Did my mortgage broker lie to me?
My wife and I recently completed a REFI. The broker we used stated numerous times that they would pay ALL costs for the REFI. Below are some of the statements he made to us. Is what he did legal?On numerous occasions I let you know that we wouldn't do this loan if it was going to make our loan amount any higher. Please explain to me how this quote from you is what happened here. "This is my best and final offer. I can give you a lender credit to pay ALL closing costs and your prepaid items. Therefore your payoff will match your new loan amount. I added in 45 days of interest onto your payoff to give you 2 skipped payments. This means your payoff will match your new loan amount and you will be receiving a refund after closing of your existing mortgage balance."Or this one"That is correct! In order to earn your business I have been authorized to give you enough lender credit to pay all closing costs and prepaid items. Therefore your payoff amount will be your new mortgage balance. That includes getting an escrow refund from your current mortgage company after closing."How can you exhaust the lender credit when you state that you'll be paying ALL costs?" Your payoff was $327,858 (my balance was $326,100.57 plus the interest you were supposed to pay). and your new loan amount was $329,311 and that does not include a principal reduction of $445 (didn't happen) which brings down your loan amount to $328,866. Again loan amount is $329,311. by jimkabat317 from Tacoma, Washington. Nov 18th 2016
Lorne Harvey (lorneharvey)
#77 ranked lender in Washington - 439 contributions
This is an FHA Streamline that you are describing. No closing costs can be added back to the new loan. The reason for the increase in the balance is the up front mortgage insurance. Depending on how long you held your original loan, there may have been a refund of the unearned portion of the original up front mortgage insurance. As long as you were not asked to bring in any cash at closing, then the broker did cover your actual closings costs and prepaid items. Typically is done by premium pricing the loan so that you have a consumer rebate to help with the closing costs, then the broker will do a broker credit to cover the balance of the closing costs. You can skip 2 payments doing this, by not making the current months payment and then the next month before the first payment becomes due. Then you will receive your escrow refund from your original lender when they process the payoff, this will typically take 30-45 days to receive this in the mail. If you apply the refund to the new loan as a principal payment and apply one of the skipped payments back to the new loan, then your balance should be back down to where your old balance was at. This is a fairly common practice and is done routinely when it benefits the consumer. There is a net tangible benefit worksheet, where our principal, interest and monthly mortgage portion of your payment must decrease at least 5%. It should have been disclosed to you that your balance may be higher due to the fact that you would pay HUD 1.75% again for the up front mortgage insurance. However, the loan should be beneficial to you in the long run, otherwise the broker could not have completed this for you, as the net tangible benefit of at least a 5% reduction in your payment must be met. I hope this helps explain. If I can help further, please feel free to reach out to me. Thank you
Lorne,This was a VA refi not FHA. Bottom line was I told the broker No many times then he came back with we will cover ALL costs. I didn't need to do this refi but i couldn't pass up getting my escrow $2500 as well as skipping 2 payments $4,200 back. My wife wanted to upgrade the kitchen. And my new loan would be same as my old loan. I've done this numerous times with my old Colorado home with no problems. Not only did my loan go up but they closed late and my 2nd half taxes were paid from my escrow account leaving only $450 less the fees and of course a late fee. I got a check for $399. So I skip 2 payments $4200 and my new loan is $3,00 higher. I would have never done this for such little reward.
Lorne Harvey (lorneharvey)
#77 ranked lender in Washington - 439 contributions
Ok, it sounded like an FHA Streamline, but a VA IRRRL is similar in nature. Without seeing your closing disclosure, it would be hard to give you the details, but I suspect it was the new VA Guarantee fee that may have increased your loan amount. If you would like me to personally review this for you, I am happy to help. My email address is lorne.harvey@pmrloans.com
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