Construction Loan

We recently built a new home in Massachusetts. We took out a construction loan. The house was not finished because the builder bailed out on us. One of the sub contractors put a lien on our property. The bank then converted the consturction loan to a conventional loan for the full amount of the loan. However they were still holding back 13000. Can they get away with this type of practice. When we asked them for the rest of the money for wich we are now paying for, they refused to give it to us, because there was a lien against the property. I do not feel this is a valid lien. We were not the ones to hire this sub, it was the General Contractor. Anyway all these people have made it very difficult for us to finish or house.

[HomeGuru]

Yes, the mortgage lender has every right to hold back funds to insure that the lien matter is resolved. You must prove that the sub is not entitled to the money and settle this separate issue to have the lien removed from title.

I am looking for the legality of this institution being able to convert a note from one type to the other. 1 they should have released the rest of the money. or 2 they should have reduced the principle amout to that which had been drawn.

Under the construction loan I agree they can with hold monies. When they converted it to a conventional note they should have reduced the amount to the amount which was drawn to date or kept the construction note open. Now we are paying for money we never received.