. Then yesterday, I got a phone call and was asked, "Would you be willing to pay a few thousand dollars for your refinance?" Huh?
My no cost refinancing disappeared just like that? And what's up with "am I willing" to pay a few thousand dollars?
I don't understand how my mortgage company can do this to me. CAN they do this to me? What are my options?
Kate Answers: Problems with No Cost Refinancing
Dear Manny, Whoa.
I'm speechless. Let me recover here a moment.
Okay, I have my breath back. Let's continue. What are your options, you ask. Let's break this down systematically.
I'd start with the mortgage representative and see if you can get a solution. Don't forget to document the conversation in writing.
But if the issue with closing costs is still not resolved, do not assume the mortgage company knows yet that you have been wronged. So next, I'd write a letter of complaint to an individual of authority at the mortgage company.
Not sure what to write? Go here for a sample letter that addresses complaints under the Real Estate Settlement Procedures Act (RESPA): Sample of Written Complaint to Lender
If you are wondering about RESPA, it is short for Real Estate Settlement Procedures Act
"insures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protected from unnecessarily high settlement charges caused by certain abusive practices."
Furthermore, the Real Estate Settlement Procedures Act says...
"None of the information collected by the loan originator prior to issuing the GFE may later become the basis for a --changed circumstance upon which a loan originator may offer a revised GFE, unless the loan originator can demonstrate that there was a change in the particular information or that it was inaccurate, or that the loan originator did not rely on that particular information in issuing the GFE. In addition, the loan originator is presumed to have relied on the borrower's name, the borrower's monthly income, the property address, an estimate of the value of the property, the mortgage loan amount sought, and any information contained in any credit report obtained by the loan originator before providing the GFE. The loan originator cannot base a revision of the GFE on this information, unless it changed or is later found to be inaccurate."
Usually problems such as these can and will be resolved at a local level. However without a response, you send the same letter with a cover letter to the California Attorney General. Information for contact the CA AG is found on your state's website.
But hopefully, your mortgage representative can turn your refinancing process back around to your satisfaction. Otherwise, it is my sincere hope someone in a position of authority at the mortgage company will.
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