If there was no repair escrow set up within the terms of the loan, that was a huge mistake. The repair money was probably spent on the broker’s other properties, so you have to hope that the value of the proerty you co-signed on, as is, is more than the balance of the loan. My offhand opinion is that the broker can’t legally hold money from other property that he manages for you; however, I haven’t seen any of the documents you have signed with him. You are definitely going to need a lawyer to untangle this legal can of worms. Get one ASAP.
In October I co-signed for a guy to buy a house (hard money loan) $30k to buy and $7500 for repairs. The mortgage broker did-not escrow the $7500 to a 3rd party with instruction for payments, He kept the escrow and gave some as he seen fit to the borrower.
After the borrower started working on the house 3/4 days the mortgage broker talked the borrower into going to work for him on some of his properties during the week then working on his (the borrower) house on the weekends.
Well the borrower and the mortgage broker had some difficulties over pay and for work he was doing on the brokers houses. The day in Jan when the borrower made his payment he told me he didn’t think he think the broker would give him any more draws from the escrow account. In Feb. the borrower defaulted on the payment, the broker called me wanting the money when the payments was 5 days past due threating foreclosure, after a couple days I asked for a copy of the papers INCLUDING escrow hold back agreement and there was no escrow hold back agreement and only a general accounting of the escrow money.
I own a parcal mortgage on another property and the mortgage broker is collecting the monthly payment and has been sending the payment regularly, Well the January payment was due on the 28th the broker held back the Jan payment before he knew the borrower had defaulted.
Any advice???