Question to all of your mortgage experts, have you ever seen any of this following situation?

I have been battling with my mortgage company for a year on a inflated appraisal they did when i took out a second mortage 2 years ago. they inflated it by 25k, at the end i had to get the Iowa attorney generals office involved and they found they shared my concerns. The mortgage company "Washington Mutual" volunterred to refinance both loans into 1 and they would eat the diffrence. We just closed today and on the HUD-1 it shows all of the closing fees, and the payoff the 1st and 2nd, then it showed a cash/from bowwer of 36482. This is the amount the company is wiring to satisfy the short to close. My questions would there be any more games ect/or heard of this thing. I am already assuming i am going to get W-2 for taxes with this.
Thanks

They are using the term "funds from borrower" to make the numbers work. You should be OK, but I would ask the escrow or title co or settlement company, (whatever you have), what their opinion is. I have been in the loan business for almost 30 years and have never seen anything quite like what you are describing.. You will not get a w-2. You MAY get a 1099-C. If you get a 1099-C.... before I filed my taxes I would definetly check with a tax attorney on what your liability, if any, would be.

As far as "lender paid" versus "funds from borrower", this would have not impact on your taxes. It could still be regarded as debt reduction and as such could be taxed as income.

I would demand the title company change that 36,482 to show as "lender paid" on the HUD 1