Bill, Home Buyer in American Canyon, CA

Help! The bank is trying to get one over on us...

Asked by Bill, American Canyon, CA Wed Sep 3, 2008

We signed our loan documents on 9/2 to on our CA single family home, to close on 9/8. It is a short sale which we have a purchase agreement signed by the seller, and approved by their first (Citibank) and their second (Citibank too). Today my RE broker received a demand from the holder of the first for $5600 for unpaid homeowners insurance on the property. The seller had stopped paying their insurance as of 1/1/08 so Citibank claims they took out a policy on the property and demands that it be cleared before escrow can close. I just finished insuring the same property for $765 so they want 7 times market rate or almost 1% of the homes value for nothing. They refuse to pay, and the second refuses to pay. The seller could care less. They claim they will foreclose the property on 9/9 instead of completing the sale if the bill goes unpaid. None of this was ever disclosed to me until today. Do I have a binding contract? Should I tell them the bill is their problem?

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Fl’s answer
Thank you for sharing with us the outcome of the story. It is educational info.
I think the agents did the right thing to help the deal go through.
The bank in my story (1)-- trying to bulldoze me (buyer), in the REO purchase-- was GreenPoint Mortgage. I've heard from other sources too that they are awful to deal with.
Wishing you all the best from here on.
0 votes Thank Flag Link Fri Sep 5, 2008
Hi Bill;
I applaud your perseverance and stamina, and I also applaud both agents for stepping up, and not getting in the way of the deal.
In the end, you learned a few things, and you got the house you wanted.
0 votes Thank Flag Link Fri Sep 5, 2008
Thank you for all your replies. In case anybody is following this...

We're going to close on the house on Monday 9/8, due to some temporary cost sharing arrangements between myself, the seller, and our two agents. We're all shared victims at this point.

To the best of my knowledge, whats happened in our case is illegal in Napa county, where we are buying the property, and I think the ethics involved on the part of Citibank is beyond question, thoroughly disgusting.

As of now, this is Citibank's stance on this issue, in their various forms:

Citibank Residential, the holder of the former first, demands that an homeowners insurance policy in the amount of $5127 be cleared before escrow can close on the house on Monday. The policy amount is extremely exorbitant by any market standards, and no explanation has been given. They have produced an invoice for this amount, so the charge can properly go through escrow, but did not provide a copy of the policy, or a certificate of insurance. The policy started on 3/1 for 1 year. There is an unused portion of the insurance that must be refunded but Citibank refuses to assume this charge as well. They claim they will foreclose this property on Tuesday 9/9 if this is not cleared.

Citibank Financial, the holder of the second, and the entity that actually loses everything if the property forecloses refused the charge on Wednesday, then again on Thursday morning. Since that time, they have ignored all calls, e-mails, and faxes from both agents, AND the title company.

The third party we found out today is called American Security Insurance Company. They are of course, a subsidiary of Citibank. They have ignored all attempts at communication since the beginning, so nobody is even able to ask them if they want to negotiate this amount. We can't even talk to them to arrange for the refund of the unused amount be routed to the proper party.

In my opinion, Citibank is trying to recoup losses on their bad loans through illegal practices. If this closes as is, the two brokers are going to assume shared responsibility to sue the various parties. Bottom line don't do business with Citibank.
0 votes Thank Flag Link Fri Sep 5, 2008
Hello Bill. I feel for you and can only imagine how frustrated you must be. You are right, the insurance amount is indeed exorbitant, but I know that when the banks take out insurance to cover the property because the borrower stopped making the insurance payments, the premium is sky high and I have never understood why. The thing to do would be to try to negotiate with the insurance company and it does not sound like the bank even attempted to mitigate the damages. I don't know if the insurance company placed a lien on the property or not, but they know that they'll get nothing if the property is foreclosed on and it would be in their best interest to adjust the amount significantly.

You asked whether you have a contract and the answer is that you do have a contract that's contingent upon the lender(s) approval of the short sale. While the lenders did approve the short sale, their approval is based on certain contingencies (e.g., they receive a certain amount and escrow close no later than a certain date). The short sale approval letters that I have seen all stated that the lender could revoke the short sale any time prior to receiving the signed approval letter from the seller. Most sellers do not sign the approval letter until they go sign escrow papers, which unfortunately leaves room for changes and revokaction by the lenders. In your case, it sounds like they may have discovered the unpaid insurance bill after they issued the approval letter. Paying the insurance bill would leave them less than the amount on which the approval letter is based, which essentially renders the approval letter useless unless the insurance bill issue is resolved. I would have your agent check with the escrow agent and see if you can get the contact information for the insurance company. Trying to negotiate the bill down can't hurt. Good luck to you.
0 votes Thank Flag Link Thu Sep 4, 2008
Ute Ferdig -…, Real Estate Pro in New Castle, DE
Let the agents fight it out if they want a paycheck. otherwise move on. There have probably been a few more bank owned listings that cam up while you were in escrow. Citibank probably did you a favor:)
0 votes Thank Flag Link Thu Sep 4, 2008
I'm the original poster. To answer a few of the questions...

Our priority is to buy the house and live in it for an extended period of time, greater than 5 years.

As of almost noon, and Citibank Residential (the holder of the first loan) still has not furnished to us either a bill for the insurance, or a certificate of insurance for their added amounts. They haven't even given an actual amount for that matter, because there are still questions about refunding the unused portion of the insurance policy.

The holder of the second, Citibank Financial has been asked by my agent to eat these charges, because they will ultimately end up with nothing when or if this goes to foreclosure. They have not given an answer as of 3 PM EDT.

This offer was accepted as a short sale on 6/1. The paperwork had been with them for over 90 days, yet they are going to push me to the final business day before the scheduled close without a final answer or approval.
0 votes Thank Flag Link Thu Sep 4, 2008
I have 2 stories that relate to this.

(1) I made an offer on an REO 2 months ago. After it was accepted, the bank/seller re-wrote a contract that supersedes the original contract, and part of this final contract says that my deposit ($3000) is non-refundable after the inspection period which is 10 days. In other words, I also only have 10 days to get a loan (instead of 17 days), which is impossible, especially nowadays (at least for me). I tried to communicate this with them, but mostly because both agents were incompetent and the bank's asset manager doesn't communicate, I just gave up and walked away instead of wasting time.

(2) A few years ago, I had some post-sale problem that was unfair to me. I finally had to hire a lawyer for $500 to write a letter threatening them that their argument will not hold up in court. So they dropped it. You might want to gamble a few hundred $ to save this case. (or as the other poster mentioned, see if the Title Co's attorney will help you. But my understanding is their attorney is there to protect the Title co., not the client. But who knows?)
0 votes Thank Flag Link Thu Sep 4, 2008
Sounds like a blessing in disguise. In a few years you'll be glad you walked away. Good Luck
0 votes Thank Flag Link Thu Sep 4, 2008

As previously states, on occasion banks seem to think they can do anything they want and bully people into doing things. this is a classic example..

Title companies generally have an attorney associated with them......our advice is to contact their attorney for advice. It may be able to be cleared up by a telephone call from the attorney or a simple letter.

Based on the information provided your position is justified.

Good luck,
The "Eckler Team"
0 votes Thank Flag Link Thu Sep 4, 2008
The cost to the bank to go through the foreclosure process will most definitely exceed the $5600.00 that they want from you. You don't HAVE to pay anything. They just want you to pay.

Who cares? Homes are a dime a dozen in this market.

Let them foreclose it, have it go through auction with no bids, sit on the market until they lower the price by 15%, and then come back and make an offer. You may end up saving $50,000 or more on the home in the end. Or you may end up finding a home that better suits you in the meantime.
0 votes Thank Flag Link Thu Sep 4, 2008
Like Eric said, you could just cancel the contract, get your deposit back and find another home. How would your agent and the other agent feel about loosing a paycheck? NOT GOOD. I would have a talk with your agent and get him or her to split the $5600 with the other agent or NO paycheck for them. I would in NO WAY let the bank take advantage of you. Have your agent fill out a notice of perform (CAR Doc) and send it in to the seller. If they don't sign, cancel the contract and walk.
0 votes Thank Flag Link Wed Sep 3, 2008
Man, this is a really tough question. Title is supposed to deliver the property to you free of any encumbrances and leins, but banks tend to act like little fiefdoms with little or no concern for commen practice and local ordinances. I wish I had a good answer for you. I will be watching as well to see what our community of agents comes up with.
If worse comes to worse, you could just walk away, let it foreclose, and then get it in foreclosure.
I wish I could be of more help.

Good Luck
0 votes Thank Flag Link Wed Sep 3, 2008
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