Lender could end up paying if all fees were not revealed at buyer's closing

Q: My wife and I purchased a house in Florida last April. This past weekend we received a letter and an invoice from the law office that acted as the parties' closing agent, informing us that we owed fees for "additional endorsements requested by the lender after the closing."

Our question is: Is this legal? Only the invoice was produced, and the bank did not present an official request. We, of course, are contacting the bank for more information, but we would like to know whether this is normal or, more specifically: If the bank did not request all endorsements in time for the closing, why do we have to pay for the additional cost? Isn't it the bank's responsibility to pay for not having asked for all endorsements at the closing time?

A: This is a great question on so many levels. When you closed on your purchase, your lender gave you certain government-required disclosures relating to your loan. One of these was a good-faith disclosure of fees for your closing.

At your closing, the bank was required to give you a final disclosure of all fees for your purchase. If the disclosures included these fees, but you somehow failed to pay them, you would be obligated to pay them now. However, if the lender failed to disclose these fees, the lender could be out of luck and might not be able to come back to you to request these fees.

The purpose of the good-faith estimate of closing costs and the recently changed truth-in-lending law was to give more certainty to the disclosure of fees provided by lenders. If your lender made a mistake, the lender might have to eat the cost.

It's possible that the closing agent received instructions from the lender to include these fees but failed to add them on the documents delivered to you. However, the closing agent may have been acting on behalf of the lender, and the closing agent's mistake might require the lender to resolve the problem after closing. Your closing statement would change if you pay those additional fees, and your lender would be required to issue you new closing documents relating to those fees.

When you purchased your property, your lender required you to obtain and pay for a title insurance policy to protect its mortgage interest in the property. Your lender might also have requested that the title insurance policy include certain endorsements to the coverage. Some of these endorsements might relate to the type of loan you received or the type of property you purchased.

But the net effect of the lender's request for title insurance and endorsements is that those fees must have been disclosed to you in advance of the closing and at the time of the closing.

If it's true that the lender failed to disclose the fees to you and wants these endorsements, the fees might need to be paid by the lender. If you had known about these costs, you might have chosen a different lender. The purpose of these disclosures is to make the system more transparent and assist buyers in choosing a lender. (Unfortunately, the new law has improved some things but has made the process of reviewing title-company charges and fees more difficult in many situations.)

If you still have trouble with the closing agent or the lender, you might need to talk to a supervisor at the lender's office or contact the Department of Housing and Urban Development and file a complaint against the lender for a violation of the truth-in-lending law.

But first you might need to talk to a real estate lawyer to go over your documents and make sure that you have all your facts covered.

Q: A number of years ago, I took out a $124,000, 15-year mortgage at 6.05 percent. I have just $37,000 left to pay on it. Would it be wise to make a lump-sum payment of $10,000 on the principal to save on the interest? I know that every dollar I prepay on my mortgage earns the net interest rate of the mortgage. It's just that I can't make 6 percent on a safe investment anywhere.

A: Making a prepayment of $10,000 will certainly cut down the time you have left on the loan. Even if it saves you a year of payments, it may be a wise investment. Just don't use all of your available cash, as you might need it if something unexpected happens.

If you have plenty of other liquid cash reserves, and you can afford to make this payment, then by all means go ahead. Once the loan is paid off, you'll quickly be able to accumulate additional cash assets.

Q: I inherited a house that my family bought in 1944. I ended up taking out a mortgage on the property, and I did some work on the house with some of the cash in a cash-out refinance.

I have had nerve damage to my legs since 1999. Because I wasn't working, I started living off of the cash I took when I mortgaged the property. I receive $650 in disability checks each month and some Social Security. I am 61, never married and owe $145,000 on a home that has gone down in value from $288,000 last year to $275,000 this year, and I was told I'd be lucky to get $250,000 out of it. That could leave me with $80,000 to $100,000.

I now owe my lender about $154,000. I am in arrears with the mortgage and am going through a loan modification. My lender wants $1,600 a month, but I can only pay $948, and I have had to take in boarders.

I'm not sure what to do next. I'm not interested in a reverse mortgage, and I'm told if I sell the house, I'll have to use the cash for Medicaid reimbursements. Someone from legal aid told me if I sold the house and collected the money, I'd have to spend it all right away.

The lawyer I spoke to told me he thinks I have been used. He said we should go to court, and he had me sign a paper that charges me $129 an hour. If we win, the money will come out of what I get. If I lose, then the rest of what I owe him will go against the loan. What should I do?

A: It sounds as though you are between a rock and a hard place. You own this property, but you can't afford your mortgage. You're living on disability, but you don't get enough to get you out of trouble. Here's what I know from your e-mail:

You no longer can climb stairs. You don't want a reverse mortgage. You don't want to stay in the property. If you sell the house, you'll be ineligible for your disability payment (according to legal aid). You feel you were cajoled into signing a paper that provides for legal representation at $129 per hour.

Find a good real estate agent and discuss listing the property. Also, get a second opinion from someone else about your situation. Talk to a different attorney in your area who is knowledgeable about elder-care issues and real estate; it might be useful to get that person's opinion.

Taking the first step is the hardest, but if you figure out your plan, you'll get through it.

Ilyce R. Glink is an author and nationally syndicated columnist. Samuel J. Tamkin is a real estate lawyer in Chicago. If you have questions for them, write to Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022, or contact them through Glink's Web sites, http://www.thinkglink.comand http://www.expertrealestatetips.net.