Bank's Trying To Screw Me
I bought a house sub to about three months ago and the the total due on the loan was 131K plus arrearages which I paid (the arrearages I mean I left the origional note in place). I have since done work to the house, put it back on the market, and am ready to close with my new buyers. The bank sent a payoff statement this time around for 4K higher than 3 months ago. It is itemized in their payoff statement as a prepay penalty. There was no prepay penalty when I bought the house. The title company called the lender for an explination and they said that because the loan was in default once they've added a prepay penalty. What!!?? Has anyone heard of this? There was no prepay on the loan and now there is??? This does not sound right to me. Am I way off here? Help!!! 
Talk to a lawyer.
Tom
If you have the original paperwork and there is no prepay penalty mentioned on the loan than you are free and clear though a lawyer may be needed. If, however, there is a penalty (there often is now as the bank wants it's share of the profits through interest) and it is mentioned in the original papers, you will have to pay the penaly. They could have thrown it in there without you looking and had you sign it.
Thanks for the response. The loan is in the origional homeowners name. When I bought the house it was in default and at that time there was no prepay penalty. Now that I am selling all of a sudden there is a prepay. I would think that when a loan originates, at the time, there either is one or there is not one. I have never heard of a lender being able to throw one in there and espececially for the reason that they gave. The lender said that there was not one to start with but because the loan fell into default at one time they have put one on there. If this was a standard wouldn't all lenders take advantage of this with all loans that at one point defaulted? This just does not feel right to me.
Ah Shylock always with us.
Check the original note of the mortgage and see if there is a prepayment. Also check you States Financial Office and see if they are allowed. If such a clause is not present it cannot be added as it is not in original contract bargain.
There are some strong games you can play one of which is to file an action in small claims and away you go. What you set up with this attack is once more a Negotiation. With luck you can bargain a reduction in the Pre Payment Penalty.
I think from what I can remember about your State is that upon any default and filing of an action. All penalties come into force.
Negotiate. Try not to expose all items to them at time of negotiation as if they believe you are fully committed to the sale they will stand firm.
As a member of the oppressed lower classess, I still do not carry a kerchief and keep buttons off the sleeve of my jacket so as not to injure my nose as I wipe. I take great umbrage at such actions from our banking members.
After all we clean up a bad loan, and arrange a refinance situation and then they clobber us.
I have won in several instances in the courts against such requests. Remember a Loss Mitigator looses Browny points if he causes an action to be filed against the Bank. This may be your lever.
Good luck. Where is Portia? Lucius <IMG SRC="images/forum/smilies/icon_cool.gif"> [ Edited by Lufos on Date 01/29/2004 ]
I would request a copy of the verbage that they are referencing to charge the amount. Even if they say it is not in the original contract, ask for the paperwork that they have added.
Check to see if it is an assumption fee. this illustrates the importance of taking subto into trusts. I can't say I am perfect either, but hopefully others can learn from the mistakes we make.
Next, ask your escrow officer what regulatory agency you can talk to about them holding you to unsigned documents. It seems like a violation of truth and lending laws. the most important thing first is to get a written copy of exactly how they come up with that number. Only then can it be negotiated or disputed. Let us know how it goes.
[addsig]
nisecor,
I think your advice is excellent. Should be followed to the letter. Nice thing about the State of Calif. We have Escrows in which can be gathered all documents.
I am most curious as to which Lender or Institution is involved. I have a little book. Just like the Mikado of Doyle and Carte.
Please Advise. Lucius
I would send a copy of the original contract to the state attorney generals office and let someone on his staff give you their opionion on the legality. Also you may want to send the same information to the state banking commission for an opinion. Hope this helps.
Hey thanks so much for the all the advise I really appreciate it. I'll keep you guys posted on what happens. By the way the lender is Fairbanks Capitol.
Maybe Im not clear. You saved this loan from default and now that bank wants to penalize you for paying off the loan early!!!!?????
Shouldnt they be happy that this loan isnt being charged off?
I'd think they would be thrilled that you showed up!
N.
You are crystal clear! It wasn't enough for these guys that I paid all the arrearages and brought the loan current on the first go round. Now that I'm trying to sell it they want to stick me with more fees....... under the guise of a prepay that did not exist three months ago!
Well the loan was never assumed by you with any NEW terms. So the original terms apply.
they were the terms that were agreed to. They are the terms that will be enforced.
You can hire a lawyer to simply write a letter demanding an explanation. That way you havent committed to huge legal expenses.
The lawyer will charge you 1/2 hour for writing the letter. Maybe a little more for receiving responses and negotiating.
But perhaps the bank will back off when he asks for a payoff figure and disputes the prepay fee.
then you will have gotten off pretty cheaply.
good luck,
Neill