Refinancing your existing mortgage can often render unwanted and unexpected results. In our experience many Mortgage Companies commit errors when calculating pay off balances, settlement charges or when issuing escrow refunds. Consumers have to be especially vigilant to ensure that the refinancing does not result in accounting inaccuracies and charges are not duplicated. When refinancing your home loan, Mortgage companies will have to compute and add two figures: (1) the pay off amount; and (2) the total settlement charges. The following are things to look out for when going through a refinance:
- The pay-off amount is typically calculated by first adding the principal balance, interest owed and other fees and then subtracting from this total any escrow balance. If the escrow balance is not subtracted from the pay-off calculation you are entitled to an escrow refund.
- Make sure to verify that you are not being charged the interest owed twice. Mortgage companies in some instances will use interest payment to calculate both the payoff amount and the settlement charges. In such instances Mortgage Companies are subject to federal and state legal claims.
- Consumers also have a right to demand an explanation of the pay-off amount. A Mortgage Companies’ failure to respond to such a demand will result in violation of federal law.
- Mortgage companies can also at times force you to take a cash pay off by not revealing the pay off until closing. You may be able to identify a cash payoff by reviewing the HUD Statement provided to you at closing.
- Make sure to carefully review your HUD Statement and have a complete understanding of all settlement charges listed in this document. The HUD Statement can be the single most important closing document which warrants your close attention.
- Find out when your next payment is due and verify this information by reviewing your Promissory Note and the Amoritization Schedules. If you have setup an automatic withdrawal make sure to cancel the automatic withdrawal before the next payment. You cannot rely on the Mortgage Company to not withdraw the payment.
- Ask for a copy of your closing documents before the closing date. It is very common for people to identify issues on the date of closing when the pressure is high and you are most amenable to compromising.
If you feel like you were treated unfairly by your Mortgage Company during the origination process please contact our offices for a free consultation.