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Bank decided which loans would be paid off during refinancing

Bank picked which loans would be paid off as part of refinancing

Q: The law firm of Waller, Mitchell & Barnett handled the closing for the refinancing of my mortgage. The purpose of refinancing my home included receiving monies to discharge several high interest rate loans. I was in no particular rush to close, but the underwriter set a closing date of Oct. 10, 2008, to which I agreed after informing them I was leaving on a business trip that day.

I arrived at the law offices at an early hour and was asked to sign a plethora of papers. The paperwork for my refinance was incomplete, but I was assured I was to receive approximately $7,000.

When I returned to the law offices, six days after the closing, I was presented with three checks needing my endorsement; two checks paying off two of my lower interest rate loans and one made payable to me in the amount of $638.88.

Why were they satisfying two of my low interest rate loans? I wanted to satisfy the two loans with higher interest rates. Why did I sign blank closing forms while being assured I would receive $7,000, and then come to receive only $638.88? Is this not illegal?

This septuagenarian college student is seeking to set things right.

Otok Ben-Hvar

A: On both ends this has been a lengthy and frustrating situation, with a volley of correspondence exchanged prior to Action's involvement.

Roland Waller, partner at the law firm Waller, Mitchell & Barnett, said the Oct. 10 closing date was set to accommodate you, because if the closing paperwork was not signed before you left on business your rate lock would have expired.

A rate lock guarantees a set interest rate for a certain number of days after initiating a loan. Waller also noted that you were informed that your loan had not been approved by the bank at this time, and that the $7,000 allotted to you was likely to change depending on the bank's final requirements. This is where your recollections differ from those of Waller and his staff.

"My paralegal has indicated to me that she made it abundantly clear that the closing statement was not finalized," Waller said. Although the documents were altered to specify the payoff of certain loans, there was no illegal action.

You received a conditions addendum in September, which required you to pay off these lower interest rate loans prior to receiving the refinancing. Waller said when the bank looked over the final paperwork it required these loans to be paid off with the monies disbursed.

Understandably, you wanted to rid yourself of higher interest loans, but there was logic behind the decision to pay off the others. As Waller points out: "You can't qualify for the loan if your monthly outflow isn't lowered so that you can afford to pay all of your bills along with this refinance."

If you run the numbers, Waller theorized, it probably had more to do with your monthly payments and less with the interest rates of the individual loans.

Regardless, those were the loans the bank required to be paid prior to closing. The bank said the payoffs could not be changed.

"Do I think there is a particular solution to this? No, I think that he appears to have taken this on a crusade," said Waller, but he's happy to continue corresponding with you.

Clarification

Rebates for installing low-flow toilets in Citrus County are available only to those who receive water bills from the county utilities office. The March 4 column was unclear on this point.

Bank decided which loans would be paid off during refinancing 03/07/09 [Last modified: Tuesday, March 31, 2009 11:46am]

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