Q: I was recently shopping for a home loan and decided to go with a mortgage broker my wife and I found on the Internet.
We went into the office and began the process of applying for the loan. We asked what the charge would be for a 45-day lock and were told it would be one point.
We signed the application and asked the broker for a copy of the good faith estimate, which we noticed was missing costs such as the lock fee, broker’s fee, and lender’s fee. The broker told us he had to first send the good faith estimate to the underwriter before he could give it to us, but he asked us for a check to pay for the appraisal.
Being uninformed, we gave him a check and left that night without a copy of the application or the good faith estimate. We thought we were getting a good deal.
Seventeen days later, we received a good faith estimate from the bank that the broker was planning on selling the loan to and were shocked by what we saw: The lock fee was 1.75 percent ($2,800), the broker fee was $400 and the lender fee was $395. This is not what was discussed that first night.
We immediately called the broker and asked for an explanation of these fees. He said to ignore the bank’s good faith estimate and told us we would be charged his fees. I asked him to fax over his good faith estimate, and when he did, I saw the fees were all the same and the loan amount had been increased by $7,000.
We took the estimate to other lenders and asked them to look over the paper and all agreed that the charges were extremely high, and that we were being taken advantage of.
We were then informed that we had the right to cancel with this lender within three days of receiving his good faith estimate if we felt we were being slighted or the numbers were wrong. We canceled the next day.
The broker is now calling our home and telling us we owe him all of his fees for his services because we canceled.
We have continued to attempt to educate ourselves and our rights, but would like to know what the law says about situations like this.
A: In my mind, you don’t owe this guy a penny. In fact, I think he should give you back the amount you paid for the appraisal that never occurred.
You are fortunate you went to other lenders to double-check the numbers you had been given. If it wasn’t for that, you would have ended up in much worse shape than you are.
Write a letter to the mortgage broker who tried to rip you off informing him that you know he has violated many of the laws under the Real Estate Settlement Procedures Act (RESPA). Demand the return of your appraisal fee that was paid the first day, and that he stop calling you immediately or you will report him for harassment.
You should mail a copy of the letter (return receipt requested) to the mortgage broker and copy the Attorney General’s office as well as the office or agency in your state that regulates mortgage lenders. Ask the regulators to open an inquiry into this mortgage lender’s bad behavior.
As a favor to other unsuspecting borrowers, you should also file a complaint with the Better Business Bureau (bbbonline.org). That way, anyone looking for a lender and doing their due diligence online will see that you had trouble with this company.
While I think the mortgage lender should return your appraisal fee, even if you don’t get it back, you’ve escaped the clutches of what appears to be a predatory lender who was trying to take advantage of you.
Next time, do your shopping around ahead of time. And, don’t give a lender any cash until you have your good faith estimate in hand.
To find out more about RESPA, go the Department of Housing and Urban Development’s website (HUD.gov) and read about your rights as a home buyer and borrower.