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Out-of-pocket costs are yours

Q. I was going to refinance my loan on my house. The day I was going to go to the office to sign the closing papers, I asked again what the loan amount and monthly payment was going to be. Well, it had changed and was higher than what I was told originally. So, I cancelled the refinance. My appraisal fee was going to be free, but now they're saying I have to pay it since the loan was not closed. But the only reason I did not close was because the figures changed. Do I have to pay it?

You may have to. Often, when you sign an application to do a loan, you agree (in the fine print) to pay any out-of-pocket costs associated with underwriting the loan if you don't wind up closing.

Typically, an out-of-pocket appraisal fee would fall under the category of "out-of-pocket costs," as might the cost of pulling your credit history and credit score. Please look at your application to see what it says about out-of-pocket costs.

However, I'm troubled by the fact that your numbers were different at the closing table than what you had been promised. Do you have the Truth In Lending statement that the lender should have given you when you applied for the loan or within a couple of days from that date? Did you lock in your interest rate ?

Did your monthly payment change or did the closing fees change? If your closing fees changed, do you know why ? If your monthly payment changed, do you know why ?

If you have answers to these questions, you are better able to determine whether you should or should not pay for the lender expenses.

However, if the loan or the interest rate changed because your credit changed at the last minute, or because you hadn't locked in your loan, or because you failed to close before the rate lock expired, then you may have to pony up for these out of pocket costs and fees.

If you aren't sure of what your application says, a real estate attorney may be able to help you parse the legalese.

Q. I am currently in default on my first mortgage for my condo. I bought a one-bedroom condo for $220,000 in 2005, and recently married and moved out of state. There's another unit in the building that was foreclosed on last October. It is listed for $89,000 and has not yet sold. What will the ramifications be if I choose to default on my home equity line of credit? I'm already taking the credit hit for the foreclosure. How much worse can it be if I default on the home equity line of credit?

It sounds as though you're in quite a difficult situation. To buy a condominium for $220,000 and have it be worth less than $89,000 now (I'm assuming less than that since the other condo at that price hasn't sold) is an extremely tough blow.

I suppose the silver lining is that if you also default on your home equity line of credit, your credit history and score won't be much worse than where they are right now. You will probably have to wait another five years to buy something new, due to the new rules from Fannie Mae and Freddie Mac about people who have had a foreclosure.

The concern I have for you now is how you wind down your relationship with the lenders. You must make certain that your primary lender takes back the house as the sum total of what you owe. Once you do that, you will have to negotiate with the home equity lender to make sure that this debt is forgiven.

What you don't want is for these lenders, or perhaps the private mortgage insurance company that insured the top 20 percent of your loan (if you didn't have a 20 percent down payment) to come after you several years from now demanding repayment.

In some states the lender cannot go after the borrower for the difference between the loan amount and what the lender got paid.