'The new Truth & Lending Guidelines taking effect July 30 have the potential of creating significant delays in getting a deal closed' is the message I have been getting from my lender. They are a company that I highly trust and respect and I often refer buyers. I know them to be extremely organized, no needless charges to my buyers and helpful even when I need assistance with someone who who isn't their client. When they have a concern, I listen. Their first e-mail regarding this warned me that they need all information regarding fees etc. immediately. Since I did not understand anything yet, I am like - What's ALL the Fuss?? Frankly it seemed a bit overzealous - I pretty much do this already and, after all, we usually have at least 30 days and things always get done. I have had no delays in closing due to anything on their side. Why the worry?
As I receive more communication, I am beginning to understand the impact it will have on my buyers and closing our deals. Here is a video that gives a good general explanation (FYI skip a bit of the beginning). While my current deals are not affected, I see that new deals with similar circumstances will be. Here are a couple.
I have an offer that was countered by the bank a couple weeks ago where they shortened the closing period and the time we requested for the home inspection. We tried to extend both but it was complicated and my first time buyers REALLY wanted this home. We accepted and rushed on the inspection and appraisal was ordered the next day and done almost immediately. We seem to be on track and the new Truth In Lending was not in effect to delay anything on this one. However it has me thinking about this shortened closing period for future.
Today we accepted a counter on an offer for another foreclosed home. When we received the counter, it extended the closing to Sept. 11, 2009 (we had the typical 30+ days August 28). No problem as we can often close sooner but thought it unnecessary. On this one, there was a $50 per diem for the buyer for delays written in the counter. Again, we started the process before the Truth in Lending kicked in and had to submit a Good Faith Estimate with the accepted counter. Just to be clear on this, I checked with my lender to see if the new rules would kick in after July 30. Their answer was they understood it as "application date" but any lender can use their own interpretation and he is using another lender I also am working on a HUD offer just accepted but luckily they put 60 days.
While I want consumers protected and to insure we don't get in this mess again, I can see some dangers in not being totally on top of EVERYTHING - which is probably the desired outcome overall. While I have a great lender who is as organized and proactive as I am, there is a new urgency in deadlines and getting documents and fees back from buyers, lenders, agents, appraisers, title companies, banks. When there are so many fingers in the pie, we tend to lose control. I am very lucky right now as all my buyers seem to instantaneously respond to my e-mails and are very proactive. However, writing that closing deadline in the offer has a whole new context--not to mention agreeing to a shorter one -- especially with a per diem attached.
Here is a Big One: As we get closer to the December 1 deadline, I can see this as a potential nightmare for the first time buyer credit. When a buyer is getting $8,000 (or not) completely dependent on closing by this date, this could have us biting our nails -- and a huge disappointment to a buyer who is counting on that credit and it closes on December 2!!
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Royal Oak Michigan Realtor selling Oakland County Real Estate. TishHouse sells Houses - selling Real Estate in Southeastern Michigan with RE/MAX Showcase Homes in Birmingham, Michigan. Helping People in a challenging market by specializing in Short Sales. See what my clients have to say about my extraordinary customer service. Follow me on Twitter.
Kathy we accepted a counter offer from the bank on Wed. A fannie mae home. I still don't have the documents. How long did it take you to get the documents from the listing agent and or bank?
My buyers wanted to close on Thursday next week.
We accepted the counter for the Freddie Mac yesterday and got all the addendum's and instructions this morning. On the first offer (with the shortened time) they sent a counter, we accepted the price and asked for a few more days for inspection, and then we did not hear anything for a week or so. I called and then we got notice for "final and best". We were all upset to say the least. Shortly after, we got the acceptance & addendum's and moving very quickly. Apparently they got another real low ball offer but cash and the bank was trying to see if they could bump that one up. We stayed the same and luckily ours was still the best. Things are moving great on both now. It is so unpredictable - had a cash offer and the bank wanted to close in a week but the bank delayed it another 9 days before they had everything together. Closing today and finally got the preliminary HUD yesterday around 6PM. It will be worse once the new guidelines kick in after July 30.
10 am closing after running to the bank at 9 am to get a certified check for their first home a young couple is eager to move into their lovely 3 bedroom single home with a lovely yard. They meet the realtor and loan officer at closing with anticipation of this wonderful transfer of wealth that is about to happen.
All of a sudden, there is a ruffling heard throughout the conference room when the title clerk hands the revised HUD to the buyer so that their LO can review the details. There seems to be an error in the HUD. The required funds have changed. 20 days ago the LO had given the buyers an estimated cost for closing of $4,000 but now the HUD required $6,000.
Furthermore, the buyer notices that the monthly payments are now $200 higher. What is going on? This frantic new home buyer is getting nervous because he thinks he missunderstood this process - and will soon loose his first home.
The LO with a straight face stares at the buyer and says, "I told you it was an estimate and that things may change by the time we close. Didn't you understand this?"
So the buyer calls his bank to make sure he has the added $2K for closing. Rushes to get the additional funds for closing at the same time wondering how is he going to pay the higher monthly mortgage.
1 year later they are being forecloused on.
This is why this regulation was created... so thank God your buyers may lose a deal for the sake of preventing millions of others from being lied to by mortgage brokers, loan officers and realtors only interested in the bottom line - lining their pockets with the money of unprepared first time home buyers.
I thank God you are not one of them but many are all around you.