Entropymom was kind enough to share details of the settlement statement with me. It appears to me that during the weekend, the lender and the settlement agent scrambled to make adjustments in the HUD-1 to increase the amount of the seller's contribution in closing costs so that the buyer could conclude the transaction. While the seller's contribution is in line with FHA rules, the way the HUD-1 was revised was a little unusual, in my opinion.
As noted by Renee below, Realtors should carefully examine the HUD-1 with the seller(s) and also compare the HUD-1 with the purchase contract. Items such as seller(s) contributions to buyer's closing costs and who shall pay certain fees should be scrubbed against the contract. Sometimes, in the rush to meet closing deadlines, shortcuts might be taken. I'm not suggesting that anything improper was done (aside from the questions about the source of the buyer's gift funds) , but there are kosher ways to prepare a HUD-1 and ways that aren't kosher. Perhaps I'm just a mule-headed stickler for doing things a certain way... even if a last minute addendum is required and a possible delay of a day or two for revisions to be approved.
A HUD-1 should ALWAYS EXACTLY match the fee and contribution agreement of the original contract. A HUD-1 that isn't perfectly clear to both parties might later create misunderstandings between the parties. At minimum, an unclear HUD-1 may leave doubts in the minds of the seller(s). Realtors and loan originators deal with settlement statements daily as part of our job, but the vast majority of homeowners see them once or twice in a lifetime. Too many in both our industries - lending and real estate - perhaps forget that familiarity breeds contempt, and that what seems obvious to us is at best Greek to our clients.
I believe that the seller's agent is the last line of defense for a seller. Certainly the loan originator, the lender, and the buyer do not have an incentive to act in the seller's interest. The only expert defending the seller's interest is the selling Realtor. Defend them you must.
In my opinion, based upon limited facts, the loan originator performed poorly. The settlement agent was perhaps too eager to accommodate a rush to close. My opinion, again relying on limited facts, is based largely upon the last minute revisions to the HUD-1 as well as the seller's discomfort with the transaction - a very justifiable discomfort - that could have been avoided by a more exacting performance by the loan originator. The origination work was unacceptably sloppy.
Realtors, be suspicious. Ask more questions than you think you should. Demand clear and unequivocal answers regarding loan approvals and the ability of buyers to close. Amazingly, mortgage fraud is at a all-time high. Loan originators are struggling to survive, and in such an enviroment, the temptation to take shortcuts - or worse - to make a deal close is too high. Trust your instincts - they are probably right.
Wow! I am so sorry you had to go through this. Prior to settlement, your Realtor should have reviewed the HUD sheet to make sure everything was correct. RESPA is the Real Estate Settlement Procedures Act. Federal law that requires certain disclosures to consumers about mortgage loan settlements. You should take a look at this site. It has a lot of very helpful information. If you feel that what happened is not legal or should not have happened or happened without your knowledge, you should contact the title company, your realtor, their broker and RESPA. I provided you the link to the site. Bottom line is that your Realtor should have your best interests at heart and protect you. Do you think that your Realtor didn't know this happened?
I hope this helps. Please let me know what happens.
RE/MAX ACTION REALTY
(215) 669-0589 Direct
(215) 358-1100 Office Ask for Renee
While the numbers, credits, etc. can change on or just before settlment, they must:
1. Be reported accurately on the HUD1
2. Meet all the requirements of the law, FHA, agreement of sale, etc.
There are limits for:
1. The amount of gifts, credits, etc. that the buyer can receive from any party
2. There is a minimum amount of "cash" the buyer needs to supply (Lender specified)
And there may be more, but these are the first that come to mind.
Have your attorney review all of this and if you get a chance, let us know how you make out.
Since you are coming to the realization that you did not fully understand the changes thrown
at you during settlement, it seems pretty clear, it shouldn't have closed.
Why not go right to the top. Contact the Real Estate Commission in Harrisburg and also the PA State Banking commission. You can also contact the FHA through HUD.GOV. I am wondering if this was a Mortgage broker or banker....but...don't tell me so we don't get into trouble.
A buyer can only receive a 6% assist in an FHA loan. The lender may get stuck buying back the loan if this gets audited.
I live in a different state, so I had my stuff signed and notarized prior to closing. I approved the HuD with both the title company and my realtor on the day of settlement and somehow all of these changes were made by the buyer's lender and realtor after I gave my approval. Hours later, my realtor calls me to tell me what happened.
I cannot believe that the buyer did not know how much money was needed or was not told. I would have gladly put off settlement for a week or so, but this is not acceptable to me.
I would not think that the title company would allow for that...
You can always inquire with your realtor's broker as well.