Consumer complaint received 2017-01-16
Company: TD BANK US HOLDING COMPANY
State: MD
Product: Mortgage
Sub-product: Other mortgage
Issue: Loan servicing, payments, escrow account

Complaint:
We are writing to complain about a TD Bank loan contract and its enforcement. We were charged nearly {$18000.00} in interest and principal payments on funds that were never disbursed. 

In XX/XX/XXXX, my wife and I obtained a loan from TD Bank under its Construction-Permanent Loan Program to build a new home. The loan has a construction phase of up to 12 months ( when it is interest only ) and then converts into a 29-year fixed-rate mortgage loan on the constructed property. Part of our loan financed the purchase of the land, and the rest of the construction loan was to be disbursed as construction proceeded over 12 months. 

In the year to XX/XX/XXXX, we were unable to get the construction started because the local neighborhood commission did not approve a curb cut. The plans had to be revised and re-submitted to the XXXX for approval, and the whole process delayed the start of construction. By XX/XX/XXXX, we had not made a single draw on the construction loan. In late XX/XX/XXXX, we received a notice saying that the loan had been disbursed and converted into a mortgage, and that we had to pay interest on the entire amount. 

We contacted the loan officer on XX/XX/XXXX and pointed out that the house construction had barely begun and no draw on the construction loan had been made. With no house in existence, the creation of a mortgage did not make sense. In effect, TD Bank had neither given us the construction money nor made a payment on our behalf to a third-party. Hence, the " construction loan disbursement '' was a fiction and we should not have to pay interest on construction funds that had not been disbursed. 

The mortgage loan officer, XXXX, informed us that the only option we had was to refinance the loan. While not sure this was the only option, we agreed to refinance the loan and pay the cost of doing so ( almost {$8000.00} ) since construction had by then started. But we reiterated that we should not be charged interest on construction funds that had not been disbursed. We asked for a meeting with a decision maker in the XXXX area. The loan officer said he would have a senior manager call us. 

After repeated requests and a two-week delay, XXXX [ Regional Sales Manager based in XXXX XXXX, ( XXXX ) XXXX ] called me. When I explained the situation, XXXX agreed that we should not pay interest on money we had not yet drawn. He then said that he would have a manager in mortgage lending give us a call. 

I spoke to XXXX [ VP, Retail Lending Operations, based in XXXX, ( XXXX ) XXXX ] on XX/XX/XXXX and she too agreed with XXXX assessment, but said that she would check and get back to me. As we continued to incur hefty daily interest charges, on XX/XX/XXXX, I sent a letter to XXXX and to the TD Bank Operations Center in XXXX, XXXX. 

A few days later XXXX said she could not do anything more for us and if we wanted to pursue the matter further we should lodge a complaint with the TD Bank Chairman Service Center at the phone number ( XXXX ) XXXX. I called the number twice and left my name and number, the last time on XX/XX/XXXX, but I have yet to hear back. 

We believe the interest and principal payments on funds that were never disbursed should not have been charged. We want TD Bank to refund these payments in full. 

Another issue that has arisen repeatedly is the mortgage loan officer urging us ( in writing ) to approve the drawing of funds by the builder from our TD Bank construction loan account, even before we receive the inspection report on the required work that has to be completed before a draw. This is simply inappropriate behavior and reflects a careless attitude towards the use of a client 's funds. 

We would appreciate the assistance of the CFPB in seeking a response and resolving these matters.

Company response to consumer: Closed with explanation