I "OWE" 3 POINTS on a loan that DID NOT CLOSE!

[Vahe Ohannessian]

Hello fellow BP-ers,

This is regarding a deal in Massachusetts, so any input from MA Attorneys familiar with Hard Money Lending and related laws would be greatly appreciated.

I recently closed on a property where I ended up closing WITHOUT the original hard-money lender I was dealing with. A few weeks before closing I signed a "Loan Estimate" with the subject lender for $475K with 3 points and 12% interest, and paid a $2500 non-refundable deposit, of which $1,000 went to the broker and $1,500 went to the lender. But because of a Commitment Letter I signed about 9 days before closing, he's claiming I owe 3 points equaling $14,750, and now even more costs as he claims he will be taking legal action.

Admittedly, the letter I signed has only one reference to “Points” which is in this paragraph, neatly disguised in the middle of the document (it did not even catch the attention of my closing attorney):

Termination of Commitment: In the event the Loan is not advanced and the Commitment is terminated the Deposit shall not be refundable to the Borrowers and may be retained by [LENDER, LLC] along with the Points that are earned upon execution of this letter as liquidated damages except in the event of [LENDER, LLC]'s default.

Then, somehow, the VERY LAST sentence of the letter is this:

"By accepting these approval terms, you do hereby agree to pay for all costs and expenses incurred in preparing to close the loan, whether or not the loan is closed, not to exceed One Thousand Dollars ($1,000.00)."

To make things even more interesting, I signed the Commitment Letter as Trustee of [TRUST A], and for a completely unrelated reason, I closed on the property as Trustee of [TRUST B]. Right now [TRUST A] owns nothing and is obsolete.

At no time in any of our conversations was there any mention of points to be earned even if I didn't close with them, including the last conversation when I called him to inform him that I was moving forward without them. I even mentioned I understood why they charge $2,500 upfront because of situations like this. He then congratulated me and wished me well, then sent my closing attorney the request for $14,750 payment, which left me utterly shocked.

Any advice here would be greatly appreciated. The last thing I want is to drag this in court for over a year, but if I have strong grounds I would prefer to let him proceed with his threats and legal action, or settle for something small.

Thank you!

Vahe Ohannessian

[Russell Brazil]

Im actually of the opposite opinion than Chris here. This is not a consumer loan such as a Fannie or Freddie product, and is not being loaned to an individual. Hard money are business loans, and laws in place to protect consumers do not typically extend into business loans, hard money, loans made to entities.

It seems very clear that you signed a contract that detailed your costs in default.  Id say you are on the hook for the 3 pts.

No legal advice given.