Ask the Brokers – Hey Mr. Lender, remember me?



I’m tryin’ to buy a house here!

A reader recently shared this in a comment on another post. I found his predicament worthy of a little more front-and-center discussion.

I just received a “notice to perform” Escrow closes on Jan 7th. My loan has been in underwriting for over 2 weeks and I am being told it is because of holiday schedule, under staffing and we have now had 2 extensions and here we are at the end of another week with no word on approval. I personally hand delivered each document throughout the process, never once putting anything in the mail. My application is clean, credit score, income, everything is high and tight. So here we are just a few days from the close date, frustrated, in the dark, the seller has to be totally impatient. So I ask, why should I jeopardize my down payment because of the inadequate performance of a bank…?

Oh btw, the bank was told by my broker two weeks in a row, “if we don’t get approval by Fri this deal is going to fall apart” and here comes another Fri. I am imagining a guy in a suit at his desk under swaying towers of loan ap’s. or maybe the towers above an empty desk as the camera cuts to a guy out on the golf course somewhere…

Your visual at the end made me laugh, but I doubt any of the parties involved are finding the situation very funny. As is so often the case, I have more questions than answers. Do you have preliminary underwriting approval and are you just waiting on final loan approval? Or, has the lender not even looked at your file yet? Is your lender making representations that the closing date can be met? Do they table funds (make funds to close available at signing), or does the closing package have to go back to the lender’s desk for final review and funding?

The closest I have come to a situation like this lately was when the buyer of one of our client’s homes didn’t get his loan documents for signing until the day of scheduled closing. His lender tabled funds, so we only incurred a one-day delay. While it was an irritant to all involved, there was never any real fear that the transaction would not close, just anxiety as to “when.”

In your case and at this late date, it would appear that a delayed closing is going to occur. If you credit and income are “clean and tight” as you say, it is never too late to submit a package to a second lender, one who can expedite your loan application and perform. We have seen mortgage brokers arrange hail-Mary, back-up financing in less than a week under similar circumstances.

Which brings us to the subject of dual applications at the time financing is initially sought. This process of “double-apping,” while certainly not rampant, is become more commonplace, particularly in situations where a party has some trepidation about a buyer’s ability to qualify or a lender’s ability to perform.

I suspect the reality in your case is that no one really wants to cancel this escrow the Friday before a scheduled Monday close. You and the seller have come too far down this road together. A Notice to Perform is the seller’s only hammer at this point, but if your agent can have a frank discussion with the other side and assure the seller that you are acting in good faith, convey that you working your darnedest to get the lender to rally, and that the delay is not due to your inability or unwillingness to close but on the lender’s different sense of urgency, this might go a long way in persuading the seller to hang in there with you.

Regarding your earnest money deposit, if I were the seller’s agent, I would most definitely be issuing the Notice to Perform. And, I assume we are talking about a Notice to Perform on loan contingency removal, since you mentioned “jeopardizing your down payment.” I would also be making the argument that releasing a loan contingency does not need to be predicated on full loan approval. Having gone this far, you as the buyer should have at least a preliminary or conditional loan commitment from the lender. If the issue is truly a procedural one, and not related to your qualifications for financing, then you should have little fear that you can ultimately perform. Of course, as a buyer’s agent, I would argue otherwise.

Your only choices are to call the seller’s bluff, if it is indeed a bluff, and not release your loan contingency or to roll the dice and sign the contingency removal. If you are indeed qualified and committed to consummating the transaction, the latter should present little risk. In either case, I can’t imagine a seller wanting to start over if it is simply a case of a delayed closing, particularly in this market. But I could be wrong.

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