Consumer complaint received 2018-12-10
Product: Mortgage — Other type of mortgage
Issue: Trouble during payment process — 
Company: PENNYMAC LOAN SERVICES, LLC. (PA)

I thought that the mortgage company was my advocate and that the rules, contracts and documentation were in place to protect consumers like me, and my home- their investment. At every turn throughout this process I have trusted their expertise and have done what they instructed. I did not bring about this situation, but rather the mortgage company, due to their poor handling of this issue. I have done everything in my power to provide a safe home for my children and to hold on to this property that my husband and I worked so hard to buy. No one should lose life savings trying to save their home due to the practices of a fraudulent and deceptive contractor, and a mortgage lender who failed to properly assess the situation. 
I purchased a foreclosure home over a year ago with a XXXX Loan. The construction costs were estimated at {$70000.00}. The hired HUD approved contractor, XXXX XXXX, stopped working on the house over 6 months ago with the house in very much worse condition than when he started. My husband and I have since borrowed approximately {$70000.00} to finish the work that the contractor did not complete and to repair the damage that he did to the home. The house is now habitable and we are living in it, but the hurdle we are presently facing and the reason I am writing is a dispute with the mortgage company. Despite being detailed in my mortgage contract the remaining {$30000.00} of the construction portion of the loan has not been released to us for construction cost or, applied to the principal of the loan. 

Below I have laid out the progression of the situation over the last year and I have appended various documents that support and detail the situations noted. ( Reference document 1 ) The house was a HUD foreclosure and did not meet FHA guidelines. In order to purchase the home the only option was a XXXX renovation loan, we were approved and have our mortgage through XXXX XXXX XXXX  XXXX. Shortly after closing the mortgage was sold to Penny Mac mortgage. They do not oversee the renovation and were unable to help me. Our contractor, XXXX XXXX, was HUD approved and upon being hired XXXX XXXX had us both sign an Owner and Contractor Agreement ( reference document 2 ). XXXX began demolition on the home and documented repairs he had made. However, these would later come to be found to be incompetent and erroneous ( reference document 3 ). For XXXX time and based on inaccurate documentation of work completed, XXXX was paid a total of {$30000.00} ( reference document 4 ) from the loan and we advanced him an additional {$11000.00} ( reference  document5 ) Two inspections were completed in this time by the original HUD Consultant, who would later be fired for incompetence. 

XX/XX/2018 XXXX XXXX the County Code enforcer inspected and determined that the electrical panel was put in by XXXX illegally and as a result the home would then have to go through a rough-in electrical inspection ( reference document 5 ). For this reason, the bank put a freeze on the renovation loan until the home passed the inspection. XXXX informed us that he did not have the funds for payroll or, materials to complete the necessary repairs to and said he would not return until he received an advance. We were advised by the mortgage company to do what was necessary to pass the inspection to move forward with the renovation. XXXX claimed that he needed {$11000.00} to complete this work so we took out an additional loan to cover the cost. XXXX returned to the home and partially passed inspection, but did not follow through with the work noted by the Code Enforcer. Upon these issues the mortgage company replaced the HUD consultant. Following this, we had two electrical engineers XXXX XXXX and XXXX XXXX, come to diagnose and inspect. It was found that there were multiple live wires in the wall and some of the new electrical work completed by XXXX was staged to look complete. Without success despite numerous and strenuous attempts to contact XXXX about these discoveries and further unsuccess through the HUD Consultant a decision was made with XXXX XXXX to complete an Exit Inspection and to move forward without XXXX. 

The mortgage company advised me to return all the tools as well as, any construction material XXXX purchased, and to send him a certified letter that he was fired. Following this, I was informed by XXXX XXXX that the renovation was on hold until XXXX signed a letter verifying he had seen the Exit Inspection and was owed no further funds. This was completed and sent to XXXX XXXX ( reference document 6 ) We were unable to find another contractor that was willing to fix this work and start before the contractual deadline. On XX/XX/XXXX, XXXX XXXX indicated that we could hire tradesmen to do the work individually and we would reimbursed by the renovation budget after the passing of inspections that had {$41000.00} left after XXXX pay outs. My husband and I did this work and passed inspections to do so taking on {$50000.00} of debt. We have yet to see a reimbursement. XXXX XXXX blames this on a claim XXXX made to them of past and unpaid invoices despite the signing of Exit Inspection and verifying otherwise. XXXX XXXX encouraged us to fight this in the court system and freed part of the renovation budget to us, {$11000.00} to hire an attorney and do so. 

We thought that once the right to lien period of six months had ended the remaining {$30000.00} ( less the {$11000.00} in attorney costs ) of funds would be released so that we could complete the work. When we talked to the acting bank manager XXXX XXXX after the period had ended, she advised us that this was not true and we would need to sue the contractor and win in order for the funds to be released. She stated that in the event XXXX sued in the future they had to protect their assets and hold on to the money so there was no chance of them being liable. Multiple attorneys advised us that the contract with the contractor, that XXXX XXXX provided, was neither valid nor, enforceable in Pennsylvania leaving us with no basis to successfully sue XXXX. The arbitration clause in the contract was also not enforceable, so we were advised that it was a costly and futile option. ( reference document7 ) Our attorney has sent a letter to the Pennsylvania Attorney General noting various circumstances of violations from XXXX including lack of criminal history disclosure violations of Pennsylvanias Home Improvement Act,  pursuant to P.S. XXXX, incorporation issues and a detailing of far and wide negligent work that exceeds the electrical issues noted here ( reference document 8 ). The courts agree with our case and are working on a judgement in our favor, but there is no timeframe to a conclusion and therefore, we can not foresee a settlement of the {$30000.00} through XXXX XXXX. 

At this point we have finished most of the renovation and the house is habitable. We were forced to move in because we could no longer afford two homes, even though there was no heat, and minimally functioning electric and plumbing. The courts are taking longer than expected and we can no longer afford our attorney. XXXX XXXX still holds hostage the {$30000.00} that is included in the total debt for the home that we pay a mortgage payment to every month without resolution of either crediting toward the mortgage or, reimbursing us personally. We have been informed by XXXX XXXX that we need to pursue this in the courts or, that they could hold the money indefinitely. This was not noted in any of our contract. 

We are desperate. We have pursued this through every agency that we possibly could. We will gladly provide any additional information, emails, affidavits, witnesses, receipts, invoices, photos, videos, and detailed inspection reports. We are out of options and out of money. I am hoping you can help us resolve this in a timely fashion or, advise us of how we can find a resolution. 

This lender apparently cares nothing about the people who entrust them with what is the most important purchase of their lives. With no legal proof or warning, they arbitrarily confiscated and held our funds. That they would allow someone to lose their savings, and potentially lose their home as well with no proven basis for withholding funding is outrageous. Despite the law being in our favor, they held our money without our consent and without any evidence of wrongdoing on our part. These actions lead to a spiral of disastrous events that are now irreversible. Every effect was the direct result of both the shady business practices of our contractor and incompetence on the part of our lender. I am not looking for a handout or nor do I think I am entitled to special treatment. However, given the circumstances, I ask you to take the time to go over the facts and objectively assess the situation. Was this fair, was this legal, and was this ethical? Thank you for your time. 


Thank you so much for your time,