Stuck In a Terrible Lending Situation

[Account Closed]

Hey BP,

My wife and I just closed this past week on a house that we are using as a rental. Throughout the entire process working with our lender, we told him over and over that this would be a non owner occupied house and that the mortgage needed to be for a rental.

He proceeded to write the mortgage as an owner occupied primary residence! This came along with a statement promising we would live in the property for at least a year!

We literally didn't find out he did this until a week and a half before we were scheduled to close!!! We immediately told him that the mortgage was incorrect and his response was that we should leave it alone because it would severely delay closing if we changed it. He said we could get a letter from the lender after closing stating that we could use it as a rental.

Fast forward to now, we have an owner occupied mortgage with two options: 1. Live in the house for a year (We don't want to and won't do this)

2. Refinance it into a investment property mortgage

Our mortgage was 80% LTV and now the new refinance requires 75% leaving us to come out of pocket for the difference. The lender also said that we have to repay closing costs to the tune of 4k!

This process has been absolutely ridiculous and I cannot believe they did this to us! Their mistake is costing us over 4k plus the extra hoops to jump through and headaches!

Each time we told them that we weren't at fault and we asked for an investment property mortgage it's basically our word against theirs and it goes nowhere.

They even had the nerve to throw out "Mortgage Fraud" as something they have to look into!!!!! I can't even wrap my head around this!

At this point we are working on trying to refinance and find the best deal we can.

We feel so betrayed and lied to and don't know what to do. Has this ever happened to anyone else and what can we do???

[Jon Holdman]

You shouldn't have closed. You should have said "fine, it will cause a delay". As soon as you closed you lost most of your leverage. The lesson here is that if anything is wrong, you don't close. A lawyer can make a very good argument that you did in fact commit loan fraud when you signed the forms for the OO loan knowing it was not. Your case now depends on proving you did that under duress.

Was the person you were working with an employee of the lender? Or a separate broker? Is he now denying what he told you before the closing? Do you have anything in writing or were all these just phone conversations?

Your state may have some department for mortgage broker licenses. If so, you may be able to make a complaint with them.

An hour and a couple hundred bucks with an attorney may be a good investment.