Language Barrier Causes Prepayment Penalties?

[teng27]

Iowa

My parents signed a loan note w/out "knowingly" the content of the contract (i.e. the prepayment penalty). They do not read or write English.

They are looking to refinance, but the current mortgage company is charging a prepayment penalty. Is the contract invalid if the signers did not understand the content? Can the prepayment penalty still be applied under this situation?

 

[HomeGuru]

Give me a little history.
Did they go through a mortgage broker or direct with a lender? When did they close their loan? Who worked with them on their loan application and explained to them all the required application papers that needed to be signed. Who explained to them the tuth-in-lending statement and good fath estimate. Who explained to them at closing the mortgage, note etc. Did the notary public speak the same language as them?

 

[teng27]

The loan was closed three years ago. My brother had his old college friend, who is a loan rep, file the loan application. I don't remember much of the details (call it stupid/naiveness), but just did what was asked of me from the loan rep. (i.e. fax check stubs for my parents, checking acct. info etc).

I never saw "a good faith estimate," - back then I didn't know what one was. I only recall the loan rep calling me and telling me that it was a 10% fixed for 5 years with a balloon payment at the end.

Someone called my brother to tell him about the closing date and said that my parents would need a lawyer for the closing. It was necessary. They asked us to recommend a lawyer in town - which my brother provided.

Just my parents went to the closing. According to my mom, she said there were about 40 pages, so the lawyer just went over the basics and told them where to sign. (And no, he doesn't speak their language).

She and my father understood that it was a mortgage loan, and that it was 10% fixed for 5 years. Beside that fact, the rest were just fine lines.

 

[HomeGuru]

Let's think about this for a minute. There were about 40 pages of loan and closing documents explained to them (both cannot speak, read and/or write English) by an attorney who does not speak their language.
How did the attorney explain things to them and how were they supposed to understand everything?

I suggest you look for the title/escrow officer, the notary public and this attorney and have them do some explaining.

 

[teng27]

I spoke with a represenative from the current loan company and presented my situation to them. They said, I'm barking up the wrong tree b/c they bought the loan and did not close the loan with my parents. They suggested that I go back to the origination.

So, I tried to call the original company, only to find out that they had closed down two years ago due to some legal problems (i.e. fraud). Nice.

Two mortgage brokers from " Funding Inc. allegedly prepared phony contracts with inflated prices... An appraiser and a title company owner were indicted on 14 counts of mail and wire fraud.... Twenty wholesale lenders who funded the phony loans are awaiting settlement."

Who/ Where do I go next to find somebody to accept some sort of responsibilty? Do I go to a lawyer now?!

 

[HomeGuru]

Sounds like a 3 ring circus.
Yes, now you need an attorney. Find one that speaks their language.

 

[teng27]

Yea, what a circus alright. Thanks for your help, I appreciate it!

 

[HomeGuru]

Please keep us posted.

 

[teng27]

Not very positive.

I presented my parents case to a lawyer in Iowa, and he was somewhat hesitant and unsure about what to do. He said this case may be more expensive to go after than just paying the prepayment penalty.

He said he would need to look at the old mortgage note and a letter from the mortgage company that i'm refinancing with (i.e. the status of the loan now, is it approved?).

In addition, he said b/c my parents signed the old mortgage note with a lawyer that WE had recommended, it would be tough to argue.

He suggested not making any more monthly payments to the current mortgage company, and putting the loan into "default." It would take a couple months, and give bad credit history to my parents, but at least we can negotiate some sort of final payment for the loan.

This is suppose to be a very reputable firm...w/ lawyers graduating from Harvard magna cum laude.

It sure doesn't sound like it!

Present it elsewhere, or forget about it???

 

[HomeGuru]

Find another attorney and make sure that person does not give bad advice like the one you talked to.