Recently I read a terrific mortgage post about "Loan Surprises On Or Before Closing Should Not Happen" by George Souto from 11/28/06 when I found myself involved in a similar scenario.  My situation involved a recent refinance with last minute problems while George's post focused on closing issues for purchase transactions.    

I was the loan originator for a difficult cash-out refinance that needed to close by the year's end.  The purpose of the loan was to pay off a negotiated debt settlement and put the client into a fixed loan product.  I was referred to the client when a previous originator and the existing mortgage company could not complete the transaction.

Apparently they were unable to successfully negotiate the debt settlement to a number that would fit into an acceptable loan to value ratio.  The clients had been making payments on 2 homes for 16 months while trying to sell one of their homes.  Unfortunately, their obligations outside of the 2 mortgages became very delinquent.

We put together a program that fit the clients' needs, received a debt settlement agreement and obtained a U/W approval.  The loan was set to close on Friday 12/22, the last day of the month for a refinance to fund by month's end.  More importantly the loan needed to fund by year's end to satisfy the settlement agreement. 

The challenge arose when a new member of my team did not order the existing mortgage payoff until just before the closing was set.  I compounded the problem by not following up with the payoff personally to insure we would get the file to closing on time.  

The existing mortgage company (known for its option arms) has a policy to "back solicit" their existing clients whenever a payoff is ordered.  Don't get me wrong I too would try to retain my exiting clients if I was informed they were obtaining financing elsewhere.  So this lender requires 10 business days to process a payoff request.  Most companies process payoff requests within 1-2 days and some even within a few hours. 

Having been in the industry for a long time I had already prepared the client for this company's aggressive retention proposal.  I also made a point of counseling my new team member about the company's tactics.  Unfortunately, my team member tried to minimize these efforts by waiting to the last moment to order the mortgage payoff.  The result was a file that would not close because we did not have a payoff statement. 

Normally we would simply reschedule the closing until after the payoff was received.  But, in this particular instance, if we did not close and fund by 12/30 we would lose the settlement agreement.  I tried contacting the creditor to extend the agreement explaining that we were unable to obtain a payoff.  After 2 days of phone calls and pleas with management I realized that it was out of their hands and could not be extended.  Several good faith attempts to close the loan and satisfy a settlement by the previous originators limited the client's options.  The creditor was unwilling to extend the agreement and was out of options from a legal standpoint.        

So, I focused my attention on closing the loan without a payoff for the existing mortgage, which contained a prepayment penalty.  I obtained U/W approval to use the most recent statement, a copy of the existing note and prepayment rider to arrive at an acceptable escrow hold back to cover any unforeseen issues with the payoff.
The next step was to obtain approval from the closing department for the same issue.  That was fine until the title company wanted to establish a much greater escrow holdback that challenged an already tight deal. 
We eventually convinced the title company that we would make receipt of the payoff a funding condition and proceeded to draw the closing documents. 

Then magically, we received a copy of the payoff just before the closing.  Great everything was solved, right.  Wrong, we had to redraw the documents using the actual payoff numbers and push the closing back 2 hours.  The title company had difficulty accommodating the later closing time so we arranged for an after hour notary service.  The title company forwarded the documents to the notary who would go to the clients' home.

Well at least the file would close and the settlement agreement would fund in time and even though the closing would not be as smooth as usual the problem would be solved, right.  Wrong again, the notary had a challenge printing the closing documents and could not close the file before the client, a police officer, had to report to duty.  So at 6:15pm on the Friday of the Christmas holiday weekend the title company was able to track down another notary service in the next town over who would try to close the file at 10pm while the client was on his lunch break.

I was unable to contact the client who went out of town at 6am Saturday morning and do not know the final outcome as I never received the new notary's contact information either.  So because I did not follow through on one of the little details it takes to complete a smooth transaction I caused a lot of unnecessary complications.
I also took advantage of my relationship of the other parties involved who really chipped in to bail me out.

Perhaps the client will appreciate the effort in the end - but I'm not expecting many referrals.

Hopefully, everyone will learn from this and remember not to overlook the little details...

Happy Holidays!