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#2014491 - 05/15/15 08:06 PM Delivery of CD before loan approval - Why oh Why??
Rdy2Retire Offline
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Been training my folks since March, giving them a little at a time. Yesterday, I spent an hour with MLOs from our secondary market division just talking about issues specific to them. After I left, I was told that the conversation turned to the delivery of the CD before the final approval is obtained and this seems to be the "talk" in the secondary market world. This makes me cringe... I haven't completely wrapped my head around the "black hole" discussed in another thread, where there is a time period that even if there is a changed circumstance, we won't be able to issue a revised CD. I asked a few questions, one being, "Would you give a HUD1 in today's world before the loan was approved?" Besides TRID issues, I can see UDAAP written all over this. Are others hearing this talked about in the secondary market world? I would appreciate any feedback. Thanks!

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TRID - TILA/RESPA Integrated Disclosures Rule
#2014603 - 05/18/15 01:57 PM Re: Delivery of CD before loan approval - Why oh Why?? Rdy2Retire
Truffle Royale Offline

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We sell everything to secondary and this hasn't come up...yet...to my knowledge. eek
I'm curious, tho. What possible reason could your MLOs have for giving a CLoD before getting the loan approved?

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#2014605 - 05/18/15 02:05 PM Re: Delivery of CD before loan approval - Why oh Why?? Rdy2Retire
RVFlyboy Offline
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It's probably related to timing. In today's environment, while we may have tentative underwriting approval, we often don't get "clear to close" until just a day or two (or sometimes even an hour or two) prior to closing. With new requirement of having to have a closing disclosure in the borrower's hands 3 business days before closing, institutions are either going to have to adjust their process to get clear to close sooner in the process, or are going to have to provide a CloD prior to clear to close. Our shop is working on the former, not the latter.
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#2014614 - 05/18/15 02:27 PM Re: Delivery of CD before loan approval - Why oh Why?? Rdy2Retire
Truffle Royale Offline

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Thanks, Flyboy, that makes sense now. I'm thanking my stars that it has always been sop here that a closing date cannot be set until the loan is approved. You've got to wonder for whom it's going to be harder to come to terms with the demise of the instant home loan, borrowers or MLOs?

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#2014624 - 05/18/15 03:03 PM Re: Delivery of CD before loan approval - Why oh Why?? Rdy2Retire
John Burnett Offline
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Issuing a CloD before getting approval of the loan request is a risky thing to do. What is the "Plan B" that you'll follow if the loan is approved with terms that are different from those on the CloD?
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#2014652 - 05/18/15 04:01 PM Re: Delivery of CD before loan approval - Why oh Why?? Rdy2Retire
rlcarey Online
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Or worse yet, the loan is not approved?????
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#2014687 - 05/18/15 05:31 PM Re: Delivery of CD before loan approval - Why oh Why?? Rdy2Retire
John Burnett Offline
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Trying to fast-track a mortgage can win you points with an anxious borrower, but it's really important not to set unrealistic expectations. It starts with the real estate agents, but lenders control the money, and they need to be talking with brokers and agents to get them to back away from the "instant home loan."
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#2014719 - 05/18/15 06:33 PM Re: Delivery of CD before loan approval - Why oh Why?? Rdy2Retire
Andy_Z Offline
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While I see Jim's point, the first thought that comes to mind is the case of FirstBank Mortgage Partners who had apparently approved, then disapproved a loan when it realized one applicant was on maternity leave. The loan was disapproved just before closing and the couple had to split up because of housing issues that resulted from the last minute loan decision. In addition to a $35K penalty the lender had to jump through many other hoops.

I'm in the camp that says you're playing with fire and putting the proverbial cart before the horse. I suppose with accurate knowledge of the closing costs and strong communication it could be done, but if deals start falling through or the lender starts eating a lot of closing costs, I'd fallback to a position of taking the time necessary to follow the required steps as they are laid out on a calendar. CLoDs are such a final item there is little room to turn around once it goes out.
Last edited by Andy Z; 05/21/15 03:45 PM.
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#2014843 - 05/18/15 11:54 PM Re: Delivery of CD before loan approval - Why oh Why?? Rdy2Retire
Truffle Royale Offline

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Before this thread shuts down, can I ask you, Jim, for an example of a 'tentative underwriting approval' and a 'clear to close'?

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