News Flash

3/04/10 - Last Minute Changes to Contracts not conducive to New RESPA Laws

As we have discussed in previous memos, and as many people know RESPA laws have changed and rather dramatically.  

It is going to be more important now than ever before to have our "ducks in a row". Lenders need to know immediately of any changes between buyer and seller.  Especially regarding closing cost credits.  Example: 

  • For whatever reason, two days prior to closing, seller agrees to credit buyer with $3,000.
  • Seller has already agreed to pay closing costs of $5,000 for the buyer in the initial contract.
  • The $5,000 figure covers all of the closing costs and this is the figure that has been disclosed in the Good Faith Estimate and all disclosures to the borrower.  There are no more closing costs for the seller to cover.
There is nothing left to do with the $3,000 except maybe buy down the rate with the excess funds or lower the purchase price.  Fees used to buy down the rate are discount points.  Discount Points are APR related.  A change in the APR can delay a closing under the new RESPA laws.
  • Seller does not want to lower the purchase price.
  • Lender could use the funds to get the buyer a lower rate; however, this results in a change to the APR that is outside of the .125% tolerance level
  • Loan needs to close in 2 days

This is a problem....the lender needs 3 days to re-disclose.  The closing either goes forward, with a reduction in purchase price or everyone waits the 3 days or the buyer leaves the $3,000 behind.  New RESPA laws are not conducive to last minute changes.

  

We hope that this helps.  We all want to close on time with happy buyers and sellers.