Loan Issues...Am I open wide for a lawsuit?

[mark1210]

What is the name of your state? TX

With one day before closing I get a call from my loan officer indicating that there has been a problem securing the 80% loan (I am doing a 80/20). The problem is that the lender has placed a limit on seller contributions. The limit is 3% and we need 5% to close. I am aware the lenders can do just about anything up until the moment before close but this seems kinda odd. With this limit I am being asked to come up with $2700.00 by tomorrow which isn't happening. I am out well outside of my option period and the seller's have voiced their concerns already since they have already moved out. Am I open to a lawsuit here? i don't think the subject to financing clause applies because I am well within the interest rate caps.

My loan officer is attempting to find other lenders but he says I may have to goto the sub prime world and I don't want to do that.

Suggestions please.

 

[HomeGuru]

What is the name of your state? TX

With one day before closing I get a call from my loan officer indicating that there has been a problem securing the 80% loan (I am doing a 80/20). The problem is that the lender has placed a limit on seller contributions. The limit is 3% and we need 5% to close. I am aware the lenders can do just about anything up until the moment before close but this seems kinda odd. With this limit I am being asked to come up with $2700.00 by tomorrow which isn't happening. I am out well outside of my option period and the seller's have voiced their concerns already since they have already moved out. Am I open to a lawsuit here? i don't think the subject to financing clause applies because I am well within the interest rate caps.

My loan officer is attempting to find other lenders but he says I may have to goto the sub prime world and I don't want to do that.

Suggestions please.

**A: you are open to the Seller terminating the deal.

 

[Aegis]

Do you have representation by a Realtor® or Texas licensed real estate agent?

Is your contract the one promulgated by the Texas Real Estate Commission?
http://www.trec.state.tx.us/pdf/contracts/20-6.pdf

Does it have a 3rd party financing condition addendum?
http://www.trec.state.tx.us/pdf/contracts/40-1.pdf

Not being a licensed attorney, I can't give legal advice (that's for others in this forum).

I wish I could say it was unusual for lenders to pull these last-second 'issues' out, but it's not (in my experiences).

However, as a Realtor® in Texas, I can say that what has happened to my clients in this or similar situations in the past is A) Seller backs out and keeps the earnest money or B) Seller deals with it and waits for the buyer to resecure financing because they've already moved out and it would REALLY suck to start the whole selling process over again at this point (IF they think you can in a somewhat timely manner).

As for your liability, I've no clue. Or for the lenders liability to you.

 

[mark1210]

Aegis: Thank you for the information. The answer to all three of your questions is "Yes" however he is out of town until the day of close (today) and things are still being worked. I would imagine since the lender will only allow 3% the sales price would need to be adjusted 3% less or I would be given the 3% in the form of sales draft as close? I say this because when the offer was made, we added 6% to the offer and included the clause "seller to contribute 6% towards closing costs"

Thanks again!

 

[Aegis]

Aegis: Thank you for the information. The answer to all three of your questions is "Yes" however he is out of town until the day of close (today) and things are still being worked. I would imagine since the lender will only allow 3% the sales price would need to be adjusted 3% less or I would be given the 3% in the form of sales draft as close? I say this because when the offer was made, we added 6% to the offer and included the clause "seller to contribute 6% towards closing costs"

Thanks again!

The conditions of the loan now state that 3% is the cap on your seller concessions which disallows half of the 6% you negotiated in your contract with the seller. I'm surprised you loan officer just now got this info unless you are doing a rush close.

Attempting to change the terms of financing this late in the game may not be allowed by the lender. An adjustment in sales price would be a red flag to them. Can't hurt to ask your loan officer (NOT your loan underwriter) though. You may also be able to work a deal with the seller "outside of closing".

To help make this happen your loan officer may be able to lower some of your fees... as can, and I shudder to suggest this, the Realtors®... Noone is obligated to do so, however, as their fees have already been negotiated. It's all in the math and it could be that even lowering fees/commissions wouldn't help you anyway.

Let me see if I understand correctly: You secured an 80/20 loan and have the 20% to put down on the loan. But you needed additional help on CLOSING COSTS and had negotiated 6% seller concessions to put towards these closing costs(not to the loan down payment)...and the conditions of the loan state that you can only receive 3% from seller concessions towards the closing costs? Sound right? Or am I off a bit?

Your lender should have detected that 6% clause in the contract and found a compatible loan...

 

[RanchLady]

Why don't you ask your loan officer to change the 80% part to an adjustable rate, they are lower and then bump up the rate a bit and get rebate pricing to pay the balance or at least most of it and also maybe the realtor could kickin too they don't want this to go south? Your loan Officer should have known the terms from day one they don't know thier programs
Loan officer