Here is an excerpt from a recent blog post of mine that deals with this issue and itâ€™s larger implications:
Buyers Balking â€“ Five Key Reasons, Two Significant Results
â€œIn addition to tougher requirements in securing a loan, thereâ€™s another serious lender-backed change occurring. In my opinion, this change is more ominous. Underwriters now check borrowerâ€™s information multiple times throughout a transaction. In addition, they are adding stiff property guidelines. This can easily happen three times during an escrow and by three different underwriters. And no two underwriters are looking for the same things, so demands can be very different from underwriter to underwriter. Many requirements come very late in the transaction and can cause significant delays and/or unexpected expenses to either party. Other requests simply kill the deal outright.
Itâ€™s become very similar to navigating a minefield blindfolded.
As a result, the odds of successfully closing an escrow have fallen dramatically. In a recent discussion with Kim Silva of Chicago Title (in Fremont), she emphasized, â€œBanks keep piling on requirements at the end of closings. Consequently, escrow failures are way up, causing severe frustration and confusion on behalf of all parties involved.â€â€
SO â€¦ I TOTALLY understand buyerâ€™s reluctance to remove the loan contingency prior to funding. Weâ€™ve had a number of deals where banks literally stated it was OK to remove the contingencies, then changed the playing field with increased conditions AFTER weâ€™d removed contingencies. Weâ€™ve discovered that currently, at least in our experience, big box lenders are the worst â€“ especially Bank of America. A good relationship with the loan office is NO guarantee that the loan will make it through underwriting â€“ itâ€™s like a black hole from which emergence is not guaranteed no matter how good your initial prospects may appear.
Ironically, more and more big box loan officers are REFUSING to tell us whether or not we can remove contingencies. They donâ€™t want the imputed liability that goes along with telling us our loan is now â€œgood-to-go.â€ If a loan officer will not / cannot tell me I can remove contingencies â€¦ I wonâ€™t.
For this very reason we try VERY hard to convince our buyers to go with our lender: he works for a lending institution that (1) has a pool of reputable appraisers and (2) they work directly with underwriting all the way through the process. There are no surprises. And he will tell me clearly when I can remove contingencies. And once I do, I know we are good to go.
Here is a post that explains a bit more:
I WISH You Would Use My Lender - 6 Critical Reasons Why You Should