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Settlement procedures aren’t the same everywhere

DEAR BENNY: In a previous column, a homebuyer had a problem concerning a warranty he never got, and you gave him a few good ideas. I just do not understand why you did not instruct him to contact his lawyer who represented him at his closing.

Is this not one of the reasons we have our own lawyer at closings? –Bill

DEAR BILL: You are referring to an earlier column where a reader had warranty issues with his developer. I did not instruct him to contact the lawyer who represented him at the closing for several reasons.

First, my column is carried in many papers throughout the United States, and settlement procedures differ from state to state.

In New York, for example, I understand that the settlement is often held in the office of the bank’s lawyer, although buyers are instructed to have their own attorney present also. In the Western U.S., the settlement is called “an escrow closing,” and often there is no attorney present on either side.

And in many jurisdictions, such as in the District of Columbia or in Maryland where I practice law, settlements take place either in an attorney’s office or at a title insurance company where lawyers may not be present.

Clearly, however, if the buyer has his or her own attorney and is comfortable with him, that attorney can be consulted on any warranty claims or any other legal issue for that matter.

DEAR BENNY: I recently applied for a personal loan at my credit union. It was to help out a relative.

While going through the application process, we were completely honest about the reason for the loan. My credit rating is very good, and I had just made the last payment on my car loan there.

With all of that information given as well, I was under the impression my interest rate would be doable. The loan officer said it would be around 7 percent, and then she took the application to her superior. I received a call an hour later saying that the loan was approved.

I went back to sign the papers and to my surprise, the interest rate was higher than the aforementioned 7 percent. In fact it had risen to 10.7 percent.

I balked a bit, but knowing that the payments were still within my budget, I signed. I was so surprised and asked why there was an increase; the answer was that because I was honest about the purpose of the loan, that changed the interest rate.

I am still confused. The paperwork states that this is a “debt consolidation loan,” and my relative is on the loan as a co-borrower. The whole idea was that I would have the loan in my name and the relative would make the payments.

I don’t know if this is now going to affect my credit rating of 826. Do I have any recourse? Can I complain and renegotiate? –Jorie

DEAR JORIE: Yes, you can complain, but I suspect that the credit union will tell you, “Sorry, you signed the legal documents, and there is nothing more that we can do.”

I don’t want to sound so negative, but no one forced you to sign, especially when you saw that the interest rate was so high. In today’s market, a 10.7 percent interest rate is, in my opinion, outrageous, especially if you have good credit.

I have one suggestion: Can you repay the loan now? You have to determine if there is a prepayment penalty, and that will be spelled out in the loan documents you signed.

If there is such a penalty, you should talk to the manager of the credit union. Explain your situation and tell the manager he should waive that penalty and give you the loan that you were asking for originally. I fail to understand why your rate jumped so high, merely because you were going to assist a relative.

If the credit union is not prepared to give you a new loan, try a local bank. It may be worth your while to pay off that high loan and get a loan with a more realistic interest rate.

The moral of the story: Don’t sign any legal documents unless you fully understand and agree with their terms. And if you cannot understand the legalese in a document, ask an attorney for assistance.

Benny Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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