On the House: How many loans are too many?

Posted: November 22, 2009

Many people who are careful with their finances, wise in their investing, and secure in their jobs own more than one property.

That's where Bill and Karen Mestichelli fit into the real estate landscape. Bill is a South Philadelphia dentist who has filled enough cavities to own a Moorestown house, a Shore place, and two investment properties.

In 2007, they refinanced the Shore house loan. Trouble was, the refi came with a 30-month prepayment penalty - $12,963.61, to be exact - that would end Sept. 9, 2009. A hefty sum, but if you plan to hang on to a property and the trade-off is that you get a better rate, it doesn't matter.

The Mestichellis, however, decided to sell the Shore house, with closing March 5 - six months and four days before the end of the penalty period. Bill called Washington Mutual, now part of JPMorgan Chase, to see whether he could avoid the penalty.

That effort began Jan. 30. A definitive answer might have ended things, but Bill became lost immediately in that maze called "customer service."

After dealing with 10 different representatives at WaMu, he was told on Feb. 4 to talk with a broker. Karen reached a customer-service rep who said the loan had a clause allowing the penalty to be dropped if the couple simultaneously refinanced another mortgage.

The rep checked with a supervisor and transferred Karen to the loan department, which kept her waiting for 37 minutes. A man finally answered, told her she needed a loan officer, and transferred her to one, who told her she needed a New Jersey person.

It got worse from there, with contradictory information from a dozen other customer-service reps on whether the Mestichellis could refinance or needed a new loan.

The final straw: Though the couple would be allowed to refinance an existing loan - on a California property in which they had plenty of equity - they couldn't do that because they already had four mortgages - the limit, according to customer service.

By then, the Mestichellis had sold the Shore house, so they actually had only three loans.

I called Chase, which has since been in touch with Bill to try to work things out, albeit several months after the fact.

Are there really limits on the number of loans one can have?

Fannie Mae spokeswoman Amy Bonitatibus said that though the limit there was briefly dropped to four for investment properties, it's back to 10. But lenders' rules will override Fannie's, she said.

I will let you know how the Mestichellis' situation plays out. And I invite you, as always, to let me try to help with other problems.

Chase is not the only party investigating this one. Bill wrote a letter to the state banking and insurance commission, which forwarded the case to the U.S. Office of the Comptroller of the Currency. If the matter isn't settled in 30 days, the OCC will do something.

Such action by the state and the feds would have surprised the last person at WaMu Bill Mestichelli talked to. "The guy on the phone laughed and said that there was no chance they could do anything," Bill says.

Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.

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