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.
“My problem is we were in the process of refinancing to a 30 year fixed mortgage. It was an out of state company and everything was pretty much faxed over to us. In the Good Faith Estimate there was no Yield Spread Premium listed at all. When we received all the final papers, we did signed and returned them and they told us our closing would be in about two weeks. They were sending someone over locally to do the closing (Title Company). Anyway I get a call two days before we were to close stating that our current mortgage company said we signed a Prepayment penalty and we would need to come up with $8000.00 more if we are to close. I said no, I would contact the mortgage company to see what we signed. They faxed me a copy, now keep in mind in the meantime I went though my hard copies and found no prepayment. Anyway the current mortgage company said it would need 90 days or more to negotiate this prepayment to reduce it or do away with it. Now the new company said they will leave it open and we pay a higher interest rate and additional fees to leave it open or if we cancel it we need to pay the Yield Spread Premium of $1700.00 in addition to the $375.00 application fee that we have already paid. They have threatened to ruin our credit if we don’t write a check for the $1700.00 today. Also, I got a call from my home owners insurance company and the current mortgage company saying we are in default because the mortgagee has changed. The new mortgage company I was getting the fixed rate with changed the name on our insurance policy before the closing papers were signed. HELP PLEASE”As a general rule, loans are contracts, and as such are governed by the terms of the document that you signed. Without looking at the loan documents for both loans, it is difficult to give you specific advice.
Question: However, some things appear to be quite fishy already. First, threatening to “ruin your credit” seems out of place from someone who hasn’t lent you any money yet. Second, there’s no reason the insurance should have been changed prior to close of escrow (call the insurance company and get that fixed). Third, a prepayment penalty should be spelled out in the documents that you signed: did the page that they faxed to you have your initials on it?
Answer:
Bottom line, you’re in a situation where you need to do some quick negotiating to get the result you want. I’d seriously think about getting an attorney to help with this-though at the same time keep in mind that you don’t want to spend more than the $1,700 you stand to lose.
