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Pre-payment Penalty to Refinance

By Christopher Combs | April 18, 2016

Pre-payment Penalty to Refinance   Question: We refinanced the original loan on our Prescott home to get some extra cash. The documents we signed for the original loan required a 10% pre-payment penalty if we paid off the original loan early. The original loan was $180,000, so when we refinanced we paid the $18,000 pre-payment penalty. Did we have to pay this $18,000 pre-payment penalty under the Dodd-Frank Act? Our accountant said that the Dodd-Frank Act does not prohibit pre payment penalties, but that we are entitled to an income tax deduction for this $18,000 pre-payment penalty. Is our accountant right?…


Seller Financing Disclosure

By Christopher Combs | January 25, 2016

 Seller Financing Disclosure   Question: My father owns his Glendale home free and clear. He is moving next month to go back to Illinois to live with his first wife. My father is going to sell the home now to me, and I will make payments to him at 6% interest for the next ten years. My understanding is that there is a new law that requires my father as a mortgage lender to make all types of disclosures of this loan to me. What are those disclosures? Does my father have to make those disclosures to me?   Answer:…


Decree Wording Helps Ex-wife Get New Home Loan

By Christopher Combs | October 4, 2015

  Question:  In a recent column you said that an ex-wife would not be able to qualify for a mortgage loan for a new home in Chandler, even though the ex-husband in the divorce decree was awarded the family home and agreed to be 100 percent responsible for the mortgage loan on the family home.  Under similar circumstances, however, I was able to qualify for a mortgage loan to buy a new home.  My mortgage lender used similar language in my divorce decree to remove any liability for the old mortgage loan from my credit reports.  Just thought that you…


Woman Stuck on Mortgage Despite Divorce

By Christopher Combs | April 5, 2015

  Question:  Under the terms of my divorce decree last year my ex-husband was awarded title to our Gilbert home.  He was required to pay the mortgage payments on our home.  I even signed a quit claim deed for our home to my ex-husband.  The problem is that when I recently applied for a loan to buy a car, I was turned down by the bank because the mortgage on our home is still shown as my obligation on my credit history.  My ex-husband does not want to sell the home at this time, and because of his poor credit…


Foreclosure Sale Likely Means Home Reverts to Original Owner

By Christopher Combs | February 15, 2015

  Question:  I sold my Chandler home five years ago for $75,000.  The buyers made a $25,000 down payment and I financed the buyers with a $50,000 “seller-carry-back” loan, i.e., the buyers agreed to pay me $50,000 in monthly payments over ten years at 12% interest.  The buyers are now going through a divorce and eight months ago stopped making the monthly payments.   My title company has now scheduled a foreclosure sale in approximately 90 days.  Will this foreclosure sale be a silent auction or will potential buyers bid against each other?  Who will own this home if no…


Arizona Prefers Deeds of Trust Over Mortgages for Home Loans

By Christopher Combs | February 1, 2015

  Question:  In Arizona a deed of trust is used rather than a mortgage for a loan secured by a home or other real property.  Other states, such as our home state of Massachusetts, use mortgages rather than deeds of trust.  Is there an Arizona law that only deeds of trust must be used?   Answer: No.  Arizona law provides for mortgages, and since 1971 Arizona law also provides for deeds of trust.  Most mortgage lenders, however, prefer deeds of trust for several reasons.   One, a mortgage can only be foreclosed judicially by court proceedings, i.e., judicial foreclosure sale,…


Prepayment Penalty Often Enforceable

By Christopher Combs | September 28, 2014

  Question:  When we refinanced the $220,000 mortgage loan on our Phoenix home, the mortgage lender charged a 3 percent prepayment penalty of $6,600 to pay off this mortgage loan.  Can a lender charge a prepayment penalty without showing that they lost money or some other reason?  Are we entitled to an income tax deduction of $6,600 for this penalty?   Answer:  The amount of any prepayment penalty is established by a clause in the loan documentation (the “note”), and is generally enforceable.  Most mortgage lenders will enforce a prepayment penalty clause when a borrower refinances the mortgage loan with…