Real Estate Settlement Charges (Title Search) for Declined Loans?

[Rakesh Patel]

I own four condo units in Boston. Attempted to do four cash out refinances with the low rates now and was declined by my lender since I just started my own company and will be receiving 1099 income instead of W2 income. I have several million dollars in the bank and a top credit score, but the mortgage company said the loans would not be conforming unless I had two years worth of income in this new job (even though I could pay off all four properties in cash easily).

Here is my question though. I had selected to use my own settlement services provider with the lender - an attorney that was giving me a package deal to do all the loans with him. Now that all four loans have been declined he is asking to be paid $200 per property or $800 in total to pay for the title searches and tax certificates. I never signed a contract with this attorney. Am I responsible for paying him for these expenses or should he be seeking these funds from the bank that declined the mortgages or would the title insurance company eat these costs? Any thoughts on this from fellow BiggerPockets experts would be appreciated.

[Angie Shires]

Since you selected them yourself, it will be your responsibility to pay the attorney...he obviously did the work and does deserve to get paid for that work. It is your reputation, I would say it's worth it to pay them and move on. Unfortunately, the lenders look at Independent Contractors differently...and require more documentation because you are self employed. That's no fault of the attorney doing the title work...in my opinion, it would be best to go ahead and pay!