Legal Question in Real Estate Law in California

Re: Can they do this

Assuming your question relates to California, you also need to worry about your creditor noticing a foreclosure. Once that occurs, even if the charge is illegal, your only remedy is to pay the total amount demanded, then sue the creditor for a return of the illegal amount. If you refuse, you run the risk of losing the property through foreclosure and having no recourse against the purchaser for return of the house.

You should probably take your documents to an attorney in your area, whether for a free consultation, or a paid consultation. Even if you have to spend a couple of hundred dollars, you may be able to save yourself the cost of a lawsuit and/or foreclosure.

Re: Can they do this

Probably not. The law generally regards anything in excess of a fair and reasonable estimate of the creditor's actual damages to be unlawful because such too-large payments are considered "penalties" and only the courts may administer penalties. Private contracts may provide for "liquidated damages" (another phrase for late fees or whatever) but not penalties.

Absent very unusual circumstances, you can probably resist or defeat such an obligation. In the meanwhile, be wary of creating bigger problems for yourself, should the creditor file a legal action against you -- you might win, but the hassle and disruption could be horrific.

Your best strategy is to negotiate from a position of knowing that the charge is excessive. If that fails, get a free consultation from a local lawyer that can review the documents.

Re: Can they do this

Who is "they"? That is probably not enforceable.