Legal Question in Real Estate Law in Maryland

mistake by lender on second mortgage terms

My mortgage company made, what they call, a ''mistake'' on the 2nd mortgage documents sent to the title company before closing on our house. We have a first mortgage at 5.5% on a ten year arm, and a second mortgage, that was supposed to be written as a variable rate starting at 6.0%, but was mistakenly written at 5.5% fixed for 300 months. We've already gotten statements that reflect this low rate, and we've made payments. But the mortgage company caught their mistake a few weeks ago and they've been calling about it. They want us to sign a document that allows them to change it to 6.0% variable. Do we have to agree to it? Aren't the papers we signed at settlement the legally binding documents? The application we filled out for the second mortgage said 6.0% variable, but we were also told that it was in no way committing us to any terms, it was just the application. This is obviously financially advantageous for us, and we're not sure if we should sign these papers or not. Any advice? Do they have any legal recourse?


Asked on 4/18/05, 9:20 am

1 Answer from Attorneys
Robert Sher Wagshal and Sher

Re: mistake by lender on second mortgage terms

At your settlement, you probably signed a document entitled "Correction Agreement" or "Errors and Omissions/Compliance Agreement". The purpose of this documents is to obtain your agreement that if, after settlement, the lender discovers clerical or typographical errors in any of its documents, you will re-execute corrected documents. Of course, that raises the question of whether the mistake you are dealing with can be considered clerical. If you didn't receive a copy of this document from the settlement attorney or company, contact them and ask them to send it to you, and see how the agreement is worded. If their document is limited to "clerical or typographical", you could argue that this is beyond that. However, they may take the position that you knew the terms of the loan and this was an obvious mistake, so they are entitled to cancel the 2d loan as a mutual mistake, in which case they may take the matter to court.

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Answered on 4/18/05, 11:24 am


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