You are sitting at the closing table and the title company says that your mortgage money is not in their account as of yet. What could this mean? Possibly no closing or maybe a dry closing? I was inspired to write this because of many of the comments from other real estate agents in a blog that Diane Testa wrote, Are you having a lot of "dry" closings lately?
In Diane's post, here is what she had mentioned in regards to why the money might not be at the closing table. "Now, here is my question. Is this getting to be common practice? Are you experiencing the same corruption? Because that is the only thing I can call this. Banks are holding out funds on Friday afternoon closings and getting paid even though they didn't put the money on the table."
Now, Diane is a good realtor and has been doing this for over 12 years. And many of the comments talked about how they advise their clients not to have settlements on Friday and sometimes on Monday. Hence why I wanted to talk about this. It's not about your money getting to the table slowly, when the lender wants to get it there. I'll discuss the behind the scenes next.
So, it's not a good idea to settle on your mortgage on Friday. Then why close your loan Monday through Thursday? What would the difference be? Ah, because some people have said that some lenders don't get the money to the closing table in time and it could be a problem. Because some feel that the lender is trying to make some money by doing this? Conspiracy theory? Let's take a closer look.
There are many reasons why you can simply assume this, especially because it might seem to happen more lately. Right? Ah contraire mon frere. You don't hear loan officers tell you why packages are received late or why the money might get there late. It would usually show that they didn't get their job done on the date that it should have and it's easier to point the finger to other excuses.
So, what's the reason? How about just for the fact that the loan was not cleared to close in time to get the wire out.
Conclusion : Okay, how is this possible? My loan was approved 1 1/2 weeks ago. There are usually what are called conditions. You could have one condition or 12 conditions. A condition is something that either the underwriting system or the underwriter wants prior to closing. It could be a current paystub, a W-2 that was missing, or possibly a better credit explanation letter. Okay, so these things seem simple. Why did it take so long to clear these?
What ifs : What if......
- you waited to long to apply, 2 weeks before closing, and now it's just being underwritten.
- you delayed getting the appropriate paper work to the lender.
- the lender needed proof of an item that was paid and you couldn't find it.
- the loan officer didn't turn your loan in when they first did the mortgage application with you and turned it in a few weeks later.
These are just some of the examples to why your loan might not be cleared to close. And most don't know, but there are a few things that need to take place even after your loan is cleared to close. It still needs to go to a closer and sometimes before that happens, it needs to go to someone to do QC, quality control. These things just don't happen overnight, hence why some loans are delayed last minute and hence why the money is not there in time for the closing. My advice? Ask your loan officer in detail. Now you are educated to other reasons why your loan may be delayed. My pet peeve? Those that don't stand up to either their mistakes or the mishaps of lending. But take the easy route and finger point to other excuses. You just don't know.....
Disclaimer : Because of the comments on this post, each state can be different in regards to when a loan will fund. This is not about closing a loan on Thursday so it funds on Friday. That actually gives a lender a whole extra to get the money into the title agency's or lawyer's account. This post was written to share the ins and outs to why the funding could be late, why the money is not there for the buyer, to buy out the seller.
And keep in mind, this is based on my opinion and 15 years in the mortgage business.
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Copyright © 2008 by Jeff Belonger
The reason the money was not available was because the Attorney or Title Agent must send all documents back to Lender to have them release the wire. I close deals every week on Fridays and have no issues with getting my check or the Seller, Realtor; ect.
Schedule your closings in the morning if you close on Friday and you should have no issues.
In Hawaii we do not record until the day after the money is funded by the lender. We try to never fund on Friday because the buyer will be paying mortgage over the weekend and not get the keys until Monday. Our signing is done in advance of the funding.
We never have a dry closing it either closes or it doesn't.
PS: The lenders who play games never get a referral from me.
KURT.... this is not actually true. As mentioned, each state is different on how they fund. But in many states, the HUD 1 / Settlement sheet needs to be approved for the lender to say okay to the funds. As you say, release the funds. But it doesn't mean that the funds then are sent to the title company.
Yes, some states are different in the sequence. But this was all about why that sequence doesn't happen and it's not because the title agent took their time in getting the documents back to the lender. I have closed deals in NC and SC. Even when the lawyer handles this, the money should be in their account prior to settlement and then they release it. thanks for your input.
RANDY..... I added the disclaimer because of your comment. Thanks... Hence why this is not about when it funds, but to why the monies are late to the table. Even if you then have to wait for the deal to be recorded. Thanks for your feedback.
Jeff, you've raised some good points. I would like to add something though that I've been seeing:
A "Clear to close" has been given, normally 3-5 days before closing date. (Meaning, all conditions are met, and the lender and title company are drawing up documents to be signed.) Package is received by title company, we're "good to go". Closing date arrives, everyone signs and then the fateful words are heard "The funds haven't arrived."
Frankly, when I heard "Clear to close" and "all conditions met" I darn well expect there to be funds ordered, wire transfer handled and funds received by the title company in time for the scheduled closing. My sellers and buyers expect it also.
Jeff,
Good points, but I think in Diane's case everything was approved, documents were executed, and only the wiring of funds remained to complete the closing...title companies are obligated to provide a preliminary Hud1 to buyer/borrowers 24 hours in advance of closing...everyone has to get on the same wavelength, the same page...that is usually the problem! Thanks, Fran
KRIS..... all I can say on that one is, who is telling you the clear to close? The loan officer? Then it could just be fluff sometimes. The title company would only know this when receiving the closing instructions and the package. But if it truly plays out to what you mentioned, that the title company has the package and the funds still aren't there? Then that is a foul up by the lender in regards to getting the wire out.
No, hold on.... in my last statement, if the closing package is at the title company, this still doesn't mean that it's always clear to close. Because I have some pull with my lender, I can get a package out and still not have all items cleared. But... I still get the loan closed and the money wired. It's all based on my promise to my underwriter, who will sometimes allow me to do this.
My whole point is, each loan officer and lender is different. The bottom line, why aren't so many settlement dates met? I think it starts with the loan officer. I have 3 clients right now that were promised loans from other lenders. All 3 fell apart. One went to closing and wasn't told until closing. And that same person was denied a month later. But I am closing that person in 2 weeks. Just knowing how to get things down is key. In any case, thanks for the compliment.
GINA..... thanks for the compliment. I think we need to see more of these types of posts. Giving people a clear picture of what happens behind the scenes. Many states don't allow for dry settlements, but it can be up to the lender and or the title company. Usually getting the borrower and seller to sign a specific type of statement. "a hold harmless" letter.
DIANE..... in a perfect world, that is all great. But it also depends on when the consumer applied for the mortgage and when the actual settlement date is. You have some lenders and/or loan officers running around stating that they can close loans in less than a week. Again, on a perfect day. But there is too much to do on a loan, unless that lender is only processing and closing 5 loans or less a month. Overall though, as you stated, there is no excuse. But things do happen. The best loan officer is one who tells everyone what happened and still gets it to the table, even if it is a day late. The bad lender or loan officer is one who makes a habit of this.
FRAN..... you hit the nail on the HUD, I mean head... lol Yes, being on the same page and that is where a good loan officer will be the general and make sure that everything is in place, handled correctly, in a timely manner.
In Diane's case, that would sound like it was all on the lender, who ever was in charge of making sure the wire went out. But then again, it could have been the warehouse bank. Again, there could be so many problems, but who stands up to what. What answers are given to you and are they honest answers.
KENT...... thanks for the polite compliment and for asking permission. Yes, you make use any of this or all of it. All I ask is that I get recognition for it. A link to this article and my name on whatever you hand out. Thanks
MARC..... time of the what? lol Seriously, that phrased is so over used by some loan officers. Basically what I say, false promises. I am working with a client right now that was given to me by a realtor because another lender dropped the ball....on their first deal. This consumer stayed with him the 2nd time around, until she talked them out of it. When I ran his credit, we were 7 days around from the commitment date. I called her up and said that we weren't going to make it, because their credit needed a lot of work. That other loan officer didn't give them a denial until 9 days after the commitment date. My whole point, I know what you are talking about. This might give you a good idea that I do understand your little phrase : Is the commitment date just as important as the settlement date?
Overall, for someone to point back to the processor .... and not just once. And lastly, a refinance and you attended and he didn't? Ouch and rut row....
MISSY.... that's understood and was mentioned. If that is truly the case, then there is no excuse in the world. Unless, the warehouse bank lost it's power... And now I am giving someone another excuse. lol But don't laugh, I had a loan delayed last minute to the next day because yes, the power was lost when they were doing the package. Believe it or not, a car hit a telephone pull that shut down a whole grid. And to think I had to tell everyone that one, when it actually happened... lol
Diane... don't be sorry. I have done purchases and refinances in NC, so I truly understand what you mean when you talk about firms dates. I wrote this based on firm dates, Is the commitment date just as important as the settlement date?, because I understand them and respect them. So many lenders don't take the commitment date seriously.
In regards to pre-approved before you take them out, I understand this one also. The difference between a Pre-Approval and a Pre-Qualification letter. I always try to get clients to take a full application with me, to get approved, while looking for a home. And to tell them that they aren't locked into me, that they still can shop me or go some where else. But it's rare that I get them to take this step, even if I tell them the benefits of this.
Overall, Diane, I am not trying to preach to you. But letting you know that I am on your side, that I do understand what you are saying. Which is why we have so many problems in the lending world. So many just want to tell you what you want to hear. I did a clients refinance in NC last year, who was with me at first. I told him the truth, but he wanted more money. Someone else promised this to him. But he never closed. I got him to come back to me and we settled. It even happens in their own states. Outside lending should never always be the concern, but who knows what they are doing, who is trustworthy, and to know those laws in that state. Thanks for your thought provoking feedback.
I've heard it all now!!! LOL
Did the buyers get to move in?
LISA..... just my working curtains. ;o) And in all honesty, you can ask questions until you are blue in the face, but the loan officer can always make you feel warm and fuzzy, even if it's not true. And again, you just won't know until that hour when at closing. And then, that person might just come up with an excuse that will make it look like someone else's fault. Read Marc Grossman's comment.
MISSY...... I honestly can't remember if we did a dry closing or not. I think we did, and mainly so, because the seller's agent knew of me and the title company new me very well, that I always came through. Knowing that this was not smoke and mirrors. lol If not, they did move in the next day. Matter of fact, yes, they did move in as a dry settlement. Even though docs weren't signed and there was no money. Again, it went back to relationships. And I actually got that buyer from another loan officer out of state. It was his wifes friend.
MATTHEW..... the lender? I guess you mean on who you are selling to? The only reason why I don't bring up details like this is because we close most of our own deals in-house. The only time we don't is when I do a subprime loan. And we fund with our own money, so I don't have to wait for all of those signatures. But thanks for your input, because that is very important for those that are brokers.
A friend recently sold their home on a Friday night. They were told that funds were at the title company, but they weren't allowed to release the funds until they had signed docs. To this particular title company that meant that they would send the check to the seller on Monday for a Tuesday deliviery. The buyer's agent added an admin fee to the seller that was never agreed upon, and when my friend challanged this charge, the closer said he was not authorized to take it off, but that he would "note the discrepency". Then my friend's check was shorted an ADDITIONAL $370 that the title company had added to a "corrected HUD-1" that the seller didn't see until it was attached to the check. He didn't sign either HUD.
Needless to say, my friend is FURIOUS. Now he has to spend hours on the phone and writing letters to attempt to get his money back. It sure seems in this case that a Friday Night Settlement didn't work, as there wasn't any accountability.
We try to close as many purchase loans after 12 noon and before 5 as possible. When folks are making a MAJOR purchase, they really should take the time off work, get babysitters, whatever is needed to make it happen during business hours to try to avoid these last minute changes.
The title company we typically use would have NEVER let any of these items fly. I am just sorry we weren't able to be on the non-english speaking buyer's side of the table, I can only imagine what a raw deal their broker gave the buyer if they are messing with the seller's money!
Thanks for your insight!
I'm a buyer facing the end of a "45 days to close" clause in our RE purchase agreement here in California. My agent, my loan boker and I have been johnny on the spot with supplying all informations and forms and submittals. The appraisal took 2 weeks, we have been in underwritring for 3 weeks, we have 5 days left. We have great credit, our loan broker says our loan is great but the underwriter says they are busy and we have to wait. I fully expect to lose this house as the sellers are very angry and want to move on, convinced we and our lender are useless idiots.
sorry all, but your industry and this SUCKS! My wife is physically sick over this BS
- pissed off buyers