Loan payment due? Seller bought and flipped home quickly, confusing lenders about whether a loan payment was due.
Q: I purchased a home on June 30th. I was made aware in loan documents and by the closing agent that my loan would be sold to another lender. Also, I received a letter in the mail from my first lender. That letter notified me that future loan payments would need to go to the new lender. The effective date of the transfer was August 1st.
I ended up having to flip the house quickly. I was able to close on the sale on the 11th of August. The closing agent sent loan payoff to the second lender. I received a notice from the new lender that the loan was paid off in full.
However, the first lender still has our account open online. So, I called the first lender. They told me I still owe the first month’s mortgage payment which includes the escrow amount. Must I really pay the first lender? Is a loan payment due?
When are loan payments due?
A: Well, here’s something new – and interesting. In all the years that we’ve been writing this column, we’ve never been asked this question.
The good news is it shouldn’t be too hard to determine whether you owe the first lender any money. When you closed on your home on June 30th, your first lender should have collected from you one day of interest. The payment of that one day of interest would have made you even with the lender through the end of June.
Loan payments are due by the 1st of the month
The payment sent to the second lender on August 1st should have included interest for all of July. When you paid off the loan and closed in August, the payoff letter from the second lender should have picked up any interest that you had not paid on your loan.
It’s interesting that you received a notice from the first lender reminding you to pay your August 1st payment to the second lender. This leads us to believe that the second lender would have collected all interest due for the month of July and the number of days in August through the day you paid off the loan.
Did the lender collect interest in advance of the loan due date?
Here’s what we don’t know: Did your second lender collect interest on the loan from July 1st through and including the payoff day in August? If the second lender collected that interest, we’re not sure why the first lender would be owed any money. However, if the second lender only collected interest on the loan from August 1st through August 11th, we can see why the first lender might claim to be owed money.
Get a copy of your payoff letter and see what it says about the interest collected on the loan. There should be a line item on the payoff statement noting the number of days that interest was due and needed to be paid on the loan. Once you determine what was billed and what you paid, you’ll have a better idea of whether the first lender is owed any money.
When a property sells, lenders typically work out payment due dates between them
One nagging thought is why the first lender would be owed anything from you in any case. If the first lender gave you notice of the transfer of the loan and instructed you to make the payment to the second lender, we’d think that the second lender and the first lender would work it out. Except if the second lender made a mistake and didn’t bill you the right amount for the interest.
On the issue of your escrow payments to the lender, it seems to us that you shouldn’t have to make that payment to the old lender. The old lender should have collected money from you to fund your real estate tax escrow and your homeowner’s insurance escrow at the time of your closing.
The old lender should have transferred the funds they collected from you at closing to the new lender. The new lender would then need to return those funds to you. We assume that neither the old lender nor the new lender made any disbursements for real estate taxes or insurance in the short time you owned the home.
Work through loan payment details carefully with your original lender
Having said all that, it can be a pain to work through this on the phone. Whoever you’re talking to at the end of the toll-free number on your statement may be looking at an outdated computer system. It may be that you just need to wait for the second lender to settle up with the first lender. That can take as long as several months. Frustrating.
The second lender should issue a release of the mortgage loan to the settlement agent that closed your deal. It may also get mailed directly to the office that handles filings or recordings of real estate loans. That will show that your loan was paid off. Your credit history should then show the loan has been paid in full.
At this point, if you can confirm that all your required interest was paid to the lender, sit tight. You’re better off waiting a while for the dust to settle with the two lenders. Look online in a month or two to see if the account has closed out.
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©2023 by Ilyce Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency. REM A1600