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MShore, Attorney
Category: Legal
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Experience:  Negotiate, Draft, and Review many complex commercial agreements each year.
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LOX Letter of explanation for refinancing and cash out reason. If

Resolved Question:

LOX Letter of explanation for refinancing and cash out reason. If I write a letter of explanation after asking my mortgage broker for advice, is the Content legal binding? That means if I change my mind what I want to do with the Cash out money or if I didn't mention everything that I want to buy with this money can the mortgage lender sue me or threaten me for lying (because I followed the mortgage brokers advice and just wrote some standard explanations) with legal consequences? Thxxxxxxxxxx
Submitted: 5 years ago.
Category: Legal
Expert:  MShore replied 5 years ago.
Thank you for the post, if you do not mention what you are taking the money out for, the lender cannot pursue you for lying, but if you represent that the money will be used for a specific purpose and it is not used for that purpose (e.g. home improvement) then you could be pursued for obtaining the loan under false pretenses. As a practical matter, upon learning that the loan was taken out under false pretenses, the lender is most likely to simply "call the loan" (demand full repayment).
Customer: replied 5 years ago.

I did not get/receive/close the loan but the lender mentioned that he will threatening me with going to court and sue me for his expense that he had for working on my loan application for nothing because of my "false" explanation in my LOX?

As a matter of fact I think I was not lying because I wrote in the LOX:


The reasons why we apply for cash out money are:

- To pay back our debts on our credit cards

- make home improvements

- to deposit some money on our savings account

With best regards XXXXX XXXXX


We were planning to do all this payments but with the line item "- home improvements" I was planning to improve the rental income home that I was planning to buy cash with separate money that I got finally from my family.

In the beginning of the 3 months loan process I was planning to take the refi cash money out ONLY for buying the rental property (and mentioned this to the mortgage broker) but this purpoes changed when my family participated on this investment.

That means I did not lie, I just didn't explain this issue in detail and I never wrote that this line items include everything that we were planning to do with this money because I didn't know it for sure at the time when I wrote and signed the LOX.

Can the lender now sue me and my wife for lying (because he said we committed a fraud/crime in a loan document with a false LOX) and force me to pay for his time that he invested to work on our loan application?

Thx HFr


Expert:  MShore replied 5 years ago.
Thank you for the explanation, no the lender cannot sue you for fraud because you really did not deceive the lender.
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