I Closed On a Cash-Out Refi and Now Lender Wants It Back

[Seth Hochberg]

Hi all, I'm a BRRR investor in Baltimore City and have a surprising situation I've never been in before. I need help knowing what my options are. A few months ago, I purchased a property in Baltimore City in cash, and renovated it. I was working with a lender (whom I've worked with before) to do a cash out refinance. A few days ago, I closed on the cash-out refinance and was wired the money the next day. I still have all the cash in my bank account, but was ready to spend some of it this weekend (pay back debts, down payment on the next property, etc).

The point of contact from the title company just told me that this lender is just realizing that the property is subject to ground rent. Originally (a few months ago), the lender told me I would need to redeem the ground rent, but when looked into it, I learned it would take 4-12 months to redeem because of the gross understaffing in the SDAT office. When I shared that news with the lender, they said "Luckily, according to my guidelines, ground leases are acceptable". I have this in writing via email. There was no other mention of ground rent after that. 

But just now, the point of contact from the title company, just said that because of the ground rent lease, "the lender may want to rescind the loan and reclose. Are you able to send the wire back?"

I absolutely do not want to do this, for obvious reasons. Am I obligated to wire this money back to them? This seems unfair, since it was 100% the lender's fault. I don't mind redeeming the ground rent, I just don't want to wait 4-12 months before I get this money back. What are my options? Thanks in advance.

[Seth Hochberg]

LOL thanks for the replies @Account Closed

The title company agreed with me and negotiated with the lender on my behalf. The compromise was that instead of wiring them all the money back and reclosing, I would wire the title company the money right now to redeem the ground rent ~$1200. I might be able to argue that I don't have to redeem the ground rent, since the lender missed it, but this is a much more reasonable request, so I went ahead with that. Super great of the title company to vouch for me, and really bizarre of the lender to make such a request. All in all, my title company gained a loyal customer, and my lender lost one.