We closed a refi borrower weeks ago and his lender at that time issued a pay-off that was verified verbally by the title co. Now the lender has (several weeks later) sent a new pay-off to the title co showing the amount needed to payoff the loan increasing by $400.00 dollars and if it’s not received immediately they are threatening to return the money they accepted initially and begin foreclosure proceedings against the borrower. It appears that they missed something and now they want more money. The title co is telling the borrower to pay it. Can someone please tell me what is to stop a lender from issuing a pay-off and the coming back much later asking for more money. The title co is saying the title insurance doesn’t cover that problem. Not sure how it doesn’t, it’s certainly not their (the title co) fault that the lender either issued an incorrect pay-off or then acknowledged it verbally or just plain out “wants more money”. But assuming that everything that the borrower knows about his loan comes from the lender, I don’t see how he (the borrower) should be responsible for that mistake. Any answers will be greatly appreciated.
Just pay it. There is no other way out short of declining the loan and starting all over. NEVER EVER accept anything verbally when doing a financial transaction. If you had a payoff in writing, the lender would have been obligated to what was written. But it is, a verbal commitment is no contract.
Maybe I was un-clear in expaling the situation. The pay-off was in writing, and the title company when the extra step and checked those figures verbally. Ten days later, after they (the lender) had received the money from the title company, they (the paid-off lender) sent over a new pay off statement that has increased the amount need to pay off the loan by $400.00 dollars. If that is to be allowed a lender can increase the pay-off at anytime (even a year later) if they decide for any reason that the want more money. Or if they feel like they made a mistake whether or not they have issued a pay-off previously; and i don’t believe that’s right. We know that it takes them a while to process a proper release (I have send it take up to a year) and then it still must be recorded. So can they just come back and ask for more money anytime the feel?
You don’t have a pay another dime. You are only obligated for what you signed for. If an additional money is needed after the fact, who ever made the error is responsible for that amount, not you. Hold your ground and the lender will give in. If they try to threaten you or in any way sabotage the loan, tell them that you will inform the Attorney General Office and contact the State Commission on Banking Regulations. When you play hardball, they will cave in.
Your situation raises some important questions.
First off, your title co. should have provided you with a HUD settlement statement showing the breakdown of the payoffs and closing costs. The HUD is the final statement showing all the fees and the payoffs. With a refinance, as in this scenario, if the lender missed something, they have the right to have the title company retype any necessary changes on a new HUD and have it resigned. This may/might occur during the recission period. That loan may not fund if the lender is in opposition of accepting the final HUD. Furthermore, your loan officer should be responsible for the oversight of the final preparation of the agreed payoffs and closing costs. He/She is in full control of negotiating any fees.
Now to my questions:
I am assuming you are a loan officer.
(1) Was you original payoff order expired? Have you looked at the paperwork to see if the date may have expired right before closing? Why didn’t you verify the payoff yourself?
(2) Are you relying on a processor to do all of your work? Processors are usually bombarded by every loan officer in the office. I strongly suggest you take the responsibility and step up to the plate as I can clearly sense the ball was dropped due to a loan officer’s inability to oversee the whole transaction. A processor is there to help, assist, and yes process. However, it is the loan officer’s signature that seals the deal and concretes the final approval for the fees to be sent by the lender to the title company…
(3) Why are you relying on verbal payoff verification to close a mortgage transaction? Are you not aware of “per diem” costs? You need mortgage training.
In conclusion,
You need to double check your closing papers and processing papers to find the origination of the error. Obviously, someone doesn’t have the right payoff.
Do not look to blame. This will not solve anything.
The loan officer needs to apologize to the home owner, own up to his/her mistake and pay the $400 out of his/her own pocket.
I would not tolerate such pathetic mistakes. You are a disgrace to our industry and a walking lawsuit.
Thank you, lendinghand for responding. You raised some points, valid or not that I will take the time to address and clearify.
First off the title company did provide a HUD 1 settlement statement showing the breakdown of the payoffs and closing costs.
Anyone doing this for longer than a week knows what the settlement statement does; and yes the lender and the title company do usually reserve the right to ask the borrower to come back and correct or re-sign in the case of errors or ommisions. But not ask for more money!
But I’m going to take a leap of faith here and assume (yes i know what they say about the word assume) that you’ve been doing this for longer than a week…
We’re not speaking about the lender here, we’re speaking of the company being paid off. So if the pay-off does not have a disclaimer (which it didn’t) that wouldn’t apply.
Technically it shouldn’t apply anyway. It is the invoicers responsiblity to get their invoice correct, not the invoicee; and ceratinly not after the bill has been paid.
A person of at least average intelligence would have to equate this to contracting to have your car repaired and after you write them (the repair company) the check, they turn around and send you a new invoice with a bill that was revised higher. That is the problem here… plain and simple.
Our product (being money) has two “reciepts”. The first being the settlement statment or HUD 1 that you recieve when you accept delivery of the product; and the second being the mortgage discharge, that you would recieve after you return the product.
But unfortunately our industy is one of the few where you don’t get your final reciept until months after you’ve returned the product and paid the bill for its use. Well I imagine (see I’m trying to stop assuming so much) anyone being in the business for longer than a week has heard of a discharge that was never recorded. I’ve seen it take as long as six years… This is a problem!!!
If you read the posting completely, you would have noticed that it stated that after they (the company being paid off) recieved the check, they turned around and issued another pay-off. Assuming (yes I know but it’s hard) that you’ve been doing this for longer than a week, that would imply that the recission period had expired (which it did) before the title company issued the check (don’t know what state you’re in but in Michigan and Florida where I do business, that’s how it’s done).
So obviously the new lender did accept the final HUD. But this has nothing to do with the new lender. So how could the loan officer be responsible, there was no oversight. There was no negotiating of any fees because the pay-off was accepted as provided from the lender to be paid off.
To answer you questions directly:
No I was not the loan officer on that deal, it was one of my employees.
The original payoff was not expired. It still has not expired (not until the end of this month). Therefore the loan officer in question had no need to verify the pay-off. My organization only hires experienced loan officers (so I would not ever verify the payoff myself).
The title company only does (verbals) it to insure that they have the correct pay-off since most will allow the loan officer or other parties to the transaction to order them. As some lenders do not fax and actually still mail them to their account holders. And (yes I know better than to start a sentence with and) mistakes occur with property addresses and people having more than one account with a lender.
But once again I’m assuming that you know that title policies do not insure property addresses, only legal descriptions. No pay-off that I’ve ever seen has had the legal description on it, what about you (have you seen one that contained it) in your vast opinionated experience?
We do rely on the processor to do a lot of the work. Does your physician not rely on your nurse? If you went to a doctor and he was checking people in, checking their weight, on hold calling in their scripts, setting their next appointments, co-ordinating the referrals, filing charts, stacking the mags in the lobby, billing your insurance, taking your cash, collection bad checks, taking out the trash, taking urine and stool samples, etc… well I’m sure you get the picture. Would you not look for a different physician? Instead of an opinionate hack that wants to show the world that he can do it all himself! I know that I would!
A person of average intelligence but a little less opinionated would assume (yes I know I know) the same thing, that’s why we hire them (the processors); to do the work they do, interesting premise isn’t it…
So obviously the ball was not dropped by the loan officer, or the title company, the old lender wants more money… for whatever reason… mistake or otherwise on their part.
If you closed a refinance or purchase and after the title company forwarded you your check, you looked and it and said “gee I worked too hard on that deal for such a small amount of money”. “Let me send over a new fee sheet and ask for more money”. How would everyone else view you… that’s what’s happening here.
The loan officer does not sign off on the pay-off to “seal the deal” as you put it… he just “concretes” the final approval of the lender’s fee sheet; prior to the lender forwarding their escrow instructions to the title company.
I’ve done this once or twice myself believe it or not (I obtained my mortgage brokers license in 1992 in Florida where you actually have to obtain credit hours and be tested) but a funny thing though, I don’t ever remember seeing a fee sheet that says to “valid the pay-off” on a refinance!
The loan officer did not rely on a verbal payoff verification to close the mortgage transaction; and the pay-off did have the “per diem” amount on it.
Even thought I became a realtor in 1983 and a mortgage broker in 1992, I get the chance to take advantage of more training opportunities than anyone you know, I’m actually think of putting on one myself (titled “how not to be so opinionated”) you should sign up.
In conclusion, we are not looking to blame anyone. And yes the loan officer did apologize to the home owner… for circumstances that are obviously outside of her control (the homeowner has seen both pay-offs as well).
But whether or not she (the loan officer) chooses to pay the $400.00 bucks out of her pocket, well that’s up to her. My suggestion to her was to stand up for what’s right and inform the homeowner that if given the opportunity to do that (take a stand on behalf of homeowners and mortgage professionals everywhere) if need be, she would bear the additional cost.
I understand not being willing to “tolerate mistakes” (you wouldn’t happen to be german and born in or around about 1925 would you). And you may actually be correct about me being a disgrace to our industry.
But if I am a disgrace to “our industy” it’s because I can tolerate people like you and you “ilk” for commenting with such a short sighted view of people and still sleep well at night for asking people their experiences and standing up for what is right in “our industry”.
Thanks again for the comments.
Yours truly,
The walking lawsuit.
I agree with you I have never seen this happen before in all my years which is 11 years.
Yes I agree with you lendinghand can be a pain at times 
I noticed that you have been a LO fo over 13 years I am sure this is the first time this has happened to you in all your years.
This is a hard one. It is only $400 dollars why is the bank being such a butt. It would cost them more to foreclose on the poor borrower with attoney fees an all .
What are they thinking…they are being real anal about this.
Banks take short sales all the time I know that this is just a refi and not a short sale and I am just making a point $400 whaaat?
I am wondering if it is just a little guy making the threat and not the bank nor its policy makers just an idea?