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Grievance against credit union/lender
Old 03-20-2018, 08:26 PM   #1
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Grievance against credit union/lender

DW and I are FIRE’d and are relocating from Hawai’i to Central Texas’ Hill Country later this year. We own a house in HI that we are listing for sale this spring. We started the process of financing a lot purchase and for a new construction home. We thought about selling our house in HI first then just pay cash for the house and lot...the builder owns the development/land and will be the builder of the house. However, we wanted to take advantage of incentives the builder was offering (i.e. 35% off lot premiums and 20% off Design Options) and timelines will not line up if we wait to purchase the lot and begin construction until after we sold our house in HI.

Needless to say, we felt we had to secure a new construction loan for the property in TX, not only to take advantage of builder incentives but for some additional flexibility. We went with a well established and recommended credit union with competitive rates. We told the loan officer of our plan to list our house after we return from TX to close on the lot. All was going well until 3 business days before we closed on the lot...when we were told that since we haven’t sold our house in HI that they can’t do the loan, citing our debt to income ratio (we do not have W-2 income but have enough assets in stocks/mutual funds/CDs to cover the purchase) would be higher than what they can support. Are you kidding me?

In all our dealings with the bank, which began in November/December, we’ve always been up front about our plan to sell the HI house after we return from TX and after we closed on the lot. After I asked what our options were, they returned with new “workable” loan terms, namely a 30-yr fixed (up from a 15-yr), higher APR (from 3.5% to 4.625%) and lower loan amount (from $600k to $400k)...which meant our cash to close doubled (using round figures for illustrative purposes) from $100k to $200k. We were told late Wednesday night that someone would contact us the following morning to go over details of the loan. We cashed out some CDs to have enough cash, and some fluff, to meet the $200k cash to close.

The following morning, I had to call the bank since nobody contacted us. I left a message which was returned late afternoon. This new contact then proceeded to tell us that, after looking at the numbers, our cash to close would be close to $300k! At that point, I lost it and DW became sick to her stomach.

Cooler heads prevailed and after additional conversations with this loan officer (this time without DW), he was able to get his VP’s approval for a higher loan amount with the same rate and term, meaning our cash to close would remain at around $200k. I had to write an email stating when we would be listing our house in HI, how much we would net on the house, and our intent to pay the loan off in full once we receive the proceeds from the sale of the house.

At this point, I intend to write a letter to the CEO to express our disappointment and displeasure with how we were treated and request to be reimbursed the early withdrawal penalties (~$1,200) we incurred by breaking the CDs prior to maturation. I also plan on contacting the CFPB and the NCUA to file a complaint. Aside from the above, what other actions can anyone suggest we take for some measure of accountability for what the credit union put us through?
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Old 03-20-2018, 10:13 PM   #2
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Hire a lawyer, sue 'em, and expect to be buried in legal costs. Then you lose. Life is not fair.
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Old 03-20-2018, 10:31 PM   #3
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Sounds like you pulled through with only some scrapes, this type of @^$%Q is why I am now so careful to not open myself to being raked over the coals. I would have sold the house first, or got the loan signed before committing to a builder.

Life is short, go ahead and write those letters, I think they should reimburse you for the costs ( I had a bank do that when they delayed on me).


Just wait and see how badly the builder breaks his word on stuff, you have lots of excitement to look forward to, and we could have an exciting thread in months from now.
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Old 03-21-2018, 08:19 AM   #4
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Yeah, we are not about to pursue any legal action and seek settlement/damages in the hundreds of thousands or millions or whatever unreasonable amounts one might think. We basically want to be reimbursed for what they cost us in early withdrawal penalties and hope they’ll re-examine their processes in order to prevent the same thing that happened to us from happening to another customer.
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Old 03-21-2018, 08:48 AM   #5
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What is not clear from your post is whether you ever received a written, signed loan commitment (as opposed to a non-binding term sheet) from the lender. You post says that "you were told" but what is important is whether the lender EVER COMMITTED IN A BINDING WAY IN WRITING TO A LOAN TRANSACTION" with you. Verbal statements by a loan officer (or even his belief detailed in e-mails) do not count. The Lender needs to bind itself to a transaction and it is not clear to me that it ever did. A Borrower has no legal right to rely on anything until a written loan commitment signed by a bank officer is issued. Normally a loan commitment says at the top "The Bank is authorized or committed to the make the Loan to you subject to the following terms and conditions.......".
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Old 03-21-2018, 09:09 AM   #6
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What is not clear from your post is whether you ever received a written, signed loan commitment (as opposed to a non-binding term sheet) from the lender. You post says that "you were told" but what is important is whether the lender EVER COMMITTED IN A BINDING WAY IN WRITING TO A LOAN TRANSACTION" with you. Verbal statements by a loan officer (or even his belief detailed in e-mails) do not count. The Lender needs to bind itself to a transaction and it is not clear to me that it ever did. A Borrower has no legal right to rely on anything until a written loan commitment signed by a bank officer is issued. Normally a loan commitment says at the top "The Bank is authorized or committed to the make the Loan to you subject to the following terms and conditions.......".

+1 on this.... a loan officer can tell you anything, similar to a car salesman, but until it is down on paper you have nothing....

The loan committee decides what they are willing to do... the loan officer might have really thought that it would fly through, but it did not...


You will not be able to legally get your early withdrawal penalty.... I also doubt that they will reimburse you.... heck, they will probably say they made an accommodation to you to let you only pay $200,000....


BTW, I also think that email about selling your house and paying off the loan will be invalid unless they somehow put it in the paperwork.... just like their promise, yours can change....
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Old 03-21-2018, 09:16 AM   #7
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Originally Posted by phil1ben View Post
What is not clear from your post is whether you ever received a written, signed loan commitment (as opposed to a non-binding term sheet) from the lender. You post says that "you were told" but what is important is whether the lender EVER COMMITTED IN A BINDING WAY IN WRITING TO A LOAN TRANSACTION" with you. Verbal statements by a loan officer (or even his belief detailed in e-mails) do not count. The Lender needs to bind itself to a transaction and it is not clear to me that it ever did. A Borrower has no legal right to rely on anything until a written loan commitment signed by a bank officer is issued. Normally a loan commitment says at the top "The Bank is authorized or committed to the make the Loan to you subject to the following terms and conditions.......".
Phil,
We received a letter from the CU that we were conditionally approved for the loan in early January. In that conditional approval letter, there was no mention of a requirement our house in HI be on the market or sold as a condition for the final approval. We also received signed Loan Estimates (with nothing stipulating sale of our house in HI as a condition for funding)...but the Closing Disclosure was not provided until we were about to close.

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Old 03-21-2018, 09:36 AM   #8
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Phil,
We received a letter from the CU that we were conditionally approved for the loan in early January. In that conditional approval letter, there was no mention of a requirement our house in HI be on the market or sold as a condition for the final approval. We also received signed Loan Estimates (with nothing stipulating sale of our house in HI as a condition for funding)...but the Closing Disclosure was not provided until we were about to close.

VG23
Hence the word "conditional" meaning if you change anything you are screwed but if they change anything it's all good.
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Old 03-21-2018, 09:39 AM   #9
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Hence the word "conditional" meaning if you change anything you are screwed but if they change anything it's all good.
I get it...just don't feel good faith was maintained in our dealings with them.
What's irksome is the fact that had it been another buyer who may not have the same liquid assets as we were able to gather at the last minute, then they would've been out in the cold. It doesn't seem just and there should be some accountability.
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Old 03-21-2018, 10:13 AM   #10
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Phil,
We received a letter from the CU that we were conditionally approved for the loan in early January. In that conditional approval letter, there was no mention of a requirement our house in HI be on the market or sold as a condition for the final approval. We also received signed Loan Estimates (with nothing stipulating sale of our house in HI as a condition for funding)...but the Closing Disclosure was not provided until we were about to close.

VG23
"As a condition of the final " means that you knew (or at least legally should have known) that you did not have final approval. I do not mean to be difficult but without going into specifics my career was in this area and it is vitally important that people understand what they have or do not have in terms of a commitment, term sheet, mere proposal etc...

Thirty years ago a bank would issue a firm commitment subject to only a few conditions (i.e. maintaining employment, etc...). As times have passed banks have moved away from this model and now issue hybrids of the above.....most of which are not binding until closing. Often one of the conditions in a document you may now be issued is "such other terms and conditions that the bank determines in its sole and absolute discretion".

Sure, the banks should be required to disclose whether you have a commitment or not.....but they are not. Even attorneys hired by a buyer sometimes fail to fully explain the document issued by a bank. But ultimately I feel it is your money and your obligation to fully understand where you stand in the transaction. Read every word. Ask any question even if you feel it may not be an intelligent question. It is your money.

Where you have a condition that you are concerned with, have the bank confirm in writing that its offer to make a loan IS NOT CONTINGENT ON THE SALE OF YOUR HOUSE or IS NOT CONTINGENT ON CONTINUED EMPLOYMENT if that is an issue. Have them change the document until it is right. Lastly, ask them if what you received is a final approval of the bank or is it still subject to final loan committee approval. If they say it is final send an email confirming the conversation immediately.

I pass this on simply as advice to others.
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Old 03-21-2018, 11:14 AM   #11
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I get it...just don't feel good faith was maintained in our dealings with them.
What's irksome is the fact that had it been another buyer who may not have the same liquid assets as we were able to gather at the last minute, then they would've been out in the cold. It doesn't seem just and there should be some accountability.
I wasn't poking at you just commenting that the lenders aren't really interested in good faith or that they feel much of an obligation to a borrower...it's the modern world I guess.
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Old 03-21-2018, 12:14 PM   #12
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Thanks, Van-Guard, for sharing your experience - it might be helpful for others here down the road. Hope everything else with your move goes smoothly and you enjoy Central Texas as much as way too many other people do
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Old 03-21-2018, 12:28 PM   #13
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Aside from the above, what other actions can anyone suggest we take for some measure of accountability for what the credit union put us through?
Your best bet is to take your business elsewhere - find a different lender.
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Old 03-21-2018, 12:47 PM   #14
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Your best bet is to take your business elsewhere - find a different lender.
That's problem in a nutshell the OP went ahead a did business with this lender.I'm guessing under the better the devil you know then the devil you don't know theory.
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Old 03-21-2018, 01:21 PM   #15
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Sure, the banks should be required to disclose whether you have a commitment or not.....but they are not. Even attorneys hired by a buyer sometimes fail to fully explain the document issued by a bank. But ultimately I feel it is your money and your obligation to fully understand where you stand in the transaction. Read every word. Ask any question even if you feel it may not be an intelligent question. It is your money.
And in our current culture, where regulation is treated like a four letter word, not likely to change soon.

Big companies don't want the regulations and have been successful in getting the little guys to think that regulations are bad too.

Caveat emptor.

-gauss

p.s. Could always try to give the lender a bad review on Yelp! or any other similar site were consumer reviews are shared.
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Old 03-21-2018, 01:47 PM   #16
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Your best bet is to take your business elsewhere - find a different lender.

As covered in the original post, we were in a time crunch as we had to head back to HI the day after closing on the lot. We did not have much time to go with another lender so we felt like that was the only option available lest we risk losing out on all the builder incentives.
This experience would make me think twice before doing business with them again.
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Old 03-21-2018, 03:29 PM   #17
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That's problem in a nutshell the OP went ahead a did business with this lender.I'm guessing under the better the devil you know then the devil you don't know theory.
Yea, it sounded like it was way too late in the process to go to another lender... kinda stuck with what you have...

BUT, I would not do business with them going forward...


Edit to add... opps... OP answered, but had not read yet...
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Old 03-21-2018, 03:39 PM   #18
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maybe i read it to fast, but i don't see where you were out anything other than some moments of heart burn.
You liquidated CDs early thinking you'd need a 200K loan.
After the panic and talking with the office, you're back to those original terms.
While I think you have grounds to complain about the process/professionalism and stress, IMO you have no grounds to ask for much less sue for the lost CD $ as you ended up with the same deal.
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Old 03-21-2018, 04:08 PM   #19
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maybe i read it to fast, but i don't see where you were out anything other than some moments of heart burn.
You liquidated CDs early thinking you'd need a 200K loan.
After the panic and talking with the office, you're back to those original terms.
While I think you have grounds to complain about the process/professionalism and stress, IMO you have no grounds to ask for much less sue for the lost CD $ as you ended up with the same deal.


The “original” terms (for at least 2 months) were a cash to close of about $100k and loan amount of $600k. The amended terms or v2 had $200k cash to close with loan amount of $400k (with a higher rate and longer term)....with the promise that someone would call Thursday morning to go over the details. We were told of v2 on Wednesday night and we cashed in 4 CDs the following morning before we spoke to the new point of contact at the bank...good thing we did or the 2-3 business days for ACH transfers could’ve derailed the planned closing Monday morning. V3 of the terms was $300k close with a loan amount of $400k...and v4 was the $200 close and loan of $500k. I don’t know about you, but those are dizzying highs and lows when DW and I are already stressed (at least I was) about choosing and finalizing architectural and design options for the new house.

As stated earlier, we’re not angling to sue for millions in damages...just get reimbursed for EWPs and a hope, fleeting though it might be, that this wouldn’t happen to another customer. If writing a letter to the credit union CEO/President will get that done, then “mission accomplished”...and we would also close our accounts with them.
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Old 03-21-2018, 09:48 PM   #20
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As far as getting it to not happen again, might as well forget about that...

When I was a trustee I had a trust where there were a few large companies that were to send in money on a demand basis... well, most sent a wire, but one sent a check... but the check was made out to the bank and not the trust, with NO explanation for what it was (also, it was over a million dollars).... well, sent to AR and they looked high and low to put the money to something... then sent to retail to see if there was an account to deposit the money into... and finally to our area 3 months later....

So, client calls us to their office to ream us out for not having a process in place to get said check to the trust in a timely manner... my boss came with me.... the head of the company kept saying that 'this cannot happen again' and I said that if they were going to send a check with no info I am sure it will... finally boss said that she would talk to mgmt and 'it would not happen again'...

After leaving I asked about her stmt.... she said that we would do nothing... the guy wanted to think he made a difference and she gave that to him.... that if it did happen again they would take their business someplace else anyhow so that was that... next time offending company sent in a wire and all was good.... BTW, the trust said they were supposed to wire the money so they made the mistake.....
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