Consumer complaint received 2022-09-08
Product: Mortgage — Conventional home mortgage
Issue: Closing on a mortgage — 
Company: GATEWAY FIRST BANK (CA)

We were referred to Gateway Mortgage by our real estate agent since XXXX had already approved the builder of the home we were in contract to purchase with. 

I first spoke with XXXX XXXX on XX/XX/XXXX and he informed me of their one-time close construction to perm product. I was told that I would just need to do one initial closing and that the loan product was a 20 % down, 12-month construction loan that would convert into a permanent loan automatically at the end of the construction period. I was told that there was a second loan that came a long term rate lock that ran concurrently with the construction loan and came with an approximately {$5000.00} extended lock fee that got reimbursed when I modified to the second portion of the loan, I was told they take this fee to ensure I do not try to work with any other lenders during the construction period and that I would lose that fee if I switched lenders. I asked XXXX what would happen if construction ran behind the 12-month schedule and was informed that the loan would be extended typically in 3-month increments but that there would be an extension fee associated with any extensions. There were items in the loan documents that outlined the costs of extension so I had no reason to question what XXXX had told me. This information provided by XXXX was further confirmed by the marketing material advertising this product on Gateway Mortgage Websites. XXXX and XXXX underwriting were providing our construction contract that outlined a 8-12 month build project and signed a contract with the builder outlining the same timeframe. 

We received our closing disclosure on XX/XX/XXXX which I sent back due to an error in the loan amount. It showed the wrong amount but the correct term of 30 years and a fixed rate of XXXX with the first 11 months being interest only and principal being applied to start in month XXXX. 

XX/XX/XXXX I received notification from XXXX XXXX that I had actually been approved to only put 10 % down so they were increasing my loan amount to approximately $ XXXX in order to reduce my cash to close. I agreed that this was ok and reviewed the closing disclosure which again stated 30 years and a fixed rate of 3.625 % with the first 11 months being interest only and principal being applied starting in month XXXX. 

XX/XX/XXXX I received an email from XXXX team that said the below Please find the attached final CD for your closing. The amount you need for closing is {$82000.00}, to wire the funds, you will need to contact the title company for them to give you the wiring instructions. Their information is below : Thanks, and let us know if you have any questions. Again this was the same disclosure I had signed that stated Closing Disclosure Stated I was receiving a 30-year loan with a Fixed 3.625 % interest rate that could not increase after closing. Since I was told this was a onetime close and I had a closing disclosure confirming had a 30-year fixed rate mortgage I had no reason for concern. 

Our loan closed the next day on XX/XX/XXXX At no point during the research of XXXX  materials for this product, discussion with loan officer, or during the closing process was I made aware that there was a risk of not get the locked interest rate, nor was their any mention of any risk of my payments nearly doubling. I was told that this was a XXXX time close loan that would modify at the end of the construction period. My construction to permanent change notification document states Rate for final modification is locked prior to closing the construction phase. Your end rate will be the same or lower, as your construction rate. When I received a closing disclosure that said I was receiving a 30 year loan with fixed rate that would not increase. I had no reason to question this because this is what I had been told from the beginning of the process. 

On their website XXXX describes this loan as Perfect for homebuyers with good credit, stable job and income history, and are seeking to build their dream home with the flexibility of conventional financing combined with the cost savings and convenience of one loan closing. 

In XXXX brochure they describe the modification process as below : MODIFICATION PROCESS : Although your builder has completed the project and has received the final draw, the modification process must be completed before you move into your new home. 
XXXX. Rate : You must lock your permanent interest rate. If you locked during construction, this step is complete. If you have not locked, please contact your Loan Originator to discuss your lock. Afterwards, your Loan Originator will inform our modification desk of your loans particulars. 
XXXX. Updating Credit Information : Depending on your XXXX and credit score, XXXX may require updated income and credit documentation to ensure the best rate possible. 
XXXX. Document Signing : Once your rate is locked, we will contact you to arrange a time for you to sign the modification documents. 
XXXX. Funds Due at Signing : Expenses due at modification may include the following : Construction interest due up to time of signing. Prepaid interest due on the permanent loan. Escrow setup ( property taxes, insurance, and mortgage insurance ). Any shortages in the inspection fees. Any unforeseen costs not paid from the initial closing. 




On approximately XX/XX/XXXX. I was notified by the builder of my project that they were running approximately one month behind the estimated 12-month timeline due to issues with XXXX, a large fire in the area combined with supply chain issues on a couple of the materials needed for the home. My builder reached out to the loan administrator at Gateway Mortgage with the same information and was told on XX/XX/XXXX they are being fairly lenient because of Covid with extensions. She said when the loan is within about 30 days of expiring, the loan officer will send a letter asking if you need an extension. 

After receiving this information I reached out to my loan officer XXXX XXXX along with the other assistants involved in my initial loan transaction to notify them with as much notice as possible of the potential delay and to prepare for anything that would be needed for an extension. I did not receive any response from XXXX and still have not received any word from him as of today XX/XX/XXXX. 

On XXXX I reached out to XXXX XXXX who sends my monthly statements because I still had not had any response from anyone at XXXX regarding an extension. At this point, I was provided with the information that XXXX XXXX was no longer with the company and that my new loan officer was XXXX XXXX. I immediately called the number that she provided and the phone was answered by an assistant of XXXX XXXX. At this point I was first informed that the permanent loan would only be extended up to 30 days. I asked him what happened if the rate expired and I was no longer able to qualify for the permanent loan. His response was that his advice is to make as much income as possible and wait to see what happens. I informed him that with only a couple of months left to convert the loan it was unlikely that I would be able to add enough income to offset an approximately {$18000.00} annual increase in payments based on current rates and approximately {$540000.00} over the life of the loan. I again asked him what options I had if I dont qualify for the new loan payments and was told that he would call me back. 

On the afternoon of XX/XX/XXXX I still did not have a response from XXXX XXXX 's assistant so I sent an email requesting a call from XXXX to review my concerns and to prepare for what we needed to do to have a successful modification from the construction to perm loan. I received a call back from XXXX the same day but we were not able to connect until the next morning XX/XX/XXXX. 

On XXXX I made contact with XXXX XXXX XXXX At this time I was first informed that my rate lock had already expired a few days earlier on XX/XX/XXXX. He expressed frustration with XXXX XXXX for doing this to dozens of borrowers where he locked the rate long before the loan actually closed causing the permanent loan to expire months before our construction loan without explaining that impact to the borrowers. This decision left us with a rate lock that expired before our estimated completion date of the build. According to XXXX this now requires us to get a new loan at current rates that we can not afford. At todays rates the new payment is approximately {$1600.00} per month higher or over 60 % higher than what we were quoted and under the impression was locked and fixed since we had closed our loan months before. All of XXXX ' promotional materials for this loan product stating that once you " lock the rate this step was complete '' are completely false. I asked XXXX why I was not contacted prior to our rate lock expiring as we were told would happen 30 days prior by multiple people at XXXX and he stated that he is very busy with hundreds of files. I also asked XXXX if he or XXXX had ever informed me that he was my new loan officer to which he had no response. Had I been informed that I had a new loan officer I would not have lost several weeks trying to get a response from XXXX and would have had the opportunity to extend my lock the initial 30 days per XXXX policy. I again asked what options I have if I can not afford the new payment since I am now a couple of months away from having a {$620000.00} loan that needs to be paid off and XXXX is not willing to honor the rate for the modification I was given at closing on the XXXX close mortgage. I even restated that I was willing to pay the lock extension fees for the extensions which I was originally told I would incur. XXXX response was that he can not speak for the board at XXXX but that they would probably not want to foreclose. I again asked XXXX if there were any options to work together for a solution that was not foreclosure since I am willing and able to pay the amount originally locked and would have never taken the loan if I had known there was no option to extend due to COVID delays and he stated that there were not any other solutions and that it was not his fault my builder was running behind. He also stated that there are hundreds of people at XXXX in the same position as me. I asked him if that isnt there a problem with their practices if they have hundreds of people with no ability to repay the loans that XXXX generated. To Which he had no response. He lastly stated that if I have a problem with Gateways policies I can give the owner of XXXX, XXXX XXXX a call. XXXX told me that he was the head of XXXX for TN and there was no branch manager above himself that I could speak with. 


In my opinion, there are many unfair and predatory practices involved in XXXX One Time Close Product that by XXXX XXXX 's own admission are harming hundreds of their consumers. 

XXXX. Admittedly they have a loan officer that was explaining the XXXX rate lock as running concurrently with the construction loan which it did not. They have documents in the loan package stating the rate for the modification will be the same or lower than the initial rate. Since other banks offer true onetime close loans the loan officer has an incentive to mislead the borrower into thinking that this is the same or very similar product. They also had my build contract showing a 12-month build, which was reviewed by the loan officer and I assume the underwriter and not one mention was made that I would not have the option to extend the rate to the projected length of the build. Essentially negating any benefit I would have gotten from choosing this product. 
XXXX. They blatantly disregarded any fiduciary duty or duty of care and fair dealings owed to me as a client of a closed loan with them. They avoided contact prior to the expiration of my rate lock. I attempted to make contact with my loan officer prior to the lock expiration and got no response. Not only that the new loan officer responsible for my file did not attempt to make me aware that he was my new contact. He also stated that he was the manager and was aware that this was a problem happening with many of XXXX XXXX 's files and still no communications. This shows an attempt at deception to allow the lock to expire so that they would not have to honor their commitment or their policy. 
XXXX. Their advertising materials blatantly mislead the borrower regarding the true facts and risks of this product. Nowhere does it state that it is possible for rates and payments to double at the end of 12 months or in my case at the end of 10 months. 
XXXX. In combination with misleading advertising and statements to send a closing disclosure that states a 30-year conventional fixed-rate loan in which the interest rate can not increase after closing and then 10 months after the closing inform me that that was not correct and that they can double that rate is false and misleading. 
XXXXThey have the borrowers in a very tough spot after closing the initial loan because XXXX. The builder has to be approved which takes time so finding an alternative that meets the criteria during the allotted time frame is not really a option if there are any issues with the builder. 
XXXXThey also have the borrowers in a pinch after closing because even though they supposedly closed both loans at the closing table if there are any delays in the timeline they are able to cancel and make more by denying the borrowers an extension and forcing them to take out a new loan at a higher rate causing a drastic increase in payment that they may not be able to afford. If the borrower does not qualify for the new rate then they have no ability to repay the construction portion of the loan making their one-time close loan not really a one-time close loan. 
XXXX. Multiple people within this institution use the fact that there are two different loans with two different terms to selectively and falsely answer questions from the consumer. For example, I asked multiple people, multiple times regarding extending my loan and was told that before during, and after closing my loan I would be contacted 30-60 days prior and given an option to extend at a cost. When it came down to it they are now telling me that is true but only on the construction portion of the loan. If a consumer asks a question about a one-time close and a lender chooses to only answer the question about one-half of that loan and not make mention that it does not apply to the other portion, that is dishonesty and deception. This is also a problem within the loan documents. Since there are essentially two different loans that supposedly close at the same time modify later there are a lot of documents involved in the closing. They blur the lines between those two loans to create confusion for the borrowers. There is a page in my note that outlines the cost and process of extension that matches what XXXX originally told me. When I point to that after the fact they again state well that it was only for the construction loan and now tell me that they do not need to honor that for the loan modification. 

I feel that XXXX Mortgage employed a multitude of deceptive and unfair tactics in generating this loan. When making the branch XXXX aware of the problem I was not offered a single solution other than wait and hope they choose not to foreclose. I feel that both my original and current loan officers were clearly not working in my best interest and breached the fiduciary responsibility that they had to me.