Consumer complaint received 2021-01-01
Company: FIRST NATIONAL BANK OF PENNSYLVANIA
State: MD
Product: Mortgage
Sub-product: Other type of mortgage
Issue: Applying for a mortgage or refinancing an existing mortgage

Complaint:
Facts : On XX/XX/XXXX, we closed on a construction loan with First National Bank of Pennsylvania ( FNB ) including a beginning principal amount of {$310000.00} and construction funds amount of {$680000.00}, for a total of {$990000.00} ( see Exhibit A ). It took close to a year to obtain the permits that were needed before we could start construction ( see Exhibit B ) Because of the favorable interest market, we were exploring the possibility of refinancing the construction loan with more favorable terms. On XX/XX/XXXX, we made an inquiry to FNB about the payoff amount ( see Exhibits C1, C2, C3 ). We later learned that because of that inquiry, and without our knowledge, FNB cancelled the construction loan on XX/XX/XXXX ( see Exhibit D ). We were not informed that the construction funding had been cancelled until XX/XX/XXXX, when we inquired about the draw process to start construction ( see Exhibit E ) When we inquired as to why they cancelled the construction funds, we were told by our loan specialist that it was because we requested a payoff statement. We were never informed that requesting a payoff statement would result in the cancellation of the construction funds. 
We were always under the impression based on our contract that the construction funds would remain available to us, but after the first twelve months interest only period, we would have to make full amortized payments on the full amount of the loan, which we were willing to do. 
We were then told that the construction funds could be reinstated upon request, subject to approval. The process would take around 7 business days, which made it sound like a standard process ( see Exhibit F ). 
Two weeks later, we had not heard back from FNB, so we followed up with our loan specialist for an update ( see Exhibit G ). Only then were we told that the funds were permanently cancelled for the following reasons : the 12 months construction period had expired ; we did not request to extend the construction period and the construction had not started ( see Exhibit H ). We did not request to extend the interest only construction period, because we were willing to start making full amortized payments after the initial 12 months. 
At that time, we were given the option to refinance into a new construction loan. The bank representative offered to waive some of the bank fees we had already paid with the original construction loan that we were not able to use. In order to waive those fees, the loan had to go through an internal process ( see Exhibit I ). The terms they were offering were also very favorable and it seemed like the natural course of action. We started the process to refinance the loan with a Mortgage Loan Consultant and provided all the information required ( see Exhibit J ). On XX/XX/XXXX, we completed the loan application and loan disclosures ( see Exhibit K ). 
We did not hear from the bank for a couple of weeks and we reached out to the Mortgage Loan Consultant  several times for an update on the status of the loan, without success. 
When we finally heard back from the bank on XX/XX/XXXX, we were informed that our loan application had been denied. The reasons stated on the Notice of Action were as follows ( see Exhibit L ) : Employment Status - Insufficient Stability of Income ( for both applicants ) Other - We do not grant credit to any applicant on the terms and conditions you have requested ( for both applicants ) We believe the reasons stated are invalid. First our income is stable. Co-borrower has been working for the same company for more than 14 years. And although Borrower recently started working for a new company, he has been in the same line of work and same type of industry ( government consulting ) for over 16 years. Second, we did not request any special terms and conditions for the loan. FNB had offered to waived certain fees, which we agreed to.

Our complaint : 1. FNB failed to communicate with us in a timely manner : They cancelled the first loan without notifying us. We only found this out 2.5 months after the fact, when we asked about the draw process. 
They did not inform us there was a problem with reinstating the construction funds until we inquired about the status of the process. 
Again, they did not inform us that our application for the second construction loan had been denied until we inquired about the status multiple times. 

2. FNB acted inappropriately : They cancelled the construction funds on the first loan because we requested a payoff statement, but they never informed us that issuing a payoff statement would cause our loan to be cancelled. Had we known that ; we would not have requested a payoff statement. 
The reasons stated by FNB to deny the second loan are invalid. First, as stated above, our income is stable. Second, we did not request any special terms and conditions. The special terms and conditions were offered to us by FNB, we merely agreed to them.

3. FNB mislead us multiple times : They lead us to believe that the construction funds for the first loan could be reinstated in a matter of days. It appeared to be merely an administrative process. 
They lead us to believe that our application for the second loan was a very straightforward process. The loan would go through an internal process to take us through closing. 
They lead us to believe that they were willing to waive some of the fees we already paid on the first loan that we were unable to use. 

Damage caused by FNBs actions and failure to communicate : It delayed our ability to start construction on our project ; It delayed our ability to act promptly to secure new construction funds ( FNB cancelled the construction funds on XX/XX/XXXX ; 5 months later we still dont have the funds to start building ) ; It caused us to seek a new construction loan with another lender and incur unnecessary fees. 
It caused us to pay unnecessary interest to FNB while we have to find another way to secure the funds needed to start construction. 


The financial damage FNB caused is as follows : 1. Closing costs in the total amount of XXXX, which includes such things as : Origination charges of {$3500.00}, Titles and Settlement fees of {$3700.00}, State recordation tax of {$8600.00}, please see Exhibit A for other charges. 
2. Temporary rental expense for six months at {$2100.00} per month is {$13000.00}.

3. Difference in interest cost during construction estimated at {$4800.00}.

4. Difference in monthly payments after construction of {$130.00} per month, or {$15000.00} for the first 10 years.

5. Increase in construction costs as the cost of lumber and material increased due to Covid-19.

6. Cash flow cost since FNB is computing our current loan payments as if the principal balance was {$990000.00}, when in fact the principal balance was reduced to {$310000.00} when they cancelled the construction funds.

Company response to consumer: Closed with explanation