Mortgage broker advised to sign off on finance contingencies and then the loan did not go through. Is broker liable? My deposit is at risk.

Asked by Jojo, Los Angeles, CA Mon Sep 12, 2011

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9
Jojo, Home Buyer, Los Angeles, CA
Tue Sep 13, 2011
Thank you for your reply, Julie. My loan fell through because the down payment was from an inheritance in the form of a trust. The lender did not understand the terms of the trust and rather than saying so at the beginning, they brought it up 5 days prior to closing. They asked for a death certificate one day, a letter from the estate lawyer the next etc. etc. and had me jumping around like a trained monkey. Each item I provided was followed with a request for another item. I realized very quickly that this process would extend far beyond the closing date. The loan broker told me in writing that the trust would not be a problem and that I could sign off on all finance contingencies. Unfortunately, I did just that. Now the seller will not extend the closing date so I have gone back after the broker who advised me to sign off. The loan has never been formally denied nor approved and time is passing. I have received a demand to close escrow from the seller. I think I have a good case!!
1 vote
CJ Brasiel, Agent, San Jose, CA
Mon Sep 12, 2011
JoJo -
Liability is a legal issue and to be for sure, for sure, you should consult with an attorney. The answer will most likely depend on reviewing whether or not the application you completed was truthful, whether or not the decision was documented and potentially a couple of hundred other extenuating circumstances.

With that said, you may very well get your deposit back with no issues. This is where a good real estate agent and many apologetic phone calls and emails MAY save the day. If the seller feels this all happened in good faith, you may get your deposit back.

Review your contract to see how issues over deposits will be resolved.

Good luck.
CJ
Web Reference:  http://www.TalkToCJ.com
1 vote
Julie Rice T…, , San Mateo, CA
Tue Sep 13, 2011
You have a very good case! But the most important question is, can the lender perform, given their current understanding of the terms of the trust. Are you the only person named in the trust or do you need consent from others to withdraw your funds for a down payment? What you are trying to do, at first blush, does not seem complicated. But not knowing the terms of the trust or the people involved, it is impossible for me to say. Another option would be to see if there is another way for you to get the down payment, and then use the trust to pay back that money later? A gift from famly? A 401K loan? Or can your loan be restructured to just go 5% down with mortgage insurance? And then you can refinance into a loan with a lower LTV when you have your trust money in more of a liquid state.

I hope I have tossed out some ideas that maybe will help you find a solution.

Julie Thall
jthall@opesadvisors.com
0 votes
Julie Rice T…, , San Mateo, CA
Tue Sep 13, 2011
As a Mortgage Advisor, certainly I would like to delay removing finance contingencies until the loan funds. But that is not always reasonable or practical. So when I do have a conditional loan approval, I review each and every condition standing between that date and funding the loan. And I make sure that the client in on board with me that the required conditions are attainable...especially since most of the documentaiton will come from you, the client. The Mortgage Advisor and buyer must work as a team. We are only as good as the documentation and explanations we provide to the investor.

The big question is, why did your loan not go through? Do you feel you were wrongly denied financing, or did you dodge a bullet in not having the loan go through? Be honet with yourself.

Good luck in geting your deposit back!
Julie Thall
jthall@opesadvisors.com
0 votes
, ,
Tue Sep 13, 2011
Very hard to believe. I don't think any mortgage professional would advise removing a finance or appraisal contingency until the loan has closed. It's usually the listing agent that wants these contingencies removed to the buyers detriment.

Happy funding, Rudi
Web Reference:  http://www.umboc.com
0 votes
Eric J Soder…, , Pleasanton, CA
Mon Sep 12, 2011
That was horrible advice. Was that the last contingency that you had. Have your broker speak with the selling broker. Good luck.

Best Regards,

Eric Soderlund
0 votes
Emily Knell, Agent, Huntington Beach, CA
Mon Sep 12, 2011
Although I'm not an attorney & you should seek competent legal advice. I would say you could win in a small claims or otherwise courtroom because you removed your loan contingency based on what your lender stated.

However, you should check your paperwork. If the lender only told you VERBALLY, you may not have a case. If the lender told you IN WRITING, check to see if there were any other If this' or if thats, like "your loan is approved so long as.....your credit stays the same or your income stays the same. If your credit or income changed, the lender will say this is your fault.

I don't know how much of a deposit you have at stake or if the sellers will seriously suffer as a result of your not closing, BUT you let them know that if they put up a fight, so will you based on your lender telling you to remove the contingency.

Prior to court action, please know that (if you are using a Realtor in this transaction) you do have other mediation options that may solve the problem for less cost to you & will keep you out of an actual courtroom.

EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Main Street Realtors
0 votes
Dan Tabit, Agent, Issaquah, WA
Mon Sep 12, 2011
Jojo,
CJ is correct, you'll need to get an attorney to review your paperwork to advise you. I'm sorry for your circumstance.
0 votes
Douglas Perez, Agent, Los Angeles, CA
Mon Sep 12, 2011
I think so. You relied on your mortgage broker's advise to remove your loan contingency, otherwise you would have held on your loan contingency until he or she would have got your loan funded.
I hope you get your deposit back.
Good luck,
Doug
0 votes
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