Last Minute Closing Issues

May 22, 2010

The First Time Homebuye Tax Credit came to an end on April 30, 2010.  The month ended with record numbers of new mortgage applications because the new nationwide mortgage guidelines dictate that an application doesn’t officially begin until there is a property determined.   This huge influx of applications has slowly gone through the “documentation and processing” stage and is quickly resulting in extended delays in actual underwriting decisions.

This back up is made even more frustrating because of the new documentation changes that virtually every mortgage investor is implementing.  Underwriters are running scared.  It’s as if they just assume that every mortgage application has fraudulent documentation hidden somewhere and they are going to find it.  We end up documenting the same type of income 3 different ways, or the normal appraisal with 3 comparable sales now must have 4 to 6 comparable sales or the value is not acceptable. 

Today’s system obviously creates stress for the mortgage industry but that stress doesn’t even compare to the stress that is being forced upon every buyer and every seller.  It is impossible to project an approval date in today’s system.  Contracts that have been written for 30 day closes are forced to extend to 45 days or even 60 days.  Sellers have no way of knowing when they can schedule movers or turn off utilities in advance.  Buyers don’t know whether to turn in advance notice that they intend to move to their landlords.  Sellers blame listing agents because that “approved” buyer is having problems.  The listing agent blames the buyer’s agent; the buyer’s agent blames the mortgage originator.   There is no end to the frustrations or the building of stress.  

Buyers and sellers must realize that the real estate / mortgage industry is a new, reinvented industry.  Documentation has changed.  Risk factors have changed.   Nothing is the same as before.  If you are buying or selling, find real estate and mortgage professionals you feel you can trust  and listen to them.  If they ask for more documentation get it as fast as possible.  If you have questions, keep asking them until you get answers you understand, but be prepared for the unexpected.   Problems are going to surface and it is not going to be the realtor’s fault or your mortgage originator’s fault.  It is a new industry with new requirements and until the system becomes stable again you and I are simply going to have to deal with it.