Q: I was going to refinance my loan on my house. The day I was going to go to the office to sign the closing papers, I asked again what the loan amount and monthly payment were going to be. Well, it had changed and was higher than what I was told originally. So, I canceled the refinance.
My appraisal fee was going to be free, but now they’re saying I have to pay it since the loan was not closed. But the only reason I did not close was because the figures changed. Do I have to pay it?
A: You may have to. Often, when you sign an application to do a loan, you agree (in the fine print) to pay any out-of-pocket costs associated with underwriting the loan if you don’t wind up closing.
Typically, an out-of-pocket appraisal fee would fall under the category of “out-of-pocket costs,” as might the cost of pulling your credit history and credit score. Please go back and look at your application to see what it says about out-of-pocket costs.
However, I’m troubled by the fact that your numbers were different at the closing table than what you had been promised. Do you have the Truth In Lending statement that the lender should have given you when you applied for the loan or within a couple of days from that date? Did you lock in your interest rate when you applied for the loan or sometime after you applied for the loan?
Did your monthly payment change or did the closing fees change? If your closing fees changed, do you know why those fees changed? If your monthly payment changed, do you know why the payment changed?
If you have answers to these questions, you are better able to determine whether you should or should not pay for the lender expenses.
If you failed to lock in the interest rate for your loan and interest rates went up, your lender would not have done anything wrong, you would have been entitled to not close, but might be responsible for the lender’s out of pocket expenses.
But if you locked in your interest rate, did everything you were supposed to do, and the lender changed the loan amount, changed the interest rate or added fees, you might not have to pay those fees and in addition may have a claim against the lender for violating the terms of your loan and the terms given to you under the Good Faith Estimate of fees.
If nothing changed on your end and you did what you were supposed to do, and the lender increased your interest rate without disclosing it to you well in advance of your closing, your lender might have been trying to pull a classic bait-and-switch on you. This occurs when you apply for a loan at an advertised rate only to find out at the closing that the lender offers you a higher rate to close.
If you know for certain that the lender has not been honest with you, you can file a complaint with the Better Business Bureau (BBBonline.org) or with the agency that regulates mortgage lenders in your state. Depending if the lender is a mortgage broker or mortgage banker, there are national organizations with which you can file other complaints. They are the Mortgage Bankers Association of America (mortgagebankers.org) and the National Association of Mortgage Brokers (namb.org).
But if the loan or the interest rate changed because your credit changed at the last minute, or because you hadn’t locked in your loan, or you failed to close before the rate lock expired, then you may have to pony up for these out-of-pocket costs and fees.
If you aren’t sure of what your application says, a real estate attorney may be able to help you parse the legalese.