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  1. #1
    Join Date
    Apr 2012

    Default Recovering House Deposit from Bank For Failing to Finance Before Closing

    I'm literally going to small claims court tomorrow to try to recover the deposit I placed on a second home I was purchasing as a rental property. To give a summary of the situation: I currently had an existing equity loan with the bank on the house I live in, that was completed in April of 2011. In September I made the decision to purchase a rental property, with a $15,000 portion to be added to my existing equity loan and the remaining portion being a traditional mortgage loan.

    I have a perfect credit history, my job status has not changed and I have over fifty emails documenting conversations with one of three different people that handled the loan. I got approved for the mortgage loan and after receiving no indication of an issue, eight days after the original closing date got declined for the home equity loan. They then proceeded to then approve me for the loan but nearly 30 days after the original closing date and well beyond a time acceptable for the seller. Below I put together a list of the various things the bank managed to do. Any advice on if I actually have a case or the things I should focus on would be greatly appreciated.

    I'm filing the this claim for the following expenses:

    $3425 on the deposit placed on 56 Munson Ave. that was lost
    $650 lawyer fees
    $350 home inspection

    TD Bank was directly responsible for these expenses, due to the following reasons:

    -To avoid any issues with the loan, upon filing the loan I made it clear that as a salesman at AT&T my income was divided into a base salary and commission. On Sept. 23, 2011 I was told by Mary Cowhey of TD Bank that the reason my home equity loan was declined was due to the fact that the bank could legally only use my base salary when determining my 2009 and 2010 income, despite making over $70,000 in 2010 and over $50,000 YTD in 2011 (as of August, with the final YTD exceeding $70,000).

    If this was indeed the case, it was something that could have been determined prior to me ever
    even filing the loan application. The bank had the information necessary to make this determination
    and the individuals processing the loan, either weren't aware of the issue or didn't communicate
    it to the person making the final decision.

    -Nearly a month after the scheduled closing date of Sept. 15th, 2011 TD Bank contacted me
    to tell me that they would now in fact be able to process the loan. This is well beyond
    the time period necessary to close the home purchase and contradicted everything I was told
    earlier by Mary Cowhey.

    -During the course of the two loans I sent over 50 email correspondences with the individuals
    processing the loans. I asked numerous times the status of the loans, repeatedly asked if there was
    any additional paperwork or information they required from me. I made every effort to communicate
    with those processing the loan and provided all necessary paperwork in a timely fashion.

    -Multiple times I had to fax loan documents that got misplaced or weren't filed, despite being
    faxed with a cover letter containing the loan application number, my name and the name of the
    intended recipient. I eventually had to resort to hand delivering the documents to ensure that
    everything got filed properly.

    -Multiple times after being told that the bank had all the necessary paperwork to complete the loan, I contacted the bank to get an update on the closing date of the loan and only after I contacted
    them was I told that I needed an additional form they failed to mention. I didn't even find out the loan
    got declined until I called to check the status of the loan.

    -During the course of the mortgage loan I had three different loan processors, including one
    that was out of office for a ten day period. I had multiple phone calls and emails that simply never got returned, in addition to forms that got misplaced.

    -Earlier in 2011 I got approved for a home equity loan through the very same Torrington TD Bank
    branch. The loan was taken out to pay back in full my parent's, who had assisted in the purchase
    of my house. This current loan got approved with absolutely no issue. I mention this because not only would the same income guidelines have been followed to approve the loan, but also because
    it means TD Bank had the opportunity to view all my financial information in this loan as well. These documents included the same 2009 and 2010 W-2's that were being used in the most recent home equity loan application and included pay stubs for the time period, that clearly indicate my hourly rate.

    -The loan being declined was not credit related. I have a credit score of approximately 743 (which is after the hard credit pulls from these loans) and have no outstanding debts on any credit cards, vehicles, student loans etc.

    -At no point over the course of the application process was I given any indication that approval of
    the loan would be an issue, up until the actual date that it got declined. Due to the loan not being declined until eight days after the scheduled closing date of the property being purchased, I had
    no way to recover the deposit that was placed on the home.

  2. #2
    Join Date
    Sep 2011

    Default Re: Recovering House Deposit from Bank

    You will likely lose based on the loan paperwork, which likely has disclaimers regarding their choice to grant, not grant, rescind or call any loan.

  3. #3
    Join Date
    Apr 2012

    Default Re: Recovering House Deposit from Bank

    I should also mention, the bank has offered to initially settle for $700 and then settle for $1250 prior to the court date. It doesn't seem like something they'd do if they felt they weren't liable, but it could be them just not wanting to send someone to court.

    I just heard back and the offer is now up to $1750, so it looks like that kind of answers that question. It doesn't seem like something they would offer out of the goodness of their heart. Any thoughts?

  4. #4
    Join Date
    Sep 2005
    Behind a Desk

    Default Re: Recovering House Deposit from Bank

    What does your contract - the loan application - say about the amount of time it may take to process the loan, and closing dates? Did you have a commitment lender from the bank? (Not pre-approval, which means next-to-nothing, but actual commitment?)

    The settlement offer sounds to me like "nuisance value" - they'll end up paying their lawyer more than that to fight the lawsuit. If they do go to trial they'll be out to win.

  5. #5
    Join Date
    Apr 2012

    Default Re: Recovering House Deposit from Bank For Failing to Finance Before Closing

    Well, they had nearly two months to process the equity loan itself and didn't actually decline the loan until 8 days after the closing date (the mortgage loan was approved). They then approved me for the same loan 30 days later that they previously declined, with extremely minor variation. I'm in the process of reading through everything, but I'm sure anything the bank puts together is air-tight as far as the contract. I guess the question is if they fail to do due diligence on their end if it voids any contract. I have over fifty emails documented and at no point do they give any indication the loan was going to be a problem, especially since they used my existing home appraisal from the previous equity loan.

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