How to Deal with Problems when Refinancing a Loan

Note: The DearEsq free 'ask a lawyer' site is offered as a free informational service to the public and is not intended as legal advice. Laws vary from state-to-state, and in addition every situation is unique, and relevant facts may not be known. The answer to the question posed below may not apply to in your state or to your situation. For legal advice in your state and your situation you should consult with an attorney in your state who is familiar with the rules and laws in your state.

“I recently refinanced my home in Ohio. I worked with a mortgage broker and refinanced with the same mortgage company that my existing loan was with. I recieved $15,000 in cash at closing, $10,000 as a result of a prepayment penalty being paid to me and $5000.00 added on to my principle. I was going to apply the $10,000. to my principle on my first payment. About 3 weeks after closing I viewed my account on line and realized that both my existing loan and my new loan were active. I called to verify that they were both open and was told that they had no knowledge of my refinancing, even though both loans were in my name. My existing loan had not been paid off and the mortgage company was looking for pay ment on that loan.

I called my mortgage broker and he worked with a representative from OptionOne (the mortgage co.) and they let me know 5 days later that another person’s loan with the same last name as mine had been paid off instead of mine. I was led to believe that the change over would be simple and the payment on my existing loan would be backdated to the date it was to have been paid off with no negative impact on me. I was told to wait from a call from OptionOne to make sure things had been resolved to my satisfaction.

When OptionOne called they immediately told me that all calculations for paying off my existing loan were based on the other Buzzelli’s mortgage payoff and that I needed to send them a check for $15,000. in order to pay off my existing loan in full. I let them know that I still had the money but I didn’t have my paperwork in front of me and I wanted to talk to my mortgage broker and lawyer before making any such move.

I am certain that the good faith papers that I signed and initialed (when I met with my mortgage broker) contained the correct information. The papers that I signed at closing were incorrect. I did not know they were incorrect. I assumed that all calculations were based on my property and my payoff and everything was up to snuff.

My questions are as follows:

1. If I wanted to completely back out of the agreement at this point would I be able to?

2. Do I have any case for keeping the agreement as is..meaning they pay off my old mortgage anyway, I keep the $15,000 and the same payments and move forward with the new loan?

3. Does title insurance have any impact in this situation ? I paid for it…

Any assistance would be greatly appreciated! Thanks so much!”I got confused at the $10,000 prepayment penalty. Prepayment penalties are paid to the lender when a loan is paid off before it has been in existence a certain time. I don’t understand why you would be getting cash back due to a prepayment penalty; typically, that would be added to the new loan in order to pay the penalty on the old one. But to try to answer your questions:

Question: 1. It’s possible, but not likely. Mortgage lenders don’t generally like to pay out money at non-current rates. If your old loan had a higher interest rate than what is currently available, they might be more inclined to do that, of course, but in that case you’d probably be better off just getting a new loan.You might be able to convince them to do it anyway if it looks like the mortgage company somehow defrauded you, but that’s the sort of thing that’s often difficult to prove.

2. Sorry, no. There ain’t no such thing as a free lunch, or in this case a free $15,000.3. Probably not. Title insurance generally insures against defects in the title (i.e., proper ownership). The loan paperwork is the problem of whoever drafted it up.
Those answers are very general, and your situation is fairly complex, so I would strongly urge you to have an attorney review all the paperwork before you make a final decision on how to proceed.