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Mortgage Caution - Delays in Closings Will Happen!

By Gretchen Faber

Real Estate Agent with The Kentwood Company at Cherry Creek

September 06, 2009 12:18 PM

A broker in my office came to me yesterday with some questions about a seller’s recourse if the loan doesn’t fund at closing.

Colorado is a “table closing” state, and our contract expressly states that the buyer must attend the closing with all moneys and documents. This means that if a closing is at 4 p.m. on a Wednesday, as this broker’s closing was, the buyer and the buyer’s lender must perform under the terms of the contract at 4 p.m.

This lender had a lackadaisical attitude, ignored the new HERA/HOEPA regulations and essentially didn’t do his job. He was told on August 23rd that there was a slight change in the final figures, but he failed to disclose the change to the buyer.

Under the new regulations, any change upward to the buyer’s APR (over 1/8%) must be disclosed in writing to that buyer and the closing can’t happen until 3 days after the disclosure is made.

The loan broker did not disclose the resulting change in APR to the buyer until yesterday, the day of the closing. Actually, it was the second date for the closing, since this lender also didn’t order the appraisal on time (another story.)

Real Estate Buyers - Caution!

You are at risk to lose your earnest money in Colorado if you aren’t prepared to close at the date and time the closing is scheduled in the contract. In this case, the earnest money was $8,000. You lender and your real estate broker must be watching out for you and advising you. How could you possibly keep up with the changes in our industry? It’s obvious that many lenders and real estate brokers aren’t even keeping up. If the real estate broker in this instance had been on top of her game, she would have hounded the loan broker to get his disclosures out.

Her managing broker is helping her out, and using this as a “teaching moment” by paying the sellers’ damages. This equates to their loan per diem until the closing and various other pro-rations and charges. He’s a good broker and stepped up to the plate immediately because he understood that we must not stand in the way of a buyer and seller finalizing the transaction, or risk our clients’ earnest money. I’m sure he’ll also go after that lender for leaving him hanging in the wind like that.

This added level of complexity makes it more essential than ever that you hire a professional and seasoned real estate broker and that you listen when they tell you what to look for in your lender.

Don’t leave your earnest money to chance.

This was fisrt written at LifeStyle Denver.

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Lew Corcoran

Better Living Real Estate, LLC - East Bridgewater, MA

Real Estate Agent, Home Stager, & Photographer

Gretchen, it's getting increasingly MORE difficult to close a loan within 30 days. Once a person applies for a mortgage, the broker will send out disclosures which the borrowers must promptly sign and return along with copies of required documentation. But, before the broker sends out their disclosures, ALL fees must be included and as accurate as possible. That includes the title company's fees and the attorney's fees. Once the disclosures are returned, then the lender will send out their disclosures. Once the lender sends out their disclosures, there is a required 3 business day wait before the appraisal can be ordered.

Now, all appraisals must be ordered through an Appraisal Management Company. As the broker or lender cannot even speak to them, there's no sense of urgency on their part and they can take as long as they'd like to hire an appraiser, for the appraiser to make his appointment, and for the appraiser to fill out the report and return it.

Meanwhile, if there any any changes in fees that causes the APR to increase by more than 1/8th of a percent (and it doesn't take much to do it), then the lender must send out new disclosures. There is a required 7 business day wait (effectively 10 days) before settlement can occur if new disclosures are sent out.

Bottom line is, everyone needs to be aware that it's becoming increasingly unlikely that closing will occur within 30 days of the signed P&S Agreement. You're better off planning on 45 days.

Sep 06, 2009 12:49 PM

Gretchen Faber

The Kentwood Company at Cherry Creek - Denver, CO

LifeStyleDenver

Yes Lewis, you are certainly right on the mark. I've been telling agents not to get their buyers' (or sellers') hopes up for a quick closing if there's a loan involved.

Sep 06, 2009 01:02 PM

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Gretchen Faber

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