Refinancing? Bank on Unexpected Costs
A couple of words of caution to anyone about to refinance their home: Borrower beware.
Call us naive, but my husband, Marty, and I found out the hard way that there’s a big difference between a bank’s “loan fees” and the actual cost of refinancing. Unfortunately, we didn’t discover just how far off we were until an hour before we were to sign on the dotted line. That’s when we got a phone call saying “I just want to tell you to bring money.”
Admittedly, I vented too much of my anger at the escrow officer (my apologies to you, Joni) who claimed she was only following the bank’s instructions. But we had been told that our fees would be built into our loan, and there was enough money to cover almost twice the amount we had been quoted. We actually believed we might walk away with a few extra dollars in our pocket. Silly us! Because when the final score was tallied, not only were we not getting any money back, but we needed an additional $4,560 to close escrow.
The bulk of the excess charges were real estate taxes they wanted us to pay in full, two months before the tax assessor’s deadline. “This happens anytime a loan funds after Feb. 1,” the loan officer explained. Never mind the fact that we applied for the loan in November and it was only because the bank dragged its feet getting it processed that we now had to come up with the money early. When we asked why we weren’t given any warning that this might happen, the loan officer replied, “We’re so busy around here we don’t even know it’s February.”
There was a full year’s premium of homeowner’s insurance that the bank wanted now, even though our policy didn’t expire for another 45 days, and then only half of the premium was due. Again, our loan officer never gave us the slightest indication that this would be necessary.
There were charges that were higher than those originally quoted (“Those were just estimates”). There were charges we had never been advised of (“That’s a different department”). There were charges we had already paid (“We forgot to subtract your application fee”). And there were charges from the escrow company and from the two banks we were attempting to pay off with the new loan (“We’re only obligated to tell you ‘our’ costs”).
There were ridiculous charges like $45 for Federal Express and $16 for a messenger. Considering the loan took nearly three months to complete, wouldn’t a 29-cent postage stamp have sufficed?
When we told the bank we were in a state of shock and that we needed time to raise the money, they were less than sympathetic. Unless we came up with the money within five days, they said, every document was null and void and we’d have to start over again from Square One.
So there we were, stuck between a loan officer and an empty bank account. Because the appraisal of our home came in so low, there was no room to build any more fees into the loan. We considered standing on a street corner with a sign that read “Will Work for Loan Fees.” But then a kind relative took pity on us and offered to lend us the money until we could get a personal loan from yet another bank to pay them back.
We signed the escrow papers, paid the additional charges, and looked forward to putting the whole unpleasant experience behind us. But the fat lady hadn’t sung yet. Two days later Marty received a phone call from the bank’s loan center.
It seemed that some of the documents had been typed incorrectly. They would fax us corrected documents, which we would have to sign and return to them by 1 p.m. the next day. And, they informed us, we would have to foot the $42.50 fee for the messenger. When Marty asked why we were being made to pay for their mistake he was told, “If you don’t like it, feel free to withdraw your application.”
Marty brought home the papers and we diligently compared them to the originals we had received at the escrow office. To our surprise they were identical. When we called the bank early the next morning, frantic that we might miss our 1 p.m. deadline, we were told nonchalantly, “Oh, we must have sent you the wrong documents.”
A new set of documents was faxed to us along with a nice cover letter that apologized for any “inconvenience” we may have been caused. What it neglected to mention, however, was that due to the delay, our loan, which had been scheduled to fund on Wednesday, Feb. 12, wouldn’t fund until Thursday the 13th. And it wouldn’t record until Friday the 14th, too late in the day to messenger the payoffs to our creditors. Just our luck, the following Monday was a bank holiday. Therefore, while we started paying on our new loan on Feb. 13, we had to continue making payments on our two old loans until Feb. 18. Total additional cost to us in interest and late fees: $399.02.
Our loan officer took a full week to answer our cries of protest, and then only to tell us to “put it in writing.” Now we don’t intend to give up without a fight, but we have no illusions that we’ll ever be compensated for the ineptness of the people with whom we placed our trust.
The bank lured us with the promise of low fees, and then proceeded to snare us in a tangled web of deception in which information was withheld and costly mistakes were made. They knew that once they had us caught up in their labyrinth of paper work, we would rather beg, borrow or steal than go all the way back to the starting gate.
I assume the bank was acting within the limits of the law. As our loan officer said, they told us only what their legal obligation required of them. But it’s their moral obligation that I take exception to. I would have hoped that somewhere, tucked between the myriad fees and costs and facts and figures on our loan documents, was a line that read, “Common Decency . . . No Extra Charge.”
Postscript: A few days after we put our grievances in writing and sent carbon copies to the bank’s vice president and CEO, the bank offered to meet us halfway on our reimbursement demand of $442.12. After two more weeks or negotiations, offers and counteroffers, we agreed to a settlement of $321.19. Shortly thereafter we received a check and a letter assuring us that our experience was “not characteristic” of the bank’s operations. It’s not an assurance we’ll be banking on.
