02-08-2013 09:39 AM
After a bad experience, I have realized that the standard NWMLS forms don't protect the buyer when the lender fails to perform.
Many buyers won't even be thinking/knowing about this, so I want to alert them about this issue. Usually the closing date is extended by seller in such case, but still buyer is left vulnerable (what if you don't get an extension? then you are in breach of contract).
I think following clauses should be added to NWMLS forms to protect buyer when lender fails to perform (IANAL, this is not legal advice):
It is agreed between buyer and seller that:
- If lender is unable to perform by the closing date, this agreement will terminate and earnest money will be refunded to buyer
- Buyer will be given a 24 hour review period before signing any loan docs. If buyer is not given at least a 24 hour review period, buyer reserves the right to terminate this agreement, and get a refund of earnest money
- If the conditions on loan docs differ by what is spelled out in the Good Faith Estimate (GFE), buyer reserves the right to terminate this agreement, and get a refund of earnest money
- In case of a lawsuit, the prevailing party will be entitled to attorney fees
02-11-2013 02:53 PM - edited 02-11-2013 02:55 PM
Im sorry that you had a bad experience, and even more so that this happens with some frequency in this industry. I think it first needs to be understood the difference between people that work in the mortgage industry, because believe me, they are not all created the same. There are a few different types of mortgage professionals: http://www.mtgprofessor.com/a%20-%20type%20of%20lo
Understanding some of these differences can certainly help you identify the right kind of professional for your particular situation. However, this doesn't mean they will close on time. This is when I would say it is more important and incumbent of the customer to do their due diligence to find the best mortgage professional possible (one with a track record). It is your responsibility to try and find someone who can close your loan on time, and this takes a little work. There are many instances why a deal would need extending, however choosing the right professional they will foresee these problems in advance to help manage expectations early instead of last minute.
I don't ever see the MILS becoming involved with outlining these stipulations and the contract really identifies this as a buyer responsibility in the financing contingency (applying for loan, securing financing, close on time).
I agree with you though, it seems buyers have limited recourse for a lack of lender performance. We literally had a deal that was to close in a week, and when I followed up to check status, they informed me they hadn't even verified their income. Clearly our file was "forgotten", and almost lost this due to a few extensions and false promises from a BIG bank lender. It is frustrating as it seems there is a complete lack of accountability at times, and that we only hear what they want us to hear to keep the deal together. I can't help this was the loan officer's first couple of deals, and probably didn't last very long either...Another issue with the lending industry is extremely high turnover.
Caveat emptor is about all I can say when dealing with a mortgage professional, and do your homework, it ultimately is more important than the house you are trying to buy!
02-12-2013 07:19 PM
Well I think you're penalizing sellers with this language. Lender issues are all buyer related. The seller could just sell to someone who doesn't need a loan. But if they agree to it, I guess that's fine. Don't think I would though.