Legal Question in Real Estate Law in California

Hi,

We are approaching the end of a 10 year fixed rate mortgage in California. In February we owed appoximately $800, with monthly payments of $186. We made March's payment and paid our usual extra, to total a payment of $200. We missed April, May, and June, and then made a $200 payment in July. We made the payments using US Postal Money Orders.

Today, a loan officer informed my wife that they have received no payment since February. He told her that her "personal balance" was $400, but that with the missed 5 payments of $186, our total owed is now $1100 ish. (This was in a phone message)

So, it seems that, if you look at the "personal balance," they must have received the money, since the sum total dropped by $400. At the same time, it seems that they want to increase the actual balance of the loan by around $700, without discussion, paperwork,etc.

Can they add the "missed payments" to the balance, even though it is double what we actually have left on our mortgage?

We have fallen into arrears before, and in the past the balance never increased, it was a strict make up the payments with nothing unusual, just the $186 in payments, and the $12 late fee. Once we'd caught up the balance, the loan proceeded at the level


Asked on 8/02/10, 12:27 pm

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

The lender has little leeway with charges, credits and balances, except, I guess, the lender can waive late fees if the choose, or not.

Otherwise, the lender should operate just like a computer, computing unpaid principal, interest, penalties, changes in principal balance, etc. strictly according to the formula set forth in the loan agreement. It has virtually no discretion.

Therefore, this dispute presumably can be resolved by sitting down with a responsible person at the lender's shop and, with your own calculations in hand, going over the lender's calculations. Doing the mathematics of finance will require understanding how compound interest works, whether they use a 360-day convention or not, and understanding when penalties accrue, so the calculations are not exactly 5th-grade arithmetic, but on the other hand, you don't need calculus either.

I don't really see a legal issue here - it's something maybe for an accountant. If this lender becomes too much of a pain in the rear for you, you might just pay them off, get a reconveyance of the trust deed to you, then take them to small claims for whatever you think was in excess of what you really owed. They have to give you a payoff amount upon written request.

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Answered on 8/07/10, 4:08 pm


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