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LOAN HORROR STORIES
(Just a Few)

What Can Go Wrong?

For those of us real estate professionals who want nothing more than to see big smiles all around the closing table, any closing that gets delayed or, heaven forbid, never closes at all is very distressing.   I'm not attacking mortgage brokers - I've worked with a few excellent ones.  However, if the loan is being brokered to an outside investor, everyone loses control.

What can go wrong?  Let's start with my most recent disaster.  The buyer was working with an agent who (as it turns out) is married to the loan originator.  There was a pre-approval letter, and every conversation with the loan originator was very encouraging.  My sellers wanted to stay in the same school district until spring, so they put a non-refundable deposit on a rental house.  Per the contract, they removed all the pictures and mirrors from the walls and touched up the paint.  They packed all non-essential items. 

The morning of the closing, I received a call from the selling agent, telling me that the loan package had not yet arrived at the attorney's office. Two weeks later, it never had arrived.    The buyer lost her earnest money. The sellers lost the deposit on the rental property.  The house went back on the market.


And Another...

The buyer has a pre-qualification letter from the lender (the lender his agent had recommended).  Every conversation until a week before closing indicated that the closing would take place as scheduled.  The sellers prepared for an out-of-state move, which included putting their mattress and box springs on the curb for the trash pick-up (charities will not take used mattresses, no matter how good the condition). 

The closing never happened.  The buyer  lost his earnest money.  The sellers slept on an air mattress for a month, and then purchased another mattress and box springs.  



And Another...

The Buyer had been working with a small mortgage broker for several months.  Neither his agent nor I had ever heard of the mortgage company, but at the time of contract, the loan originator presented us with a "pre-approval" letter, stating that the buyer had been approved for a purchase amount up to $250,000. 

In our first telephone conversation, the loan originator assured me that the buyer was "approved" and all that was needed to close was his most recent bank statements and pay stubs, and the house appraisal.  In every subsequent conversation, she assured me and the selling agent that the loan was fine. 

Five days before closing, we were informed that the buyer could not meet one condition for loan approval - a condition that the loan originator had known about for months.  The investor declined the loan.  The originator found another investor, but at a significantly higher interest rate. 

The Seller, whom I represented in this transaction, had contracted to purchase another  home.  The closings were to take place the day before Thanksgiving, giving them time to move to their new home and clean the old one.  They had scheduled everything from utilities, to telephone, to satellite TV, to professional movers, to schools for their children.  

In the meantime, the seller of their new home had come to Atlanta from North Carolina  to meet with the professional movers and move his belongings back to North Carolina.  

My clients'  loan package was complete and waiting to close.  The loan originator, processor, underwriter, title examiner, and closing secretary, had all done their jobs.  Everything had to be redated and rescheduled.  My sellers, whose buyer chose the wrong lender, had to take time off from work to close the following week. That  meant that  they were unable to take any time off to spend Christmas with their family in Virginia.

Who is the least affected?  The lender who dropped the ball. 
 


Another...

The buyers sold and closed their existing home two days before, and their furniture is on the truck.  They are buying a new home in a new community, and have planned their closing for a Friday afternoon before a long holiday weekend. 

The funds are coming from the lender's closing department in North Carolina.  They do not arrive.   The interest rate on the second loan is incorrect.  The lender says it cannot wire transfer funds after 4:00 p.m. (this closing has been on the calendar for at least two weeks).  The builder will not allow the buyers to move in without closing. 



Another...

This one also before a three day holiday weekend.  The buyers have sold and closed their existing home and are purchasing a resale home.  Unfortunately, although they closed their first loan in Sandy Springs at 9:00 a.m., the funds still had not arrived for that loan by 12:00.  Our closing took place in Lilburn, and at 5:00 p.m., the wire transfer from their first closing had not appeared.  The buyers needed the $50,000 in proceeds for their second closing.  Therefore, they could not close and couldn't move into their home on that day.



Another...

The package arrives at the attorney's office approximately 3 hours late  for a Friday afternoon closing.  The loan amount for the second mortgage is wrong.   The closing cannot be completed.  Everyone has to return on Tuesday, following the three day holiday weekend, to complete the closing. 


Another...

The buyer's loan originator has done "desk top underwriting" and is absolutely certain that the loan will be approved.  She sends the loan package to the out of state investor where it sits in a stack of loan packages for over a week, waiting to be underwritten. 

The seller is planning to move out of state, so he has moved all of his furniture out of the home and stored it.  The house has been professionally cleaned and is ready for move-in.

The lender calls and announces that the investor has declined the loan.  The buyer had given notice at his apartment, and can't close.  The seller has nowhere to go but to move back into the house.


In choosing a lender, ask yourself these questions:

How experienced is your loan originator?

Does your loan originator have a support team?

Does your lender have in-house processing, underwriting, and closing departments? In other words, does your lender have CONTROL?

Is your lender reliant on final loan approval from a third party?

Is your lender quick and  flexible, or does the loan package require a two day  turnaround after approval?

Where are the funds??? Do they have to come from another state?

If you have a question or problem at closing, is your lender immediately available?

Does your lender have a good working relationship with a closing attorney?
 


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The information contained herein is believed to be accurate and timely but no warranty as such is expressed or implied.  
  © 1999-2004 Pat Sabin

 
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