Loan Finance Agreement Terms

[Yuke]

What is the name of your state? CA

I recently applied for a mortgage loan with a lender and subsequently decided not to go with them. The lender is now threatening to charge me 1% of the loan amount I applied for as the application fee. Here are the relevant contract terms. I think all I owe is the $350, of which I have already paid.

"APPLICATION FEE

A non-refundable application fee of 1% is charged for the initial cost of applying and preparing your loan package to submit for commitment. This fee is applicable to your actual costs and application fee at the time of the settlement of your comitment. Business acknowledges the receipt of $350 of the non-refundable Application fee. I authorize LENDER to electronically debit my account in the amount of $350. Borrower agrees that the full application fee and actual expense incurred by the licensee in connection with the preparation for this loan are due and payable; however LENDER and agreed that a lender flat fee of $1,495.00 is guaranteed upon successful completion of this loan, plus applicable appraisal overage due or you may select your own certified appraiser."

It seems to me any more monies other than the $350 are contingent on the "successful completion of the loan." Alternatively, the language of the contract indicates that $350 is the entire application fee.

Thanks in advance.

 

[seniorjudge]

What is the name of your state? CA

I recently applied for a mortgage loan with a lender and subsequently decided not to go with them. The lender is now threatening to charge me 1% of the loan amount I applied for as the application fee. Here are the relevant contract terms. I think all I owe is the $350, of which I have already paid.

"APPLICATION FEE

A non-refundable application fee of 1% is charged for the initial cost of applying and preparing your loan package to submit for commitment. This fee is applicable to your actual costs and application fee at the time of the settlement of your comitment. Business acknowledges the receipt of $350 of the non-refundable Application fee. I authorize LENDER to electronically debit my account in the amount of $350. Borrower agrees that the full application fee and actual expense incurred by the licensee in connection with the preparation for this loan are due and payable; however LENDER and agreed that a lender flat fee of $1,495.00 is guaranteed upon successful completion of this loan, plus applicable appraisal overage due or you may select your own certified appraiser."

It seems to me any more monies other than the $350 are contingent on the "successful completion of the loan." Alternatively, the language of the contract indicates that $350 is the entire application fee.

Thanks in advance.

Q: The lender is now threatening to charge me 1% of the loan amount I applied for as the application fee.

A: That is exactly what the application called for: "A non-refundable application fee of 1% is charged for the initial cost of applying and preparing your loan package to submit for commitment."


Q: It seems to me any more monies other than the $350 are contingent on the "successful completion of the loan."

A: There is no language like that in what you quoted. It says that if the loan is successful, then you pay a flat fee of $1,495.00; nowhere does it say that if the loan is not successful then all you owe is $350.

 

[Yuke]

I read it like this.

Borrower agrees that the full application fee and actual expense incurred by the licensee in connection with the preparation for this loan are due and payable... upon successful completion of this loan...

Do I have a credible argument?

Moreover, the contract states they have received the $350 loan application fee.

 

[I AM ALWAYS LIABLE]

My response:

Hey, Yuke. I thought you have said in the past that you're an attorney. Am I wrong? If not, then certainly you can discern the meaning of your own contract.

IAAL

 

[Yuke]

My response:

Hey, Yuke. I thought you have said in the past that you're an attorney. Am I wrong? If not, then certainly you can discern the meaning of your own contract.

IAAL

Are you a sole practitioner? You sound like you've never asked the opinion of another attorney. And I think I said that 2-3 years ago, the last time I posted here. Do you write patents? I understand you are an attorney or am I wrong?

 

[I AM ALWAYS LIABLE]

Are you a sole practitioner? You sound like you've never asked the opinion of another attorney. And I think I said that 2-3 years ago, the last time I posted here. Do you write patents? I understand you are an attorney or am I wrong?

My response:

Ah, touche'. However, let me throw it right back at you: Obviously, you believed your were "attorney enough" when you read and signed the contract. But, you knew that you knew nothing about contract law, or at the very least, forgot what you learned about contract law.

So, instead of running the contract past your own attorney (who, presumably, knows contract law) you are now finding out that you were incompetent in this area, and are in a position of losing quite a bit of money.

I would never presume to know patent law and do something in that area BEFORE I had a consultation with a patent attorney. In other words, this is not the time to be asking questions - - as it may be too late for that.

Now, I can understand your ignorance of tort law, because a tort usually occurs when it's least expected and you have no time for a consultation beforehand. But, c'mon - - we're talking about a contract here, where you would have had plenty of time to go over the terms and conditions with your attorney prior to signing the same.

IAAL

 

[Yuke]

My response:

Ah, touche'. However, let me throw it right back at you: Obviously, you believed your were "attorney enough" when you read and signed the contract. But, you knew that you knew nothing about contract law, or at the very least, forgot what you learned about contract law.

So, instead of running the contract past your own attorney (who, presumably, knows contract law) you are now finding out that you were incompetent in this area, and are in a position of losing quite a bit of money.

I would never presume to know patent law and do something in that area BEFORE I had a consultation with a patent attorney. In other words, this is not the time to be asking questions - - as it may be too late for that.

Now, I can understand your ignorance of tort law, because a tort usually occurs when it's least expected and you have no time for a consultation beforehand. But, c'mon - - we're talking about a contract here, where you would have had plenty of time to go over the terms and conditions with your attorney prior to signing the same.

IAAL

What? That made no sense. Whether a tort happens when you expect, or when you don't expect it, your knowledge is the same. Also, I don't think you would know patent law after a [single] consultation either.

And to address your point, this is the best time to ask questions, as I am deciding how much to settle this for, the amount being reflective of how strong my position is.

Looking at the contract terms, 1% was stated as a application fee, but $350 was accepted as the application fee because the 1% was never remitted to start the application process, $350 was. Performance of processing the application was initiated by the payment of the application fee which was accepted as $350.

The terms are confusing and the confusion should be construed against the Lender/writer. The $1495 is referred to as a lender flat fee, not an application fee, so I have no idea what the $1495 is supposed to refer to, but the wording suggests it is paid in lieu of the application fee. However one thing I do know, that the $1495 is contingent upon the funding of the loan.

Btw- who the hell is the licensee?

 

[I AM ALWAYS LIABLE]

What? That made no sense. Whether a tort happens when you expect, or when you don't expect it, your knowledge is the same. Also, I don't think you would know patent law after a [single] consultation either.

My response:

Yeah, I know it makes no sense - - to someone who doesn't understand the English language.

Have a nice evening, Yuke. Then, tomorrow, consult with an attorney; preferably someone who knows more than you about contracts.

IAAL

 

[seniorjudge]

I read it like this.

Borrower agrees that the full application fee and actual expense incurred by the licensee in connection with the preparation for this loan are due and payable... upon successful completion of this loan...

Do I have a credible argument?

Moreover, the contract states they have received the $350 loan application fee.

No, you have no credible argument.

I have read a lot of these kinds of contracts and am surprised by the clarity of this one.

 

[Yuke]

No, you have no credible argument.

I have read a lot of these kinds of contracts and am surprised by the clarity of this one.

On another document entitled "Statement of Disclosures" it states that "the application fee is paid at the time of the application." Since the application period ended, and I've already been approved, I don't see how they can ask for any more money. They agreed to accept the $350 and the lender fee as a substitute for the 1% application fee. I won't be using them as my lender, so they don't get the lender fee.

Please reread the contract terms, the lender fee is not the application fee, it is a substitute.

 

[Yuke]

Q: It seems to me any more monies other than the $350 are contingent on the "successful completion of the loan."

A: There is no language like that in what you quoted. It says that if the loan is successful, then you pay a flat fee of $1,495.00; nowhere does it say that if the loan is not successful then all you owe is $350.

Nowhere does it state that the application fee is revived if the loan is not successful as well. If you read the contract terms "carefully" the lender has waived the 1% application fee in lieu of a $350 application fee and a lender fee in the amount of $1495. Nowhere does it state that if I don't go through with the loan, that the 1% fee is revived.

 

[longneck]

I'm not a lawyer or anything, but I once worked in the IT department of a law firm. Here's what I noticed.

This line...

A non-refundable application fee of 1% is charged

...means your application fee is $x. This line...

Business acknowledges the receipt of $350 of the non-refundable Application fee

...means you are paying $350 towards the application fee. This line does not change the fact that the application fee is still $x.

Therefore you owe $x - $350.

And this line...

Borrower agrees that the full application fee and actual expense incurred by the licensee in connection with the preparation for this loan are due and payable

...means that you agree to pay the balance due ($x - $350). (Why would they refer to the "full application fee" if the $350 constitued the whole fee? Because it doesn't!)

As an analogy (albeit a bad one), say you had a painter paint your house a custom mix color that can't be returned. The painter asks for $50 up front to go buy the paint, with the agreement that you will buy the paint no matter what, even if you tell him to not paint the house. Oh, and he gets to keep the paint. So you give him $50, he goes to Home Depot and spends $150 on paint. When he comes back, you tell him to not paint the house. In this situation, who gets the paint and who gets the money?

Answer: the painter gets the paint and you owe him $100.

 

[Yuke]

I'm not a lawyer or anything, but I once worked in the IT department of a law firm. Here's what I noticed.

This line...

A non-refundable application fee of 1% is charged

...means your application fee is $x. This line...

Business acknowledges the receipt of $350 of the non-refundable Application fee

...means you are paying $350 towards the application fee. This line does not change the fact that the application fee is still $x.

Therefore you owe $x - $350.

And this line...

Borrower agrees that the full application fee and actual expense incurred by the licensee in connection with the preparation for this loan are due and payable

...means that you agree to pay the balance due ($x - $350). (Why would they refer to the "full application fee" if the $350 constitued the whole fee? Because it doesn't!)

As an analogy (albeit a bad one), say you had a painter paint your house a custom mix color that can't be returned. The painter asks for $50 up front to go buy the paint, with the agreement that you will buy the paint no matter what, even if you tell him to not paint the house. Oh, and he gets to keep the paint. So you give him $50, he goes to Home Depot and spends $150 on paint. When he comes back, you tell him to not paint the house. In this situation, who gets the paint and who gets the money?

Answer: the painter gets the paint and you owe him $100.

Good points, but you need to read on.

Borrower agrees that the full application fee and actual expense incurred by the licensee in connection with the preparation for this loan are due and payable; however however LENDER and agreed that a lender flat fee of $1,495.00 is guaranteed upon successful completion of this loan...

this is an express waiver of the balance of the application in lieu of the lender fee. The application fee is applied towards your actual, costs, while the lender fee has no such provision, thus there is an equitable replacement, and the 1% application fee becomes merely a recital.

 

[Yuke]

As an analogy (albeit a bad one), say you had a painter paint your house a custom mix color that can't be returned. The painter asks for $50 up front to go buy the paint, with the agreement that you will buy the paint no matter what, even if you tell him to not paint the house. Oh, and he gets to keep the paint. So you give him $50, he goes to Home Depot and spends $150 on paint. When he comes back, you tell him to not paint the house. In this situation, who gets the paint and who gets the money?

Answer: the painter gets the paint and you owe him $100.
.

A better analogy to this case would be to say, I gave the painter $50 to buy paint. If choose not to use him to paint the house, he can keep the paint, but I don't get my $50 back.

 

[longneck]

I read that differently, but before I give you my interprtation, please check the accuracy of your original post. There is some bad grammer in there that leads me to believe you didn't copy your contract exactly. Specifically:

"...however LENDER and agreed that a lender flat fee of..."

don't make sense.