Bold Funding is at least guilty of this practice. Follow up with Robert Grieser. His staff may be ablr to help you more on this situation.
SUMMARY: This letter is intended to alert mortgage brokers and lenders in Ohio of the position of the Ohio Division of Financial Institutions that it is improper and dishonest conduct, in violation of Ohio R.C. §1322.07(C), to counsel and encourage prospective borrowers to not make payments on their current mortgages or other loan obligations pending the approval of the new loans sought by the borrowers.
Ohio Revised Code § 1322.07(C)
This provision of the Mortgage Broker Act is intended to broadly prevent dishonest conduct that unfairly misleads borrowers or is otherwise improper.
Urging Non-Payment as Dishonest or Improper Conduct
At some point in refinancing a mortgage loan, especially a loan that includes consolidation of other consumer loans, various payoff amounts will have to be established in order to determine the funds due at loan closing. However, it has become clear that some mortgage brokers and lenders are advising borrowers not to pay their current loan obligations, even though final approval of the consumer’s loan application has not yet come through, or the loan closing has been postponed or rescheduled.
When loans do not close in a timely manner or the terms substantively change at the time of the closing, borrowers relying on such non-payment advice or representations are often placed in difficult and distressed financial positions. This is particularly true where the borrowers are in the subprime credit market. Having failed to make timely payments on their current obligations, the borrowers may now face potential foreclosure and damage to their credit ratings. The borrowers in effect are placed under duress to obtain new loans, despite the fact that they may contain higher rates, costs, or less advantageous terms than their current loans. Urging non-payment under these circumstances is thus an improper and dishonest practice, which this office believes is a violation of Ohio R.C. §1322.07
Note: That once a loan has been approved and where circumstances warrant, the mere fact that the broker or lender suggests that the borrower delay a payment, in and if itself, is not viewed by this office to be improper or dishonest provided that: 1) it is made clear the consumer should set aside or otherwise escrow the payment(s) so the money is available in the event the loan does not close as initially planned and 2) the closing date of the new loan does not cause the borrower to incur a late charge.
ACTION: Registrants and licensees must review their procedures to ensure compliance with the current state law prohibiting improper or dishonest conduct in mortgage brokering/lending as it relates to advising consumers to refrain from making timely payments on their current mortgages or other consumer debts and adjust their policies and practices accordingly to conform with this letter.
CONTACT: Robert Grieser (614) 728-8400