Bank responsible for inconvenience due to undisclosed mortgage documents
A couple decided to sell their home in a major city and relocate to a smaller town. They made arrangements through their longtime banker to apply for mortgage financing for their new home. The mortgage application was completed and approved by the bank. Prior to the mortgage closing date, a bank representative met with the couple to finalize the application and insurance documentation. The couple then made arrangements for moving.
On the closing date, also moving day, the couple received a phone call from their lawyer. He had just been informed by the bank of a condition on the mortgage requiring the couple repay nearly $65,000 in loans they had with other banks before it would release any funds.
This was the first time the couple had heard of the condition. They immediately contacted the banker who had arranged the mortgage. He told them he was not aware of it either. When the couple asked the bank to remove the condition, they were advised this was not possible and that $65,000 had to be paid before any funds could be advanced. The purchase of the new residence was part of a series of property sales and closings. Any postponement of the mortgage closing could cause serious problems and lead to potential lawsuits.
To meet closing requirements, the couple had to make hurried arrangements with another financial institution to increase their existing line of credit. While they were away arranging this financing, the movers packed and shipped items meant to be left at their old house. Subsequently, these items had to be shipped back at the couple's expense.
After they had moved to their new house, the couple made numerous calls and visits to their bank branch to find out how the bank could have neglected to inform them about the mortgage condition. They also requested copies of the mortgage documents they had signed. It took four months and many additional requests for the bank to provide the documents.
When the couple reviewed the bank's mortgage documentation, a Conditional Approval form was found indicating the repayment of $65,000 in loans was required prior to the mortgage funds being released. While the form was allegedly signed by the couple, they said they had not seen nor signed the form. The signatures on the form had little resemblance to the couple's actual signatures.
The bank did not offer an acceptable explanation of the signatures on the form. The couple then hired a lawyer to help them in their dispute with the bank. They also made further trips to the bank's offices to meet with senior personnel in an effort to get an explanation of the bank's actions. The couple didn't get satisfactory answers, but the bank did offer to pay $11,000 as a goodwill gesture if the couple signed a release. The couple rejected the offer and asked OBSI to investigate.
OBSI reviewed the Conditional Approval form and concluded the couple had not signed the document. Our investigation also determined that certain bank personnel knew about the conditions of approval, but did not convey these to the couple before the closing date.
We determined the bank's actions resulted in increased moving, transportation and legal costs for the couple. We also concluded they caused the couple to suffer considerable inconvenience, due not only to the undisclosed mortgage condition, but also to the bank's unwillingness to provide any requested information in a timely manner.
OBSI recommended the bank reimburse the couple $11,430 for actual expenses. We also recommended that the bank compensate the couple $4,000 for the inconvenience they suffered because of the bank's actions. The bank agreed.