Consumer complaint received 2023-01-24
Product: Mortgage — FHA mortgage
Issue: Trouble during payment process — 
Company: Guild Holdings Company (CA)

I have an FHA XXXX XXXX XXXX XXXX loan with Guild Mortgage - Loan # XXXX, FHA Case # XXXX. 

This loan was made to me to make improvements to my property. The process has been fraught with issues. I filed a previous complaint for which Guild Mortgage explained that the issues with delays in releasing funds from my Escrow account, from which I am making full principal and interest payments was because their Outside Loan Management company had turnover issues.

The issue I have run into now is that I have been getting sub-contractors and workers hired by my General Contractor to work on my project, coming to me demanding payment and making threats to file mechanics liens against my property because my General Contractor has failed to pay them. This was the root of my first complaint. The General Contractor received payment but failed to pay a steel beam vendor who ended up filing a mechanics lien. General Contractor did not have funds to pay the lien and I could not pay it either so my project came to a stand still. 

On XX/XX/XXXX, several sub-contractors showed up at my residence, claiming they have not been paid and were threatening to file mechanics liens. Some showed up at night, threatening bodily harm to my family and I over non-payment. This is the most stressful and frustrating situation I have ever been in. Several of the sub-contractors informed me that this was a pattern of behavior they have experienced with the General Contractor on several other jobs. For a Contractor to receive funds that have been given to him specifically to pay sub-contractors and for the him to sign lien waivers attesting to the fact that everyone is paid thereby protecting me and my collateral, yet fails to pay them is just not right ethically. I therefore decided to look into my General Contractor. First thing I did was look up the license with the California Contractors State License Board and discovered that the General Contractors license had been suspended. In fact the license had been in suspension since XX/XX/XXXX. 

Once I discovered this, I verbally fired the Contractor and put this in writing to the Contractor on XX/XX/XXXX and notified Guild Mortgage as well. 

The FHA XXXX ( XXXX  ) loan requires me to hire a licensed General Contractor. Although it does not specify, the reason the program requires a licensed General Contractor I believe it is because the program believes that a licensed General Contractor can be trusted to undertake the project responsibly. However, in this instance, I was faced with a General Contractor who is not paying sub-contractors and I am constantly being harassed and threatened at my home, but I had a General Contractor whose license has been suspended since XX/XX/XXXX. So for the past several months, both Guild Mortgage and I had been dealing with a General Contractor who is unlicensed. But what bothers me is the fact that the General Contractor has known all along that his license was suspended and did not disclose it to me. In order to protect myself, I needed to separate from this Contractor hence the decision to fire the Contractor.

It is ethically wrong to know that my project requires licensure, and to know that your license is suspended, but continue to show up at my project and to bring on workers, who do not get paid even when funds are released for them to be paid. To me it constitutes fraud. I even found out that the HVAC sub-contractor that worked on my HVAC system had a suspended license as well. So it is clear that working with this General Contractor is quite dangerous to me financially because he had no morals, no ethics, I was dealing with an individual who despite knowing he was no longer in a position to act as the General Contractor on my project, continued to work on the project anyway, without any thought of wanting to disclose his suspension to me. I just can not stand such sociopathic behavior. I confirmed with the XXXX that a General Contractor whose license is suspended in California is not permitted to work, bid on any work or Contract for any work, until their suspension is lifted and their license is restored. 

Since finding this out, I have filed a complaint as well with the XXXX XXXXXXXX XXXX XXXX XXXX who will be conducting an investigation. They are short on personnel so will get to my complaint in due time. 

The amount left in my FHA XXXX XXXX XXXX XXXX Escrow account is {$57000.00}. I have decided not to hire another contractor. Instead I will finish the project myself by hiring licensed sub-contractors which I am already doing. I have had to fund a greater portion of the project from personal funds and loans and credit cards, etc and I have asked Guild Mortgage to reimburse me for those costs. The irony of the matter is that, it appears that I would have been better of turning a blind eye to the fact that there was a General Contractor with a suspended license working on my project than to fire him since I am being informed now that since I do not have a Contractor I can not have access to the funds in the Escrow Account that I am paying a full principal and interest on monthly. Despite providing several pages of receipts, cancelled checks, etc. The attitude seems to be otherwise. Instead, I was being told that I was in a dispute with my General Contractor.

When a General Contractor fraudulently poses as General Contractor for over 8 months, working on a project on which the California State Law requires him to be licensed and HUD which is a Federally funded organization requires the FHA XXXX XXXX XXXX XXXX program to require licensed contractors but no one checks the validity of the license. Bottom line if the FHA XXXX XXXX XXXX  ) program requires a licensed General Contractor but one has been receiving funds from the program while their license was suspended, I would think Guild Mortgage and the Federal Government and HUD would want to be notified of such instances. The evolution of the FHA XXXX XXXX XXXX XXXX program to where it is now was to stamp out fraud, yet we are saying we would rather release funds for my project to a General Contractor whose license is suspended, rather than reimburse me for items that I legitimately purchased and funded, because I no longer have a General Contractor.

I have mentioned to Guild Mortgage several times that they released funds to the Contractor from our appliance budget. I paid for all the appliances by putting them on credit cards, etc. The {$2700.00} of the appliance funds were released to the Contractor.

Those funds have never been given to us by the Contractor. Despite providing receipts, bank statements and cancelled checks, no one seems to bother to acknowledge that it is wrong for me to have a project where {$5400.00} is allocated to appliances. I pay {$5400.00} and more for appliances, only for {$2700.00} to be given to a General Contractor who did not spend a dime on the appliances, just because it is easier to release funds to a General Contractor than it is to release funds to me the homeowner, the person with the most to lose, the person whose property is being mortgaged or taken as security. So I am stuck with the credit card bill for the appliances, and the money is with the General Contractor. How ethical is that?

How fair is that?

The same for toilets, kitchen sinks, bathroom sinks, door handles, door locks, drawer pulls, flooring, baseboards, bathroom exhaust fans, purchase of granite counter tops for bathroom and kitchen, labor to have those counter-tops cut for the kitchen and bathrooms, kitchen and bathroom faucets, shower heads, pendant lights. I have provided over 60 pages of receipts, credit card statements, bank statement transaction pages and more to prove that the materials in the budget were purchased by me and I need to be reimbursed. All these are materials that the General Contractor was supposed to provide but indicated he did not have funds to purchase these so I did because it is my home. 

I am constantly being asked when I will finish the project. Well, how can I finish a project when no one seems to listen to what I am saying? 

I have since asked Guild not release any funds to the General Contractor. I have asked Guild to release funds to me so I can ensure any sub-contractors are paid and I will ensure that they sign the requisite lien waivers accordingly. At least I know that with me in charge of it, no one will be coming to threaten me with non-payment because I will pay them. I am the one who endures the harassment. Guild Representatives and the General Contractor are nicely tucked away in their homes when sub-contractors show up at my door various god-awful hours of the night asking for payment.

This is for the CFPB and HUD it is about time that the FHA XXXX XXXX XXXX ) loan is allowed to have interest reserve built in or be allowed to have interest only payment during the construction period. It is ridiculous to have consumers paying full principal and interest on XXXX XXXX XXXX XXXX XXXX XXXX  loans. Construction is always fraught with problems and forcing people to pay full P & I during the construction is not making the XXXXXXXX XXXX XXXX  ) loan better, it is rather increasing the risk of default because when consumers who go for this type of loan face the difficulties that I have faced with the funding and administration of this project, not to mention, a general contractor whose license is suspended in the middle of the project, no one plans for that and contingencies may not be adequate. Giving consumers the ability to pay the interest on the loan at least during the construction period frees up their reserves and liquidity be able to tackle any cost over-runs or issues. Imagine paying for the full value of something when the value is not there.

And for Guild Mortgage, I recommend that in any Construction loan, checking the Contractors license my not be stipulated in the FHA guidelines but it is a precautionary measure that should become standard operating procedure. At least from my situation we know that a Contractor 's license can become suspended halfway through the project.