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Do I have options? Mortgage Broker negligance cost me $2000 at closing!

I am writing this seeking advice on what to do concerning Alpine Mortgage, after they lost $2000 at the closing of my house. The broker admits that he screwed up and never bothered to look at the terms of my loan until closing. We had, on his recommendation, got $6000 from sellers in closing costs. At signing he told us we were going to lose $2000 of it. Here is the story.

My Wife and I had been looking to purchase a house for almost a year. We found a duplex that we liked and after talking with the seller found out it would need enough repairs that we would have to get a 203k rehab loan. At first the seller was not interested in us and wanted a cash buyer, but our real estate agent convinced them we could get it done quickly.

Originally when we shopped for a loan we were looking at standard FHA, so when we needed a 203K our options were limited among lenders. We ended up going with Alpine Mortgage here in Eugene, OR. We discussed the rate options and closing costs. We had already asked the seller to pay closing costs we just needed to know how much. The rates were explained such that we knew we could either get a lower rate (4.125 at the time) and have to "buy it" (pay extra to get rate), or we could get a higher rate (4.25) and get a credit from lender for $2000. Since seller agreed to pay closing costs, which could include the buy down we opted for,  we wanted the lower rate and asked seller for $6000 which they agreed to. This was a floating rate so I knew the terms could fluctuate.

  • December 21 2011 - US
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Answers (31)

Is there more to the story? If not, are you saying you did not lock your loan  and you ended up getting 4.25% with no lender credit?
  • December 21 2011
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sorry I have been trying to post the rest Zillow not letting me for some reason.
  • December 21 2011
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After several weeks and signing another extension I called my broker to ask when the rate would lock. He told me that it had not happened yet, and then paused on the phone and said "oh wait I do have an email saying we locked you at 4.25". I told him I was surprised it was higher since the news had been flooded with stories of the interest rate plummeting and what that would mean for our closing costs. He said rates were always fluctuating and that when they locked it was a little higher. I asked him if we could re-lock and he said it would take awhile and the sellers were already tired of the process. It had been two months since we started it so I relented and asked him what my wife and I needed to bring to closing. He said that the 4.25 closing costs would be close to the same but our down payment would rise. So my wife and I prepared ourselves to bring in the down payment and an extra $500-$1000 for the remainder of closing costs.

Another month went buy and the sellers were furious. They never wanted to sign extensions and when they did they would only do it for 2 weeks at a time. We did everything we could to speed up the process. Every week the broker told us it would be next week the lender just wanted a few more documents, or the wrong form was turned in and had to be resent.
  • December 21 2011
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We continually got paperwork with mistakes on it. Luckily my wife was a math major and can quickly tell when the numbers don't add up. We were given the breakdown of our loan at the new 4.25 percent and somehow it said we were going to need to bring $10,000 to close! This was twice what we had been expecting before. At first the broker said that is what he had been expecting?? Then he retracted that and said that yes his processor had made a mistake, but never bothered to give us a new workup. The whole process was like that, and the broker always blamed either his processor or the lender for the hold ups. We finally get a date to sign a few days before our last extension ran out. The sellers said they would not sign another and would rather put it back out for a cash buyer. I left messages for the broker about how much we should bring to close since we never got an exact number from him. For two days he did not return any of my calls until 2 hours before our meeting at title company. He said he did not have the numbers yet and for us just to go to signing and we could bring a check after.
  • December 21 2011
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So, if I understand your situation correctly, you have a seller who agreed to pay $6,000 in closing costs, but the closing costs are only $4,000.  Is this correct?  If it is, I don't know why you couldn't just get the better rate for the additional costs.  It sounds like there is more to the story.
  • December 21 2011
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We sat down to sign papers and our broker was going back and forth with the title company rep about PMI and closing costs. I guess the broker had not actually ran the numbers for the new loan and the 4.25 rate that they locked us into was not costing us money, but instead came with a $2500 lender credit. He is telling me this as they put the paper in front of us to sign. Then he says that because we are getting a credit turns out we can't use $2000 dollars of the sellers concessions and it is going to go back to them. I said that I was under the impression that not only were we using it all but any small amount left would go back on our principle. He said no your purchase price stays the same and they just get the money back. I asked if we could rewrite it to lower purchase price and contribution, and he said we could but it would take weeks to get docs again and he was not sure if sellers would sign another extension. So we signed not wanting to lose the property. Afterwards we went to get check and another copy of bank statement to show appraisal. We stopped by the brokers office, and that is where I made a mistake. He had us sign a "Truth in Lending" agreement that showed three loans. He said he just needed it for the file and that he would date it for us. I realized after going over the paperwork that the form should have been done before, and would have broke down our loan for us showing the credit.
  • December 21 2011
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I asked the broker afterwards and he blamed everyone else, but in the end said it was his job to check over. He said they have been so busy doing refinances that we just slipped thru the cracks. I asked what he could do about it and he said nothing. Legally he said he or his company can't compensate us for the money we are out. Laws prohibit transactions outside of escrow. I put it to him like this "so basically my wife and I get screwed out of $2000 because you were busy and did not have time to actually look at our loan" his response "I made a mistake like this before on a more expensive property that cost the buyer over $20,000 so it could be worse". What the heck $2000 is still a lot to me, but they just right me off like its nothing.

Is this normal? Has anyone else had a similar experience? What can I do? Is there legal action I can take? Thank you for your help and opinions.

  • December 21 2011
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Now that I see (probably most of) the other info I'm more confused.  It really sounds like a lender that is not too sharp.  I'd try to spaek with his manager.
  • December 21 2011
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Yes Bob that is what happened. My wife and I had been under the impression that all of our sellers contributions were being used. Untill we sat down to sign and broker told us different.

He acknowledges that someone at the company (likely processor) had that information when they locked us, but no one ever looked it over until the day before we signed. I can't see a reason for this considering this loan has taken 3 months and we have been locked for over a month.
  • December 21 2011
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My R.E. agent from Remax could not be at signing, but when he found out he was very upset. He said it would have been easy to change in one of the many extensions we had to do. He has been talking with the broker and said he would support me in whatever I choose to do.

  • December 21 2011
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At most companies you can re-lock on a different rate if you are already locked, but you will be subject to that day's pricing.  You will probably have issues with new disclosures, etc. that may delay your closing.  Again, I'd talk to a manager.

  • December 21 2011
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Hello Sorter,

I am sorry that this happened you. Can you please reach out to me offline.

I would like to know information about your scenario. 

Thanks,
Candace
Zillow Mortgage Support
  • December 21 2011
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Now that I know that your deal closed what I said before really doesn't apply.  What you missed out on was the maybe .125% better rate that the seller agreed to pay for.  It sounds like they messed-up pretty bad, but I don't know what you can do at this point.  My guess is it will be up to a Real Estate attorney to advise you as to you chance of success. Sorry about your experience; you should have been taken care of better.
  • December 21 2011
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That's a twelve thousand word nightmare. I would complain to the Lender/Broker's regulating body loudly, and repeatedly. They are going to have to defend their actions. They should have to write you a check for $2K, or every dime of profit they made from your loan. Mention the TIL trick for sure!


Did any of your correspondences occur in writing? The "I made a mistake", or the "this is why it's taking so long" part, maybe? Always refuse to talk to LO's on the phone, unless you're taping it, for "quality assurance reasons".
  • December 21 2011
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"  I said that I was under the impression that not only were we using it all but any small amount left would go back on our principle. He said no your purchase price stays the same and they just get the money back. "

The purchase price would stay the same, but most lenders allow a principal curtailment which would be a payment of the $2000 to the new principal balance at closing. 

Did you find this person on Zillow? 
  • December 21 2011
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Thank you for your help and advice.

Candace -- Thank you

Bob -- I thought about getting an attorney, but it is $2000 which I worry legal fees could go over. I do wonder if I could take this to small claims court.

Hamp -- Yes a lot of it did occur via email and I am sorting them out now. After 3 months of this they started to stack up.

"Chuck" -- When he originally broke down closing costs and seller contribution I am positive he told us that if any small amount was left over it could roll over to our principal. He was very clear that our 3.5% down for the FHA had to be completely separate and could in no way intermingle, but we were fine with that and had the down already set aside so there would be no issue. Unfortunately I do not have that in email since it was during a meeting in his office.

  • December 21 2011
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Some lenders will limit the amount of principle reduction they will allow at closing.  Your LO did not adjust the numbers when he locked your loan...he could of simply dropped your loan amount.  By the time he/she realized what had happened it was too late...requesting the lender to drop the loan at the closing table would have been like parting the red sea!  However it should have been addressed well before the closing table.
  • December 21 2011
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Sorter,

I had a similar situation last week at my closing. Seller ended up getting back $600 in concessions because my LO messed up and did not redo the GFE after I told him I would not be impounding taxes and insurance

We were supposed to get $4800 towards closing cost and I told the LO we didnt want to leave any of it on the table, and would buy down the rate if necessary.

So all along I thought things were fine, though frazzled and last minute...then they made me pay my homeowner's insurance out of pocket because I didn'timpound and would not let me use the seller's closing costs money towards it.  However, I was not aware of this until I was sitting at the closing table with the mobile notary. That was the first moment I saw the actual HUD.

The title company didn't even know the final figures until 20 minutes before the closing. The mobile notary didn't know anything about the docs and he was in a hurry to leave, so we ended up signing so as to not delay the closing. I tried calling my LO and he said he would call me right back, but he didn't, and 45 minutes passed. I tried him again and he didn't answer, and we ended up signing.

Your situation is worse, but I felt very bamboozled and can sympathize.
  • December 21 2011
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googlebird,even though you paid the insurance policy upfront it should have been listed on the HUD as POC, counted in the seller concession, and refunded from closing.

Sometimes a Lender or Broker with rock bottom rates/pricing also have loan officers with just enough experience to be dangerous so it can cost you more in the long run. Ask the loan officer what % of their business is purchase vs refinance, screw ups on refinances can usually get fixed before you go to closing because there are no deadlines other than the rate lock date ( maybe 1 or 2 other exceptions).  

Sorter, I am shocked your LO admitted he cost another client $20K, that is amazing!!!! Yes, your $2K is also a lot of money and I would pursue that with the mortgage company's management.
 
  • December 22 2011
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If the co management is unwilling to listen file a formal complaint with your state's licensing division. I'm quite sure that a check from the company to you will make the licensing people more thatn happy that the matter is settled.
  • December 22 2011
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Andrew -- Something that the broker told me and I am unsure of is that there is no way to know the closing costs before going in. He said that it is not an exact science and so there is no way to exactly calculate. That does not seem right to me. I would think that all the numbers and terms are there it just has to be calculated. I thought that was the point of having a broker was to run the numbers and explain it to us.

Clay -- The story he told me was about a jumbo FHA. I know he was trying to make me feel like $2000 was not a big deal, but all it did was make me feel like $2000 was not a big deal to him. That did not make me feel better about my loss.

Shapiroamg -- I filed a complaint with DFCS here in Oregon. I am not sure if there is a more specific organization closer to the city level or a more general one at the national level I should be contacting. Since DFCS is a .gov organization and had a place to register complaints about mortgage brokers I thought that would be the correct place.
  • December 22 2011
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As for licensing and broker regulating, every state is different. The key is to understand that complaints need to be addressed and the regulators like cases that are closed (it make them look like they are doing their jobs).  Hopefully they contact the lender and the lender realizes that a sum of $2k might get the case settled.
  • December 22 2011
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Sorter, Sorry the closing was so bungled.  I support your decision to file a complaint.  Unfortunately, there was such an easy fix if your LO had addressed this prior to ordering the loan docs.  I can agree that some figures for closing are a moving target (days of prepaid interest, for example) and it can be challenging to drill the exact numbers down until the HUD is created at the escrow office.  However, I am talking, plus/minus a couple hundred, at worse case...$2000 is pretty glaring.  

And, for the record, even after docs were drawn and the estimated HUD was created, the error could have been identified and an adjustment lowering your rate could be made (most lenders allow a policy to "move" the rate, up or down, based upon the rate sheet of the day of the original lock.  At that point, docs would have been re-ordered and the estimated HUD regenerated and a signing schedluled.  All of this could have been done in a few hours.

I am always amazed (disappointed) when I hear of a consumer being surprized at the closing table as you were.  However, because of all the years I worked in wholesale, I have seen many, many LO's drop the ball (some accidentially, and some quite deliberately because the surplus...prior to current finance rules....would go to the LO).  To be clear, the 2K did not go to the LO (he/she can no longer receive it); it simply went back to the seller.

I have a standard of practice that requires the HUD forwarded to me PRIOR to setting a signing appointment and I review it, line by line, with my client.  That way, signing loan documents is just that:  Signing....no stress, no worry.  My last closing, the net figures were $12 less on the HUD than my original GFE.  Missing 2K is pretty hard to do, frankly.

@Googlebird, Clay is 100% correct.  I recently closed a VA loan that the borrower paid their appraisal fee prior to close and should have been given a refund at closing because I was doing a IRRRL (paying all the costs with rebate pricing), but the funder and escrow sent the $400 to the appraiser! Of course, that meant he was paid twice.  My borrower called me well after the closing to tell me their charge was not reversed on their credit card and I contacted my closing department to remedy the situation.  It took about a week, but my clients have their $400 removed from the credit card.  My point of telling you this story, is that you do have an option of recourse to get the insurance funds from your lender.  Their error, they should pay for it...IMHO.  Again, your situation could have been remedied at the table if your LO was not MIA!!  Where are these people when closings are happening?????
  • December 22 2011
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Good post Deborah.  I would add that the one thig the lender CANNOT do is give you money!  This would reduce the amont you were required to put down, and that's a big no-no.  Like Deborah said
  • December 22 2011
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Thank you Clay and Deborah for your expert advice! I know my LO does purchases very frequently, at least that is what he told me! He works directly for the lender though, I don't know if that clouds his judgement or motivation to do a great job. 

Thanks so much for helping me see that I am not crazy and might have some recourse! I probably won't pursue it, because I love our new house and we still got a deal.  But in the future, I will definitely use Zillow to seek out real professionals for my lending and real estate purchase needs.
  • December 22 2011
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As Deborah pointed out...it's not an exact science...but $2,000 ain't even close enough for Government work!   $12 low is pretty exact in my eyes...I usually tell folks it sould be within $100 give or take.  I like to under promise and over deliver.  If you are expecting a range of $100 and it's $20...your pretty happy!

Trust but verify! 

The LO told you he did a lot of purchase transactions!

He told you a few other things that were not exactly true.  Folks spend way too much time searching out the best rates and fees.  Folks need to spend more time shopping for a loan officer and less time shoping for a loan.  Find a great loan officer and you will get a good deal.

Just my .02
  • December 23 2011
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Your LO definitely dropped the ball.  

Once he locked in your rate and the credit he should have known that he was going to have excess seller concessions.   $2000 would be considered excessive by FHA standards and you can't use them to reduce the principle balance of your loan because it is considered an inducement to purchase.  

However, he should have had plenty of time to use it to pay the UFMIP which is allowable but just needs Underwriter approval.  Naturally, if the loan amount is higher than $200k then doing this will require cost cutting elsewhere but if properly explained, can be justified.
  • December 23 2011
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Thank you everyone for your help and advice. I have been trying to resolve the problem with Alpine. I tried to contact the office manager and was told she was on vacation, but that the person covering her responsibilities would get back to me. I shortly received a call from someone who said he was a sales manger. He listened to my story and said he would quietly look into it and get back to me. When we spoke he said he would work up a breakdown of what happened and exactly where and how the credits and contribution were used. He inferred he would work on it and have it to me in a couple days. He also let on that I was out more than the $2000 my broker had told me we were losing to the seller. He mentioned that we did not use the entire credit from the lender. He did not give me exact numbers, but kept saying it was $2500 we were out.  It has been more than a week and I still have not seen or heard anything from Alpine. Today I sent out an email to the office manager, other senior brokers in the office and the regional managers (not the easiest emails to find). I hope to hear something soon, but I get the feeling they are blowing me off and hoping I just get tired and go away.

  • January 04 2012
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at this point I would suggest documenting who you spoke/speak to, tim/date of the coonversation, and the suject matter.
Its now past the new year and most companies should have all staff back in. When you call back try to get to the same person you last spoke with. If you get voicemail, tell them your next call will be to whatever state agency or division oversees their business. make sure you know the exact department. In mass its the Division of Banks.
  • January 04 2012
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$2000 would be considered excessive by FHA standards and you can't use them to reduce the principle balance of your loan because it is considered an inducement to purchase.   
===========================
that's incorrect, you can use it to increase the down payment/reduce the loan amount.
  • January 04 2012
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