Oh, won’t you please close my loan before the holidays… No matter how I really need to be
in this home… If you want to make me happy in a million ways… before the holidays, please just close my loan!
My apologies to Perry Como for butchering his famous “There’s No Place Like Home For The Holidays”, but I just couldn’t resist considering the only thing we are hearing more these days than Christmas songs is news that another loan is not closing when expected. As is typically the case at this time of year, everyone seems to be extremely busy running around checking off tasks before the holidays arrive. The same can certainly be said about real estate professionals, including lenders. Thanks to unprecedentedly low-interest rates and other market factors being driven by the global pandemic, lenders across the country — and certainly in Florida — are experiencing an extremely high volume of residential and refinance closings, resulting in backlogs and many instances of delayed closings. Additionally, conventional lenders must comply with certain requirements established by the Consumer Financial Protection Bureau (“CD Requirements”) which stipulate that mortgage lenders must deliver a Closing Disclosure form, which provides a good faith estimate of loan terms and closing fees, to borrowers at least three days prior to the Closing Date. Mix in the fact that many offices will be closed for several days during the holiday season, and you get a recipe for potential disappointment when the Closing Date arrives. So what exactly are the parties resources when, through no fault of their own, the closing cannot occur as scheduled because a lender is unable to either meet their CD Requirements or otherwise, is not prepared to close the loan on the expected Closing Date? The answer will depend depends upon the following considerations, among others:
1. CD Delivery Requirements. Section 5(a) of the FAR/BAR Residential Contract provides that if the Contract is made contingent upon the buyer obtaining loan approval by a certain date, and funds from Buyer’s lender are not available by the Closing Date due to the lender’s CD Requirements, then the Closing Date shall be extended for such period as is necessary to satisfy said requirements not to exceed 10 days. Note that this is not a catch-all for delays having anything to do with closings being delayed due to loan funding issues, but rather a narrowly worded provision by which the Closing Date is only extended if lender CD Requirements are not met.
2. Buyer’s Due Diligence and Other Considerations. As discussed above, Section 5(a) is not a catch-all. Section 8(b) of the FAR/BAR contract provides that Buyer’s failure to use diligent effort to obtain Loan Approval shall be considered a default under the terms of the Contract. “Diligent effort” includes, but is not limited to, timely furnishing documents and information to the lender, paying all fees and charges, and otherwise responding to the lender’s requests and fulfilling the lender’s requirements. There are, of course, many other examples that would result in a Buyer defaulting; any one of which may be a reason for a Seller to cancel the Contract despite the lender not meeting CD Requirements.
As discussed above, Section 5(a) should not be relied upon in all instances when a lender fails to meet CD Requirements, but rather it serves as a protection in the circumstance when the buyer has not defaulted but the lender is nonetheless unable to provide loan funds on time due to CD Requirements. It is always recommended that the parties also execute a written Closing Date extension addendum in order to not rely solely on Section 5(a).
Should you have any questions about this, or any other real estate related issues, please don’t hesitate to reach out to your trusted local real estate attorney.
Andrew Conaboy, Esq., firstname.lastname@example.org
Berlin Patten Ebling, PLLC
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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