Seven last-minute obstacles to closing escrow on time

By Jeff Lazerson

1/4/18

Rate news summary

From Freddie Mac’s weekly survey: The 30-year fixed rate averaged 3.95 percent, 4 basis points better than last week’s 3.99 percent. The 15-year fixed averaged 3.38 percent, 6 basis points better than last week’s 3.44 percent.

The Mortgage Bankers Association reports a 2.8 percent decrease in loan application volume from two weeks earlier.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $453,100 loan, last year’s rate of 4.20 percent and payment of $2,229 was $79 more than this week’s payment of $2,150.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at zero cost: A 15-year at 3.50 percent, a 30-year at 4.0 percent, a 15-year agency high-balance ($453,101 to $679,650) at 3.875 percent, a 30-year agency high-balance at 4.25 percent and a 30-year jumbo (over $679,650) at 4.50 percent. A 15-year jumbo is not available.

What I think: Never assume your purchase is completed or your refinance is funded until you actually receive confirmation from your escrow officer that the loan recorded with the county recorder’s office.

Many a loan officer, escrow officer or Realtor can provide you with accounts of hair-raising stressors that have delayed or even derailed closings.

Here are seven of the most common closing delays:

1. Previously unsourced money: Lenders require bank statements from the last two months to verify your funds. Time and again, borrowers bring money in from previously undisclosed bank accounts. For good measure, if those two bank statements have any deposits larger than, say, a paycheck, be prepared to source and explain where those deposits came from. Disclose potentially necessary funds upfront.
2. Underinsured: The policy your insurance agent sends to the closing agent is less than the minimum dollar coverage required by your lender. Ask your lender early how much coverage is required. Communicate that to your insurance agent.
3. Discovering that your lender will not subordinate to a PACE (property assessed clean energy) super tax lien: One popular brand name for PACE is called a HERO loan (think Kleenex for tissue). The previous owner may have used this expensive financing for home improvements and pass ongoing assessments to you. Or, you financed improvements via PACE and now you are refinancing. Conventional and FHA financing requires those assessments to be completely paid off by new loan completion.
4. The closing date changes: Anticipate delays. One borrower could be out of town, for example. Execute a specific power of attorney for someone that you trust to sign closing documents for you.
5. Tax return verification is either delayed or comes back with “no results” from the Internal Revenue Service: The IRS may be experiencing a backlog in 4506-T confirmations or perhaps your name and address don’t match precisely to your submitted tax returns. Make sure your lender gets an early jump on the verification process.
6. Reassigning leased solar panels: Leased solar panels must be properly assigned to the new property owner. And the lender must be satisfied that the liability language Fannie Mae requires is added or already embedded. Make sure your lender gets a copy of the lease agreement early for vetting.
7. Unreported loan payments: Make sure the payoff demand statement from the existing lender reflects the most recent payment made by the refinance borrower. The borrower will be short and need to chase down money to bring to the closing agent. Communicate with your departing lender and tell the escrow officer showing unreported payments.

If you have questions or comments, please contact Jeff Lazerson by clicking here.