CHICAGO -- The refinancing frenzy has cooled somewhat as interest rates have crept up from 20-year lows in January, but for some, painful memories linger.
The refinancing boom that started to build steam last fall and peaked over the last two months has caused a surge in complaints all over the country about inflated fees, exorbitant point charges and, in particular, failure to deliver on promised interest rates.
"We've had far more complaints than we usually get. People have been calling from all over," said Peggy Miller, banking director for the Consumer Federation of America in Washington. "It's caught us all by storm."
National trade groups representing mortgage bankers and brokers, however, say they haven't seen a big increase in complaints even though they anticipated it because of the tremendous demand for refinancings coming in a short period of time.
The number of complaints was much higher during the 1986 refinancing boom, when people who had taken out mortgages with rates in the mid-teens in the early 1980s rushed to get rates that went down to about 8.75 percent, according to Michael Hoogendyk, executive vice president of the Phoenix-based National Association of Mortgage Brokers.
"We would have been expecting to hear a lot," said Brian Chappelle, vice president for government affairs of the Washington-based Mortgage Bankers Association of America. "But our members haven't indicated it."
Complaints haven't reached mid-1980s levels, agreed Patricia Cunningham, consumer affairs director at the Illinois office of savings and residential finance.
The most common complaint coming into her office involves delays by lenders that cause lock-in dates to expire before the loans can be closed, she said.
A lock-in guarantees an interest rate until a certain date, usually 45 to 60 days from the time of loan application.
She has seen some situations "where [loan] disbursement can occur by magic one day after the lock period expires," Ms. Cunningham said. "I don't believe in magic. I'm making no accusations. I'm saying we're taking a good hard look."
Leonid Sagalovsky, a physicist working at Argonne National Laboratories, has filed a complaint with Ms. Cunningham's department over expiration of a lock-in date, citing Associated Financial Services, a mortgage broker in Northbrook, Ill.
Mr. Sagalovsky, who lives in Des Plaines, Ill., claims Associated Financial locked him into a 7.5 percent interest rate with no points for the first five years of a 30-year mortgage, then delayed so much in processing his application that the 45-day lock-in period ran out, forcing him to take an 8 percent rate instead.
Mr. Sagalovsky said he finally accepted the higher rate because he didn't want to go through all the paperwork with a different company.
But Mr. Sagalovsky said he refused, on advice of an attorney, to sign a waiver releasing Associated Financial from all liability. The waiver was presented to him at the loan closing.
Now, he said, Associated has sent him a letter accusing him of fraud because he didn't sign the waiver and saying his loan, which was issued by California-based Countrywide Credit Industries, may be called in. "If I didn't know any better, I'd be scared," Mr. Sagalovsky said.
Associated President Sherwood Zwirm said Mr. Sagalovsky "is not being honest and truthful," though he declined to listen to or respond to specific charges.
Overcharging was cited as a common complaint by callers to the Consumer Federation, according to Ms. Miller.
It also figured strongly in a survey by Lake Bluff, Ill.-based Consumer Loan Advocates, a company that does audits for adjustable-rate mortgage holders to see if they have been overcharged through miscalculation of their rates.
The company said a survey of more than 200 of its clients doing refinancings showed 77 percent felt they were overcharged in fees by lenders for items such as credit reports, appraisals and the like.
Tom Buck, a Denver accountant and used-car wholesaler, got hit with a $200 "tax audit" fee on his refinance closing statement and was told by a real estate broker friend that the customary fee was $15 for such a service, which involves checking that property taxes have been paid.
When he went back to his lender, Mr. Buck said, he was told it was a "mistake" and the fee was reduced to $20.
Borrowers also expressed the view that lenders used the rapid decline in interest rates to charge higher points, the Consumer Loan survey said.
Points -- each one being 1 percent of the total amount of a mortgage -- are almost always paid upfront.
They cover the loan origination fee plus "buy-downs," by which the borrower pays more upfront to get a lower interest rate.
The Consumer Federation's Miller cited the same complaint. One protest came from a man in Michigan who told of lenders charging 4.5 points for refinancing, she said.
"That's insane," Ms. Miller said. "That truly is usury."
Still, some people may find such point charges acceptable to get the mortgage rate they want.