Consumer complaint received 2017-09-04
Product: Mortgage — Other type of mortgage
Issue: Trouble during payment process — 
Company: FIRST HOME MORTGAGE CORPORATION (MD)

I closed on a property on XXXX/XXXX/XXXX financed by an FHA 203K renovation loan ( {$170000.00} purchase + construction = {$230000.00} loan amount ). The intent was for the house to be my primary residence following construction. 
The General Contractor submitted a zoning permit application to the local township on XXXX. The zoning permit would then be submitted with a building permit application to the county. On XXXX, we received a denial based on the fact that the existing use of the property, though single-family residential, is a non-conforming use on a Commercial zoned lot in a Commercial District. This was shocking to me since it was sold to me as a single family home! Commercial zoning was not noted on the property listing, appraisal, tax records, title paperwork, etc. 
I notified the representatives from the title company, mortgage company and my real estate salesperson on XXXX/XXXX/XXXX via email and subsequently spoke with them on the phone. 
Due to the complexity of these issues, I retained an attorney on XXXX/XXXX/XXXX and he began communicating with the mortgage company on XXXX/XXXX/XXXX. 
I found out just a few days ago that the loan has been sold! The new company servicing the loan expected my first payment on XXXX/XXXX/XXXX on the full amount of {$230000.00} even though no construction was done! Apparently the lender did not pass along accurate and complete information to the new servicer. 
I am now in a position where I own a property on which I can not do construction and in which I can not reside. I also can not use it as a commercial property, even if I was inclined to do so, because my loan is based on this being my primary residence. And I now need to make mortgage payments on a property I ca n't use while paying rent for my current residence. 
The response from FHMC follows : " After closing, First Home Mortgage received a letter from XXXX XXXX attorney stating the subject property was zoned as commercial and as a result, she is not able to obtain the necessary permits required to renovate the home. During the application process, the property was represented to First Home Mortgage and XXXX XXXX as being residential from various sources including the listing, appraisal, tax records and title report. Our general counsel has been in communication with and will continue to communicate with XXXX XXXX attorney while she pursues this matter with the title company and the title insurer. We will assist XXXX XXXX in her pursuit as we can in order to resolve the matter, but respectfully decline her request to forgive the balance on her loan. In the interim, First Home Mortgage intends on putting the title insurer on notice regarding any future claims we may have as well. XXXX XXXX loan was structured with three mortgage payments built into the loan amount because it will take three months after the renovations begin to inhabit the property. This is typical on renovation mortgages with significant work to be completed. As such, XXXX XXXX mortgage payments will be paid out of her escrow funds for the first three months. As for the sale of her mortgage, First Home Mortgage sells all of the mortgages that we originate and there is no delay in doing so on renovation mortgages. Since there is never an option to delay the sale, we would only communicate an immediate sale to a customer. I can only speculate that XXXX XXXX may have received misinformation from a third party that was not affiliated with First Home and unaware of our processes. Regardless, the timing of the sale of XXXX XXXX mortgage has no impact on her situation. '' My response is this ... 
The loan was structured to include 3 mortgage payments at my request only because the property was to be uninhabitable during construction. Since no construction is in process, it is incorrect of FHMC to make those payments. Also, where is the {$64000.00} that was not used for construction or mortgage payments? According to FHMC attorney, he believes that XXXX holds the funds. According to XXXX, FHMC is responsible for the maintenance of the rehab escrow account and disbursement of funds from that account. What about all the extra money in fees, points, etc. that I paid for the larger loan amount? 

The bottom line is this. My FHA 203K owner-occupied residential rehab loan is no longer valid. It can not be an owner-occupied residence because it is commercially zoned. I had no interest in purchasing a commercial property.