Just when you think you’ve heard it all, something happens that makes you realize you should never close your mind to how far out of left field the ball might fly (a little baseball analogy for those sports fans to appreciate). It seems that is definitely the case with banks, and wait until you hear what the latest hurdle is…unfortunately I know from personal experience that this in fact is happening.
Last week my investor client, who was getting a loan to purchase a property, was told we were ready to draw docs on a Bank of America funded loan. We had been given the thumbs up from the lender, the appointment was set for the buyers to sign at the escrow office that afternoon, and we were just awaiting docs to arrive at escrow. Then my clients’ mortgage professional received the phone call from the lender: there are no funds currently available to fund this loan. He was told they would be available in approximately 5 business days.
Now, had this transaction been a traditional sale this may not have made any difference. But being a short sale, with a deadline established by the short sale lender by which we needed to close (or risk the home going to foreclosure), we didn’t have 5 business days. My buyers had to close with cash at the last minute. Luckily, they were able to do so, but my buyers were not happy about this.
Is this crazy or what? Those of you who know me know that I have been singing Bank of America’s praises for the past few months – I have blogged about how they really seem to be helping close short sales faster. But this – this is a big step backwards for the lender. Last minute bombs like this could decimate the ability and desire to buy property.
The inside scoop. Here is how it happened. B of A decided to shut down lending channels to mortgage servicers who sold their products, deciding that only B of A would be able to sell B of A loans. How many loans were effected is unknown to me, but I bet there have been some serious situations lately that could lead to lawsuits.
Realistically, this could lead to a slew of litigation. It could put buyers in breach of their real estate contracts if they are not able to close on time. They risk losing their initial deposits, and the monies they paid for home inspections, appraisals and other expenses. In the case of short sales, as mentioned above, if the short sale lender did not extend the deadline last minute due to such an issue, the home would go to foreclosure. Bad for sellers, bad for buyers, bad for the market.
For an in depth understanding of what happened I suggest you read this blog from my colleague Michael Mekler. This has been a fine example of another blow to the housing market, brought to you courtesy of our nation’s lenders. Hopefully they will reverse their decisions and we can get back to the business of selling real estate via cooperation and a common goal to heal the market and help people purchase real estate.