Is there such a thing as a mortgage Committment anymore?

By
Real Estate Agent with Coldwell Banker Harbour Realty

I may be showing my age with this one but back in the day when I started selling real estate - dinosaurs and huts and all that, we went through a process where a loan was applied for and a mortgage commitment was issued and then the loan went to closing.  Our Contracts of Sale are still worded based on this theory.  What I am finding now however is that a loan is never out of underwriting and therefore never "committed".  I have just had the privilege of being the seller of a piece of property and also the buyer of another.  In both cases the underwriter was changing things and asking for things up to the minute of the closing.  I feel that I have the ability to roll with this a little as I am a Real Estate professional and I understand (????) how  the market is working today.  The problem is how do we as Real Estate professionals explain this to our sellers ("O Mr. Smith although your home has been off the market for 60 days and the buyer was qualified and received an approval letter, the underwriter has determined that this loan will not be written").  I think that this change in lending policy's affects us in how our Contracts are worded as they still refer to a mortgage committment.  Has anyone seen a good old fashioned mortgage committment in these new and challanging times?  How do we prepare and protect our sellers in this market. The lenders are doing a lot of CYA as are the appraisers I think that we as Realtors need the same protection and it appears to be overlooked.  Any thoughts?

Comments (12)

Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

the answer is an unequivocal NO

Jun 19, 2009 10:33 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

I have seen lenders ask for a second appraisal a few days before settlement .

Jun 19, 2009 10:36 PM
Kathleen Gentner
Keller Williams Real Estate - Ottsville, PA
Kathleen Gentner

Jean,

Yes!  I have a newly married couple who have a lending commitment contingent upon an agreement of sale and a purchase price.  They have produced ALL required documentation.  They wanted to know what they could afford and did not want to be "house poor".  (how is that for an OLD term!)

 

i do see  as a sellers agents, we can communicate to the buyers agents a very clear statement, "the house will be under contract, however, my seller will continue to market the house and show this house, up and until there is a written mortgage commitment."  Although, in the recent past this has not been common practice, it is a way to protect the seller. 

As underwritting is "updating daily", each professional, seller and buyer are contiually increasing their real estate, mortgage, political and financial knowledge. 

Real estate practices , in the past (dinosaur times)  required a buyer to put 20% down to secure their equity position in real estate and protect lenders from the state of affairs that our economy is in today. Knowing a buyer has 20%down is a way to protect your seller.

We are seeing a few extra upset sellers and buyers in today's housing situations.

Kathy

 

 

 

Jun 19, 2009 10:48 PM
Jean DiDaniele
Coldwell Banker Harbour Realty - Onancock, VA

Kathy,

A commitment with contingencies is not a comitment.  The approval letter says that monies will be lent with contingencies met.  The problem is UNDERWRITING.  As far as continuing to market the home that is fine until there is a "commitment" issued.  Then once again we go into the unknown world of underwriting.

With my current contract there is a 50% down payment so I don't see that as a protection to the seller. 

 

Jun 19, 2009 11:06 PM
Chip Jefferson
Gibbs Realty and Auction Company - Columbia, SC

I dont think that we will see a commitment ever be anything more that a piece of paper again. It can be used as a doodle pad now.

Jun 19, 2009 11:12 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Jean:  Even in the "old days" when a mortgage commitment was issued by the lender, there were always some sort of contingencies made by the lender.  A typical one would be a credit report update to see if the buyer made any major purchases between application and closing, or if anything negative appeared on their credit since the first credit report was done.  As far as I can remember... a commitment has never been totally set in stone by the lender.  They always left themselves an "out."

Jun 19, 2009 11:15 PM
Dennis Swartz
Full Circle Property Management - Columbus, OH
MBA, GRI...experience counts!

Bad thing is that it is going to get worse, not better, as we are losing control of the deal on the real estate side. We just had one close, and then 2 days later had to reclose the deal, and the lender charged the buyer to reprint the documents! My advice to my sellers is not to give the keys to the buyer until they have been paid!!

Jun 19, 2009 11:36 PM
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

The rules change from day to day and we will not see any improvement soon. Your right every part of the process is trying to protect is self from someone second guessing the decision they made from the appraiser to the underwriter.

Jun 20, 2009 12:16 AM
Ron Wysocarski
Wyse Home Team Realty - Port Orange, FL
CEO, Pricing Specialist

Daily updates, daily changes. Its no fun being a loan officer these days. I am spending much more time working real estate deals. Good deals blow up too easily and are hard to put back together.

Jun 20, 2009 12:22 AM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Jean, in my business getting a Commitment Letter is like pulling teeth. I've had underwriting ask for another piece of paper at the settlement table resulting in having to reschedule the closing.

Jun 20, 2009 12:42 AM
Lynda A. Perry
Your Palm Beach County Connection @ Lang Realty - Delray Beach, FL
Realtor, CRS, SRES

Jean:

Not in this market ... the guidelines change minute by minute, hour by hour, day by day ... and with all reports out their within the media ... it's not going to get better soon.

 

Lynda Perry
Your Palm Beach FL Connection

Jun 20, 2009 01:29 AM
Terri Poehler
Realtor - Coral Springs, FL
Coral Springs Real Estate Agent

I have sellers that are leaving the state. They have to give notice to their jobs. This is nerve wracking. The want to tighten the deal up but I don't have that control. And I know the information is changing constantly but hearing that it might get harder is disconcerning.

Jun 20, 2009 01:34 AM