I’m so tired of lenders not being ready to close by the date on the real estate contract. There seems to be no accountability for lenders to be ready by the closing date, except not getting paid if it doesn’t close. The buyer is out inspection money, appraisal funds, earnest money and more. If the Consumer Financial Protection Agency really wants to help consumer borrowers, they should impose a FINE for lenders who can’t close a deal by the date on a contract. But unfortunately, the lender doesn’t sign any contract with their client to perform the work nor any guarantee they will do the loan at all. The contract is between the buyer and seller and the buyer just trusts that his lender will perform. The Realtor can save the earnest money that’s in escrow by extending the buyer’s financing period, but it’s hard to know you need to when you don’t find out until a few days prior to closing that there’s going to be an unforeseen issue with the lender. My favorite excuse from lenders…the underwriter just can’t get to the file. I hear this even though the lender has previously put in writing (before the financing period ended) that everything would close on time.
To truly protect buyers, the financing period should extend through the closing date because you never know what is going to pop up in underwriting to get in the way. But IF you make it so the financing period extends through the closing date, most sellers won’t agree to that.
As a Realtor, I am the one that gets blamed and has to do damage control when the lender cannot perform on time. When a lender commits to the loan at funding, they don’t re-run credit the next day and take back the loan when they find out the buyer ran up credit cards on a new refrigerator and a house full of furniture. I feel they should commit to an approval letter before the financing period ends (some states already do this) and not be able to go back on it or require further underwriting conditions on the borrower past that point. That way the borrower knows it will close and the seller knows it will close and then if the lender cannot close by the date on the contract, be held responsible by CFPB. The lenders that cannot close like they promise consumers they can, are acting irresponsibly and costing buyers money. If they can verbally promise the closing, they should make it contractual by putting it in writing! For example, if the buyer does xy&z, the lender agrees to lend the money by the closing date. I’m not trying to throw lenders under the bus, but if the CFPB’s goal really is to protect buyers, this would be a great place to begin.
The CFPB does accept lender complains so consumers can voice when they have these issues. But we will see if it helps more lenders to actually fulfill their obligation to assist the buyers to close by the closing date on the real estate contract.