New Loan Changes May Extend Escrow Closing Dates

Westcoe Realtors, Riverside California…Effective July 30, 2009, there are some changes in the way lenders must process new loans that could make closing an escrow take a few days longer.  This is generally not a big deal unless you are in an escrow time crunch, in which case you should be forewarned so you can hopefully prepare the other side of your transaction for the delay.  Given that many of today’s home purchases are bank repossessions, and these banks are almost always in a huge hurry (and often impose a $100 per day fine to the buyer if the buyer cannot close escrow on time), then it behooves a savvy buyer to be aware of these lender changes.

The time sensitive changes are as follows:

1.  When your lender gives you your disclosures on what your loan will cost to obtain (called a truth-in-lending statement), they now must wait 7 days before proceeding with the loan.  This is to give you time to re-think your desire to obtain the loan, and back-out if you want.

2.   This truth-in-lending statement must be given to the borrower again within 3 days of the closing, and if it is off by more than 1/8% from the original, then a new 7 day waiting period must be observed…again to give the buyer time to re-think their new loan conditions and either go or no-go.

Additional changes that will not necessarily add time to the process, but are changes none-the-less:

1.  All borrowers must receive their original truth-in-lending statement within 3 business days of making the loan application.

2 The lender is prohibited from collecting any fees other than a credit report fee until the 3 business days have passed for your review of the truth-in-lending.

3.  The lender must give the borrower a copy of the appraisal at least 3 business days prior to the close of escrow…although this requirement can be waived by the buyer if desired.

This new set of rules falls under the consumer-protection guidelines, and while the intent is to make sure that no borrower feels forced into a loan, the fear amongst real estate and lending professionals is that buyers who are fully aware of their loan details will be forced to wait anyway…and thereby possibly jeopardizing their ability to close escrow on their new home. 

Most reasonable home owners would understand the new regulations and simply comply with the mandated ”wait” period…but lenders who are selling foreclosed properties are not known for their patience with delays, so the prudent buyer will make sure the listing agent of any bank owned property is aware of these new regulations, and does not hold them against the borrower if there are any delays.

Good luck with your new loans, and as always, if there are any issues you would like to see addressed in this blog, please let us know.