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Legality of GFE

by Denise
(New Hyde Park, NY)

Sadly, my 23 year old son received a GFE on a coop purchase and based on that he plopped down $21,000 as a down payment. The bank he was dealing with reneged on the original GFE saying his outstanding obligations were too high even though they had his credit report prior to issuance of GFE. The bank changed the terms of the mortgage 3x and it went beyond the 45 day commitment period and now the seller wants to keep his down payment. What are our legal rights to getting his money back?


Hello Denise;

I always enjoy meeting new people online and trying to help them with their mortgage questions.

The situation you are describing really disturbs me. Things like what you are experiencing is the entire reason for this website.

First of all, the lender who created the original GFE, is who you should be dealing with for the mortgage part of the transaction. A GFE is a Good Faith Estimate. So what they are telling you is that at the time of application, based on the details provided by your son, this is an estimate of what the closing costs should be.

Normally, just prior to closing, a closing statement (HUD-1) is provided which would show the exact cost to close the mortgage. The numbers on the GFE would be slightly adjusted based on the day it will close. These numbers should be very close to the original GFE. They may vary some but not usually more than a few hundred dollars plus or minus.

The fact that the lender required a down payment to be paid, this confuses me. A down payment is not usually collected until the closing of the mortgage.

So, what you are calling a down payment, could it be a deposit on the real estate contract? If it's a deposit, then your real estate agent should be able to better answer you regrading the refund of it.

So I see two major issues here, 1) a lender who was not really doing a good job, 2) a real estate agent who did not do much to protect their client.

Now please realize there are many facts unknown to me. I can only answer based on what details you provided me. I'm sure there is much more to this.

I have seen things change just before closing because the borrower went out and made a major purchase just prior to closing. This changed their DTI (debt to income ratio) and made it where they could not close. In this case, the sellers returned the deposit.

In New York, if I recall, they also have lawyers who are involved in real estate transactions. You did not mention this. If there is not one involved, then you may need to get one.

The real estate contract needs to be reviewed and also your son's rights according to the Fair Credit Reporting Act may need to be examined.

Here are a few links to offer you more information.

Credit Reporting

First Time Home Buyers RESPA Guidelines

Hopefully you will find this information helpful and things will work out for you.

Seldom have I ever seen a seller be allowed to keep a deposit even though they may have a legal right to do so.

I cannot say for sure, but there may be some serious issues here that need to be handled.

Best Regards,

Jeff Ragan

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