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When representing a homeowner selling a house, one of my obligations is to secure a “payoff letter” for any mortgages that must be paid in full at closing.

It’s usually a routine matter, where the mortgage holder advises how much it expects to get back on a given day, plus a “per-diem” interest figure in case payment arrives at the lender later than contemplated.

When I receive a letter, I fax it to the title company, as it is ultimately their responsibility to verify the number and deliver the payoff check.  So that’s what I did a couple of weeks back.

The payoff letter advised that as of August 30th, the payoff amount was $161, 265.pp, with a per-diem of about $45.00/day.  So to calculate what was due at the closing two days later, I added $180.00 (two days over the letter amount, plus two for forwarding the money).  I put $162,445.00 down on my closing worksheet to ensure there’d be enough money at the closing to cover the mortgage.

Imagine my surprise when the title closer sent me an e-mail with a marked-up payoff attached, showing the amount owed had decreased! He’d jotted right across the top: “verified $160,955 due, good thru 9/3/10.”

I checked with my client and no subsequent mortgage payment had been made to reduce the balance due.  I asked the closer is he could “double-check” for me, as I just wanted to be certain.  The response was that he was really good at his job and I could trust his accuracy!

I still believed the number was wrong, and so I explicitly told my client to be prepared to pony up $1,490.00 more at the closing.  That never happened; documents were exchanged, bank checks were passed around, and no one ever asked for more money.

One week later, my client gets a bill from his mortgage holder for $1,490.00!  Does he pay what he owes, based on our discussion the prior week?  No, he sends it to me and asks if he has to pay. When I advise this very, very nice man that yes, he does have to pay, he sounds annoyed that he’ll have to part with the $1,490.00 (plus nine cents per day interest until his bank gets the balance due).

“This is a big surprise,” he says.  Though when I remind him that I knew before the closing the payoff was underfunded, he says “Oh, that’s right…gee, I wish you were wrong.”

 ***

Happy Birthday, Bryan!

 

Comments

( 2 comments — Leave a comment )
how2buildcredit
Sep. 16th, 2010 01:57 pm (UTC)
How to Build Credit
I still believed the number was wrong, and so I explicitly told my client to be prepared to pony up $1,490.00 more at the closing. That never happened; documents were exchanged, bank checks were passed around, and no one ever asked for more money...how did you know it?
real_lawyer
Sep. 16th, 2010 11:37 pm (UTC)
Re: How to Build Credit
If someone doesn't make a mortgage payment to reduce a payoff amount, the number on the letter never goes down. It only goes up when daily interest is added.
( 2 comments — Leave a comment )

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