We closed on our short sale house this last Friday, December 28th and moved in that day. Yesterday we received a notice from the title company that the short sale lien holder (Wells Fargo, FHA loan) will not allow the extra money we have in escrow to be refunded directly to us. Instead they will only allow that the money be applied to our mortgage principle. The title company is basically saying that the short sale lien holder can unwind the transaction at this point if we do not agree.
It is not much money but the idea that the sellers lien holder has ANY right to dictate where MY money goes is baffling to me. All the terms of the contract have been completed and there is nothing that I can find that says they have the right to dictate where my money goes. Also, it sets a bad precedent because it tells future buyers of short sale home to put as little earnest money down as possible otherwise the short sale bank can force any refund to be applied to the balance of your loan. If I had less earnest money and brought money to closing then they wouldn't ask for me to put extra money towards my own principle. That is basically what they are asking me to do. The entire process is just wacky that they can ask me to do something with money that is not theirs and the result of what they are asking does not even benefit them.
I am an insurance underwriter and in insurance we apply the rule of insurable interest. You cannot insure something without having an insurable interest (otherwise you would be gambling that something unfortunate will happen to someone and then seek to gain from that). I do not see that the lien holder has any interest in my extra money in escrow and I do not think they have any right to tell us what to do with it.
I have filed a complaint with our state AG (WA state), emailed my representatives and emailed some other folks but wanted to get the advice from this forum.
PS - I have read a lot of advice on this forum and it has been invaluable to me throughout both of our short sales. The first one was a dud and I saw a lot of red flags which led us to pull out. I believe at times I knew more about the short sale process from what I read on here than my own real estate agent or the sellers agent.
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it's the TAX escrow, and since the lender probably paid the property taxes, it's not your money anymore. Remember, the lender does not have to agree to a short sale at all, so to lose the tax escrow money is just a part of doing a short sale. If you look in your approval letter and probably your mortgage and note, it will say that any escrows will be absorbed by the lender. This is true on ALL short sales.
With respect to the board (which I have a lot of respect for) I am only going to post updates to anyone interested. I think all other views have been expressed. This may give insight to any wishing to pursue RE transaction issues with either the CFPB or AG for free without paying an attorney. If it results in no action than others will know it is a waste of time.
Last week I received a revised Hud-1 and, without my agreeing to it, the money has been applied to the principle of my loan.
Yesterday I received a call from the Consumer Financial Protection Bureau (CFPB) as the title company indicated it was not their problem. I re-explained what occurred, was placed on hold and the CFPB told me that they primarily handle issues with lenders - banks, credit unions, etc. but not with Title companies. They were willing to go after Well's Fargo even after I explained that I had no interaction with WF personally. Within three hours of that call from the CFPB I received a call from the executive division of WF indicating they are addressing the complaint. CFPB advised that the best way to submit a complaint with regards to the title company is with state AG which I have already done.
Update: I got the money back a few weeks ago but not the way I hoped. I was going to take either Wells Fargo or the title company to small claims but before I did that I decided to call the mortgage company and just ask for the $590.25. I asked if they could just reduce my next payment and instead they decided to send the money to me.
Here is the odd part. Last Friday I had a call from the mortgage company saying I am late. Feb was our first payment and there is no way I was going to be late. My bank account shows the money cleared on 2/5. I was on the phone with the mortgage company and the CSR had to look into it and placed me on hold for 10 minutes. He came back on the line and all he could tell me was that it is confusing but they are sending my Feb payment back and the loan is going back to HUD. They are no longer financing the mortgage. I was concerned that kicking the bees nest had got me stung.
I called my mortgage broker and found out that someone made a mistake with the paperwork and the company that was servicing my loan was not supposed to be. They are sending the payment back to me and I'll need to send in Feb & Mar payments into the new loan service company. What a mess this whole thing has been. I'm hoping that this works itself out and I don't see a "late" on my credit report.
Be sure and get everything in writing regarding your payments being current and in writing regarding the wrong servicer and you having no point of payment to send to. Also send letters immediatlly to the credit reporting agencies letting them know in advance of the problem you are having.
Too many here are speaking as agents and not enough attorneys involved (smile). The issue is one of contract law and of common law. Others are correct in directing you to read your contracts.
I will suggest that if you were asked by the closing agent to deliver funds prior to closing in an amount that exceeded the necessary closing, then those are YOUR FUNDS regardless of contract. The closing agent is supposed to collect any deficiency in your closing AT closing and in most states has to give you a completed actual HUD1 that will be used in the closing at least 48 hours before closing happens.
This means that you will have an exact amount for deficiency and bring cash or certified check at closing. Sending a deman for $600 more than the closing is probably illegal and certainly unacceptable and possibly something to report to the state in a compaint against the closing agent.
As the closing aggent initiated the "overpayment" it was never meant to be in the closing to begin with and no person or entity can lay claim to your excess property that was placed there in good faith to a bad HUD1 or closing estimate.
You are correct in suing in small claims court, it is proper venue.
As to reversing the closing....I am unsure that after a title has been issued and your mortgage or deed of trust recorded that anyone can "unwind" a closing. Legally you would be the owner of the property regardless as no party can remove the filed deed legally that I know of (this would violate all kinds of statutes and common law). An attempt to unwind a legally performed deed when in good faith all actions have been performed and payments transferred would be actionable. Someone would also have to foreclose under law and whoever caused the problem may wind up owing everyone for damages!
It would seem to me that if the bank unraveled your loan and unwired funds, that you would then have an unsecured loan owed to no one, a title to property and no contract with any party other than your lender (who now might not have a lien or mortgage), the seller lender would be unpaid and without contract between you and them and no right to new mortgae with the debt released already, as well as the unraveling causing loss to many parties including the seller losing deficiency waivers. This would be one hell of a legal action.
The Constitution allows you to take action for $20 or more. The real question is: "Is $600 in prepayment of my principal worth the headache and time or is the principal more important?" That is a personal judgement for you to decide. It takes a special person to end tyranny corporate or political.
Sorry I came into this late and read everything. I think Thom Colby hit the nail on the head. Most likely you did not need the full closing cost credit and in Wells Fargo thinking (or lack thereof) they won't let you get any of that leftover credit back .Don't blame you for being frustrated, go shake some trees and see what falls out! At the very least you will get your voice heard and maybe pave the way for some reform, never know...
Best of luck
Thanks for the update Joseph
Joseph. short sale are different creatures and you willingly and successfully entered into one. I suppose since you did not need the $5500 to close maybe Wells Fargo should have kept the $550 they Over Paid to help YOUR closing. Be happy and move on.
Wow I hope you are not a real estate agent because you are very bad if you are one. How much money I have and how much someone else agrees to pay are two completely different things. I should have asked them to pay more towards closing and I should have offered less on the house because they would have accepted it. Unless you hate money negotiating IS a part of real estate. The bank got what they wanted and then some and the problem I have with this part of the transaction is that they are telling us how to spend our money. They did not keep it nor could they have since we have a signed CONTRACT. Even others have indicated it is possible the contract could have unwound but they could not just take my money. Why they have the ability to tell me where my money goes is my issue even if it was $1. But you don't respect money so I can see how you wouldn't care.
Joseph, for the last time.....the seller's Lender did nothing wrong, and the title co. did nothing wrong. It is standard practice, and common knowledge that buyers can't be getting funds back from closing in a short sale, as has been explained to you numeorus times, along with the reasons for it. You and Your real estate agent simply did not understand the implications of getting that much closing cost assistance, combined with your EM deposit. Of course, you could have simply had the assistance program there, give you $550 less so you could have Spent the $550 on your closing costs, instead of paying down your mortgage.
Yes, the seller's lender could have canceled the transaction....would that be better?
Words of wisdom....Let It Be, Let It Be.
Enjoy Your House!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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