I refinanced my mortgage recently and found out only after I had sent
a check to the escrow company and after the mortgage had been financed
that there would be an additional chage for a prepayment penalty on my
old mortgage.  Of course I should have known that there was a
prepayment penalty on my mortgage, it was in one of the many dozens of
pages of documentation I have.  It seems to me however that someone
screwed up in not telling me until after it was too late for me to
back out (after my right to cancel had expired) that there was a
prepayment penalty on my original mortgage.
My guess is that the escrow company can slime out of any legal
problems because they called the fees 'estimated' fees.  Do I have any
legal recourse to sue the escrow company or my new lender/broker for
failure to notify me of the full financial terms of this deal?

---

Request for Question Clarification by expertlaw-ga on 30 Aug 2002 17:21 PDT

To assist any researcher who attempts to provide you with legal
information about the situation you describe, please incidate the
jurisdiction involved. Laws governing this type of situation can vary
significantly between nations, states or provinces.

---

Clarification of Question by samorodi-ga on 30 Aug 2002 18:22 PDT

The property in question is in the US, in Santa Clara County
California to be specific.  The escrow company is also in California. 
The original mortgage company (First Nationwide Mortgage) is based in
Maryland (payment addresses are there as are contact addresses on
their web site) though it appears to be a division of a CalFed.

---

Request for Question Clarification by alienintelligence-ga on 30 Aug 2002 20:24 PDT

Hi samorodi...

After discussing this matter with someone
we came up with a few questions of our own
for you.

How did you find out about the additional charge?

Who informed you?

How soon after your ability to back out did they inform you?

Did you specifically ask why you were not informed prior?

When was the penalty due?

Can the penalty be added onto the end of your payments?

This penalty goes to the original mortgage company (First Nationwide
Mortgage) correct?

In which paperwork was the penalty mentioned? The original? The new
paperwork? Both?



-AI


In a link I found... the person replying to a question about
reading contracts, makes this statement:

[ http://lawlibrary.ucdavis.edu/LAWLIB/june00/0342.html ]

"When I studied the Law Of Contracts we were taught that one is likely
to do
particularly well at understanding a contract if one starts reading it
from
the beginning and doesn't stop until one reaches the end. Our Lecturer
also
suggested that if one doesn't understand it fully the first time, one
must
repeat that process as many times as required until one does !!"

---

Clarification of Question by samorodi-ga on 30 Aug 2002 21:20 PDT

Here are answers to your questions:

> How did you find out about the additional charge?  
> Who informed you? 

The broker I was working with (who arranged my new mortgage) called me
to tell me that he had received a request for more money (there was a
more formal term for it) from the escrow company.
 
> How soon after your ability to back out did they inform you? 
I was informed at the end of the second business day after my right to
cancel expired.

> Did you specifically ask why you were not informed prior? 
I asked the broker and he seemed upset that the escrow company hadn't
informed him, but he couldn't explain why they hadn't.  He admitted
that he felt bad about the situation, but didn't admit that it was his
fault (nor do I really believe it is his fault -- though I feel he was
somewhat negigent for not mentioning what should be a routine cost
factor).

> When was the penalty due? 
I don't know, presumably it was due when the mortgage was funded.  
 
> Can the penalty be added onto the end of your payments? 
The penalty is from prepayment of my old loan, so it is owed to that
company.  They won't have anything to do with the new loan, so I dont'
see how I could ask them to wait for their money or for the new loan
company to loan company to pay them off.  It is worth asking about
though I suppose.
This penalty goes to the original mortgage company (First Nationwide
Mortgage) correct?
 
> In which paperwork was the penalty mentioned? The original? The new
paperwork? Both?

The penalty is in my original loan paperwork.  I will check again but
I didn't see it in the new paperwork when I read through it and I
really don't think I would have missed a charge like that since it was
more than three times the amount of the total refinance.  The notary
who went through the paperwork with me didn't mention it either.

Thanks.

---

Request for Question Clarification by alienintelligence-ga on 30 Aug 2002 22:17 PDT

**Long low whistle...***

More than THREE times the total refinance??

WOWIE... 

My original answer to this was going to be
somewhere around the lines of... a contract
is drawn up so there are absolutely NO points
of contention about an agreement. All involved
parties sign to show their acknowledgement
of the contract and to verify they have read
the contents of the contract in its entirety
and understand it fully. Which basically leaves
the burden of liability on you.

$^%^#^$^%^#^$^%^#^$^%^#^$^%^#^$^%^#^$^%^#^$

WHY, A CONTRACT? OR, A VERBAL CONTRACT ISN T WORTH THE PAPER IT S PRINTED ON!
(With an acknowledgement to the Marx Brothers and "Why, A Duck")
Richard J. Greenstone
Attorney at Law
[ http://www.rjg.com/rjg/byte2.html ]
Sixth, a written contract has the beneficial effect
of forcing the parties to contemplate the deal
somewhat longer than it took to say yes. A well
thought-out writing flushes out understandings
among the parties which they may interpret quite
differently. An attorney cannot write a good
contract over night, thus the extra time imposed
has the effect of restraining the parties from rash
agreements and providing a written framework for
careful consideration and review.

Finally, having an appropriate written contract
hopefully means that the attorney drafting it has
done his/her research and knows the applicable law
thus eliminating unforeseen problems which may
arise: for example, the inclusion of what some
persons term legalese but which serve to protect
the parties, e.g., liability apportionment through
indemnifications. It also has the effect of
informing the parties of government statutes and
regulations; full compliance forestalls surprise.

$^%^#^$^%^#^$^%^#^$^%^#^$^%^#^$^%^#^$^%^#^$

But at this point I don't think you need a legal overview.
So I have shifted my strategy to finding out about contract
disclosure, etc. What is required to be disclosed in what kind
of situation.

Sure they don't have to go over every part of
the contract... but it seems a rather heartless
person would allow a point such as a steep penalty
like that to go by, without at least saying... 
"Um, hey... you read this line here? You might
want to"

And they can't say they didn't know about it...
they found you to ask for it. 


If another researcher has a good dead ringer
answer for this that doesn't need additional
research (expertlaw? etc?) give me a shout at
the forum, or email me and I'll turn it over. 

-AI

x-o-x-o-x-o-x-o-x-o-x-o-x-o-x-o-x-o-x-o-x


" > In which paperwork was the penalty mentioned? The original? The new 
paperwork? Both? 
 
The penalty is in my original loan paperwork.  I will check again but
I didn't see it in the new paperwork when I read through it and I
really don't think I would have missed a charge like that since it was
more than three times the amount of the total refinance.  The notary
who went through the paperwork with me didn't mention it either."

The US government in recent years has taken some steps to sharply
limit "predatory" loan practices by financial institutions. For an
excellent update on the subject, see Denise Nelesen's February 9, 2002
column in the Elder Care section of the San Diego Union-Tribune's
website:
   http://eldercare.uniontrib.com/news/denise/denise-predatory.cfm
This article includes phone numbers to which to direct complaints
about predatory lending practices in the state of California.

Unfortunately, your original loan probably pre-dates the current
anti-predation laws, which may make it difficult for you to obtain
relief from your current situation. However, I recommend you contact
the US Department of Housing and Urban Development (
http://www.hud.gov/offices/hsg/pred/predlend.cfm ) to see if they can
help you find assistance for your problem.

In addition, state or federal legislators will sometimes take on the
case of someone who has been victimized. To find out who your State
Legislators are, enter your home zip code at:
    http://www.leginfo.ca.gov/cgi-bin/memberinfo

I strongly encourage you to contact your legislators by phone and/or
by detailing your situation in a letter which you send via US Mail
(the legislators' offices receive hundreds of e-mails a day, many of
which are spam).

Sorry, my mouse finger is having a problem clicking prematurely tonight!

Your US Senators are:
  Barbara Boxer      http://boxer.senate.gov
  Dianne Feinstein   http://feinstein.senate.gov

You will need to determine your US Representative by your location at:
  http://clerk.house.gov/members/index.php?state=CALIFORNIA

No one should have to take being victimized in this way.
I hope this helps you to get speedy assistance. Good Luck!

Dear samorodi,

One of the sad things about loan contracts is that, even when you do
read them, and read the disclosure statement required by California
law, the paperwork still ends up not meaning what you thought. Or were
led to believe.

Regardless, let me tell you who isn't responsible.

1) Your broker is responsible for the new loan. He doesn't know
anything about your old loan.

2) Escrow is not really responsible. All they are is a clearing house
to gather forms and checks and distribute them to the right parties.
(Escrow is only responsible if they got the demand and held on to the
paperwork for days without telling you. And yes, they are likely to
have done that. So, do look into it.)

3) Your orignal lender.  It's that loan document. Read that puppy
through carefully. If you don't find a clearly spelled out prepayment
penalty in that document, then they weren't entitled to add one just
because they felt like it.
California requires that all aspects of real estate contracts be in
writing.
So, that's where I'd start, with the original loan document. 

Depending on how much you were stuck for, if you find they didn't have
a leg to stand on, you can take them to small claims court ($5,000).

Good luck.

Your TaxMama-ga