This is my 3rd reason as to why lenders will delay closings. Check out my previous blogs for reasons #1 and #2.
Mortgage Lenders have something called a 'Warehouse Line'. It is a big gigantic credit card which we get to cash advance to fund a loan. Has a title company ever said to you (the agent), "We still don't have the wire?". If so, THAT is where we get our wire from -- our 'Warehouse Line'. If you are wondering where a guy like me gets the $15,000,000 every single month to fund the loans we close, I would love to tell you that it was from saving my lunch money when I was in school, but I would be lying to you.
I get our money from a place called a 'Warehouse Bank'. A 'Warehouse Bank' gives 'Warehouse Lines'. Lenders use these lines of credit to fund residential mortgage loans. For as much as I would like to use it to go shopping (since that is my secret vice (even though it takes me 9 months to pick out a pair of socks at Kohl's)), I can only use our lines of credit to fund residential mortgage loans.
Imagine cash advancing your Discover credit card and handing the money to someone to go buy a refrigerator at Best Buy. I cash advance our warhouse line and give it to someone to go and buy a HOUSE.
Now why would I delay a closing because of my warehouse line? Simple -- I am given 30 days to pay back the money which I cash advanced and if I do not pay back the money which I cash advanced, then my 'Warehouse Bank' will reach into my bank account and take ALL of the money which I used to fund the loan out of my bank account. Worse yet, they will close the line altogether and I will not be able to fund any more loans.
Imagine not being able to sell a $100,000 mortgage and because of that, my line gets closed on me and I cannot fund the other $14,900,000 for the month which we are trying to close. Imagine being at the check out at the grocery store and you swipe your credit card only to find out that Discover Credit Card Services closed your credit card 2 minutes earlier on you. Not fun.
How does this delay closings? Because I have to make sure that my loan is bought by an investor (who gives me my money back to repay my warehouse bank). If I am missing 1 sheet of paper which was not signed correctly, the loan will not be bought and I will get stuck paying back my line and risk having the whole thing shut down. Who out there has ever had an loan officer say to you, "We cannot get that signed at close, I need it signed right now" or "I need the customer to re-sign this document before we close"?
The reason that happens at the last minute is because to get documents signed AFTER closing, we risk not being able to get them signed at all. How motivated would a buyer be to sign something for me 2 weeks after they were handed the keys to their new home versus how motivated would they be to sign something for me BEFORE closing when I tell them that we will not close unless this is signed?
Hopefully that made a bit of sense because this is definitely a little more complex to clearly explain.
As always, call me if you have scenario questions or buyers whom you wish to get Pre-Approved. My company is the lender, I am also an underwriter and I just happen to own the place. When it comes to returning phone calls, I am a lunatic. My number is 1-216-780-1103 and you can also text me. I love scenarios, tough deals and transactions which are declined by other banks and lenders at the last minute. That is the time when I really shine. I am licensed in 14 states, but can answer questions no matter where you are in the country (something which I love about mortgage lending). All the best my friends!!
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