Philadelphia Weekly

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If lender can't provide copy of appraisal, demand a refund

Benny Kass
Inman News®

DEAR BENNY: I have a question regarding a refinance. We had several unsuccessful attempts with two mortgage brokers because our house is located in a risky ZIP code and the appraiser said that he was unable to get two comps to complete the deal. Finally, we found another bank who said "no problem" right off the bat.

Well, it's been almost three months now and we've turned in all necessary papers and have an 800-plus credit rating and we're still waiting. But that's not the problem.

Here is my concern: When we applied, we paid a $400 appraisal charge. That is fair given an appraiser was actually doing something. There was no walk-through inspection (which is OK by me) and only a drive-by according to the bank, and the home value was done electronically. All the calculations seemed to be acceptable by the bank for the refi to go through, but why are we being charged $400 for this? There was no outside appraiser.

I asked for a copy of our appraisal and was told there is none, only the value amount could be told. Shouldn't the bank just say that it will cost $400 for a refi -- take it or leave it? Do we have any recourse? --Christine

DEAR CHRISTINE: This is a very common problem not only with appraisers but with other charges imposed by mortgage lenders. I recall several years ago when lenders were sued for charging upwards of $75 for a credit report, which cost them (if at all) less than $20 only. From my experience, most lenders no longer pad the credit report charge.

Under federal law, you are entitled to receive a copy of the appraisal for which you were charged. If the lender has advised you that there is no such document, it is my opinion that you should demand a refund for the $400.

While no one likes to file suit, you should consider filing a lawsuit in your local small claims court. I suspect -- but cannot guarantee -- that the lender will quickly refund your $400, rather than spend the time and the money defending its position.

My experience with small claims courts is that most of the staff are very helpful and will provide you forms and guidance as to how to file.

DEAR BENNY: I had my home built in 2011. I closed on it on March 2 of that year. There were no liens on the home at the time of closing. The sod and sprinkler system was not put in yet so the bank held back the money to pay them when we had it all installed. At closing the bank paid the builder, and the money held back was paid to them also when the work was complete.

Come August 2011, I got a call from the sprinkler system company and they said they never received payment and were putting a lien on my property. Come to find out the builder went bankrupt and never paid anyone that did work on my home. I had the drywall, insulation and the painter all say they we going to put a lien on my property. But the only one that did was the sprinkler system company. Why is it that they can put a lien on my property and not go after the builder who received the money and signed off at closing that everything was free and clear? Isn't that fraud?

In the past year the interest rate dropped so I refinanced my home at a cheaper rate, but I had to pay the lien off in order for the other title company to refinance my home. What is the title insurance company supposed to be good for? Why do I get stuck with this since I already paid for it when the work was done? I can't help if the builder goes bankrupt and takes the money and doesn't pay any subcontractors. With all the papers to sign at closing there must be something to protect the homeowner from things happening like this? Please let me know if there is something I can do. Or do I need to take legal action about this? --Frank

DEAR FRANK: Unfortunately, in many states, mechanic's liens can be placed on property after a homeowner takes title. You made two mistakes: First, you should have confirmed at settlement (called escrow in the West) that the title insurance policy you paid for would cover future mechanic's liens. Second, you should have consulted an attorney when you first learned of the lien.

Because the filing of a lien is so different from state to state, I cannot give you specific advice. My bottom-line advice, however, is that when you go to closing -- especially on a newly built house -- have an attorney represent you so that all legal questions will be resolved before you leave the settlement table.

DEAR BENNY: My mom passed away and left the house to my sister and me. We are in the process of having the deed put in our names. There was a home equity loan on the house for about $40,000. When my mom passed away the bank closed the account and we cannot use it. There is a monthly fee that continues to be deducted from the checking account that my sister and I are now on. We would like to get the line of credit reopened in our names so we can keep the house afloat for another year until the market turns around. Does the bank have to grant us the line of credit? Are there any other options to make some cash available? --Virginia

DEAR VIRGINIA: I would have to review the terms and conditions of the home equity line. Under federal law, a lender cannot stop an assumption when the property is transferred as a result of the borrower's death. Typically, banks include what is known as a "due on sale" clause in loan documents, and the bank cannot call the loan just because your mother died. However, their loan documents may allow them to freeze the loan.

You indicate that you want to have a line of credit. Did your mother use up the entire $40,000 line or is there still money available to tap into? If the latter, then you could go to another bank and ask for a line of credit. The new line would pay off the existing line, and any balance could be used for your purposes.

But if there is no more money available on the loan, you should consider going to another bank, and see if you can borrow more than $40,000, so that the existing line can be paid off in full.