where did the additional funds go?! (kind of long, please answer!)?

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My husband refinanced our home with wells fargo financial (NOT the same as the actual Wells Fargo, we found out a few weeks ago) on a 12 year note in 2008. it was originally a 30 year term. we had been dating for about 6 months, so it was really none of my business at the time. the payment went from a little under 500 per month to 950.80 per month. turns out the interest rate is 10%. the more I dug the more pure crap I found. the original rate was 10.82%, they sold him $ 3060 worth of points and it sits at 10%.the total paid to the other mortgage company was about 61,000. closing was about 3000. there was also a small personal loan rolled into that for about another 3000. that total should be about 70,000, right? WRONG!! there was like 9,400 on the “amount paid to borrower” line, bringing our total financed to 79,000!!! problem is, he didn’t receive any money, not a single penny! He did receive what he thought were credit cards from WFF on like 3 different occasions, but he shredded and trashed them because he thought they were just credit cards and didn’t want them. were they some kind of prepaid debit card with a loaded balance of 9400 bucks? if so how do we access it now, after 3 years? we have paid 10% on it and could really use it to refinance! there is no credit card reporting on his credit, but we haven’t gotten any statements from a WFF account saying we have a balance, which makes me think they were prepaid debit cards. they weren’t even activated! we are fairly confused, and I will be calling WFF and our loan officer at Churchill mortgage first thing monday morning, but I thought I’d try to dig up some info in the mean time. any ideas??? what an awful company to have dealt with! obviously we aren’t the only ones, from what I’ve googled.

by the way, Churchill Mortgage did not sell us this garbage, they are who we are working with to refinance and have been WONDERFUL!

2 Comments
  1. Reply
    Dave W
    February 18, 2011 at 7:45 am

    Without seeing the actual settlement statement, it’s hard to be sure, but from what you describe, it does sound like that he did a “cash out” refinance. As far as I know, those are typically paid with a check made out to the borrower at the time of closing. I’ve never heard of that money being paid via pre-paid debit cards. That’s not to say it couldn’t happen – financial companies got very “creative” (in a bad way) there for awhile – but I’ve never heard of anything like that.

    It sounds like your new husband is not very financially knowledgeable. (It sounds like you either already are or are well on your way, so hopefully he will realize how lucky he is to have someone like you that’s probably going to save him a lot of money.) From everything you say, he got a really bad deal there. In 2008, 10.82% or even 10% was WAY WAY higher than going interest rates. Unless his credit rating was horrible at the time, I think he got a very bad deal on the interest rate. Also, $ 3000+ in points on a $ 79,000 loan is a LOT of points (about 4) to lower the rate by just 0.82%. Another bad deal. I personally try to avoid points if at all possible. While in some cases, the cost of the points MIGHT be offset by interest savings over the life of the loan, the reality is that most people don’t keep the loan for the full duration so the interest savings is not going to be as much as it might look like it will be. In his case, he paid $ 3000+ to save 0.82% on a $ 79000 loan for about 3 years which if you do the math is less than $ 2000, so he’d have been better off with the 10.82% rate and no points.

    I don’t think anyone that understood what was going on would agree to the kind of a deal he got, which means there are lots of possibilities for that “missing” $ 9400. Perhaps he was given a check and didn’t realize it and it was put in with the other documents he was given at the closing? Is there anyone that was with him at the time of the closing that you could talk with now to find out about that? A closing can be overwhelming for anyone without a firm understanding of what’s going on, so perhaps he missed some key detail about where that $ 9400 was going. He shouldn’t have even been getting cash out unless he asked for it – and if he did ask for it, it seems that he would have asked about where it was at the time of the closing (or soon after) if he didn’t get it.

    If you can’t get a straight answer from Wells Fargo Financial, I suppose you could also take the original closing statement to the person you are working with at Churchill and ask for their opinion. It’s not their job to evaluate your prior loan so they might tell you they can’t help you with that, but you could probably ask them what are all the possible ways that $ 9400 could have been paid and they might answer that. My guess is that he got a check and either lost it or deposited it somewhere and doesn’t remember.

    I suppose you could ask the Churchill person to contact Wells Fargo Financial (if you didn’t get anywhere with them) to find out whether that $ 9400 was ever taken (either via check or some other way) and if not, see if they will reissue the check (which they probably won’t) or reduce the balance on the loan. My guess is that they’ll probably claim they have no records of whether the check was cashed and they can’t do anything. I’m not sure of the laws regarding something like that. For that amount of money, it might be worth contacting an attorney if you, the Churchill person, and Wells Fargo are unable to come up with a reasonable explanation.

    There’s an expensive lesson here. Always make sure you understand what you are doing when doing financial transactions like this. If you don’t understand, ask someone financially knowledgeable to help you understand. I wouldn’t ever trust what the person on the other side of the transaction is telling me (unless I understand it myself and it makes sense) because far too many people are less than honest when it comes to anything where they’re making a profit.

    Good luck. I hope you’re able to get it straightened out. Feel free to contact me through my profile if you want to. I’d be curious about what you find out, particularly if that $ 9400 was paid some way other than a check at time of closing.

  2. Reply
    E&L
    February 18, 2011 at 7:46 am

    The settlement statement should have been a line by line explanation of all expenses on the loan. When you refinance, the loan company will ‘refund’ you the balance you have in escrow for taxes and insurance (which could reflect the $ 9,400). On the other hand, they will collect interest thru the end of the month and about 3-5 months of taxes and insurance at closing which could make the $ 9,400 a wash in the long run.

    If he signed documents which showed he received $ 9,400 then there should have been an explanation in the loan documents of how he was to receive it. By check, wire, etc. I question WHY he would sign a document saying he got nearly $ 10,000 if he did not receive a cent. I would have stopped right there until it was explained to me.

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