Countrywide May Have Overcharged You When You Sold Your Home
We are investigating complaints from borrowers that Countrywide improperly charged what is known as a “soft” prepayment penalty to homeowners who recently sold their homes. Some home loans allow lenders to charge penalty fees if a mortgage is paid in full, before it is due, as the result of refinancing. On the other hand, many of these loans do not allow the lender to charge a penalty if the mortgage is paid in full because you sold your home. Despite not being allowed to charge the “soft” prepayment penalty when you sell your home, our investigation shows that the fee often shows up anyway.
penalties can range well over $10,000; however, many people do not notice
the charge when they sell their home. Closing on a home can be an emotional
and confusing process, and unless you know what to look for, a “soft” prepayment
penalty may not be obvious. Below are
a few examples you can use to determine whether you were the victim of an
improper “soft” prepay. If you think
you may have been overcharged when you sold your home and are interested in
learning your rights, either email
Here are two examples of where a “soft” pre-payment penalty may show up on your mortgage:
Example 1 --- The HUD-1
The “HUD 1”, also know as the “U.S. Department of Housing and Urban Development Form 1” or the “Settlement Statement” is a form used by the settlement agent (also called the closing agent) to itemize all charges made against the borrower and seller for a real estate transaction. It gives a complete list of where the money in the home purchase is going. Here is an example:
In the HUD-1 above we’ve highlighted the name of the document as well as lines 504 and 505 where the prepayment penalty may show up. As you see, however, lines 504 and 505 do not itemize the charges that make up the amounts. For that information, there will be an attachment breaking down the various charges that add up to the amounts on lines 504 and 505. Here is a sample itemization showing a prepayment penalty:
As you can see, the attachment itemizes line 504 and shows that the lender added a $6,237.00 penalty to the amount required to “Payoff of First Mortgage Loan.” If your loan has a “soft” prepay clause, there should be no prepayment penalty on this line or line 505.
Example 2 --- Estimated Closing Statement
As part of your closing documents you should have an “Estimated Closing Statement” such as that shown below. Most likely there will be a section titled “Payoffs” as highlighted. If there is a line item for a prepayment penalty in the “Payoff” section, then you may have been overcharged by that amount at your closing.
If you are still not sure whether you were charged a prepayment penalty, feel free to email Chuck Marshall, or call us at (415) 477-6700. Make sure to attach a copy of your mortgage note and any documents showing what you believe may be a prepayment penalty. We will be more than happy to assist you.