BiggerPockets

Has anyone heard of a law that says a Loan Officer must hold the Buyer's Information for 8 days before they can attempt to close it?

A friend of mine has been trying to close his home for months and is basically having trouble with buyers getting approved for the loan. Either its on the buyers end and they're unable to qualify or the Loan Officer isn't able to move quick enough and the buyer has to walk away.

In this situation, we have a buyer who is ready to move and from what I hear, they're able to get qualified. It's just that now my friend was told by their new Loan Officer that they must hold onto the buyer information for 8 days before they can process for closing. They said it was a new law.

I've never heard anything like this and I'm wondering if it could be some sort of stall tactic, so they can process other loans that they feel are priority.

If I should know the answer to this, then please pardon my ignorance for today. lol :cool:

Lending laws are in severe flux right now so anything is possible - or more likely your loan officer is explaining something incorrectly.

When you say "8 days to close" - if this is a bank you are dealing with it seems to me that 8-days is very fast. If you are saying 8-days to first enter processing then that sounds incorrect. I have to assume that the you have submitted an application to the lender? If so you should receive some documents already in the mail - these are federally mandated 3-day docs. Within 3 days of "applying" for a loan the bank MUST send these to you. If your loan officer is holding onto your application and not even touching it for 8-days - that is a serious problem.
Maybe talk to their supervisor, other lenders in your state etc.
Look on the bright side though - if they violate the 3-day rule and subsequently fund the loan, and then your buyer happens to default - it will be a perfect file for one of these loan mod lawyers to attack with a forensic loan audit.

Its 8 days to first enter processing...

This is supposed to be a new lender. lol The last one they had was MET Life or something like that and they had to many complications.

I have to follow up with my friend today and see what happened because they very well could have chosen a new lender (third)...

Why are the buyers in such a hurry - is there something specific that makes them on a "time-line"?

The buyers were about to be on the streets. I forget what happened, but basically they couldn't stay in their current home and they had a short time frame to find another home.

When you say they may be working loans that are more of a priority - why do you feel this? Is yours a small loan and the lender is in an area where they get a lot of larger loans? Is yours particularly difficult for some reason? Are the buyers borderline - so you feel the loan officer is ignoring them?

*The only reason I said that they could be trying to prioritize loans is because I can't imagine why it would take 8 days to even begin the process.
*The loan is about $150K so I think that is a pretty good avg number for that area.
*Not sure why it would be difficult.
*From what I understand the buyer has 2 jobs and can show the income necessary to qualify quickly....

The only thing I can think of is that it may take the lender 8 days to get commitment. I don't know of any law that states the lender must keep the documents for 8 days prior to processing?

There is the RESPA rule like JCC stated - once the file is marked application received, the disclosures must be sent to the borrower within 3 days. Then if there are any changes to APR, the Truth in Lending statement must be re-disclosed and there is a 3 days waiting period for that (this would be at the end of the process, though.)

Definitely contact a supervisor if they are still working with that company.

So, the loan officer is holding onto the application for up to eight days before sending the loan to underwriting?

I suspect that the lender has a written procedure that gives the loan officer no more than eight days to accept the loan application, pull credit, execute a rate lock, get the truth in lending and good faith estimate to the loan applicant who signs and returns, and collect the documentation that is required to accompany the loan application that is forwarded to the underwriter.

The documentation for a full doc loan will include two years tax returns, recent pay stubs, a couple months of bank statements, a signed loan application, proof of funds for downpayment, and whatever else may be needed to document the borrower's income and liabilities, as well as other assets.

Unless the borrower is really prepared ahead of time, it may take the full eight days for the borrower to get everything back to the loan officer.

If the loan officer can't get his job done in the first eight days, then the underwriter might not be able to get the loan commitment before the rate lock expires.

Of course, it could be that the lender is so swamped with loans in varying stages of approval that it takes the underwriter eight days to get through the existing workload before taking on a new loan package.

Just thinking out loud.

It does Brian, Thank you!

I know I'm a little late here, but YES, there is a regulation that loans cannot close until 7 business days after the disclosures have been provided to the borrower.

It is mandated under the Truth in Lending Act and is separate from the requirement that we provide the Good Faith and TIL within 3 days of application.

There is nothing the lender can do about this. Blame the Feds.

The major reason for the 7 day rule was to stop lenders from rushing borrowers to closing - the very thing you asked about. Back in the day, many lenders (like Ameriquest) were guilty of rushing loans through w/o proper disclosure and processing just so they could take the borrower off the market. It was awful for many borrowers. Sometimes, they didn't even get the title search done. Or the appraisal wasn't completed. Then they would try to correct all this stuff on the back end - if ever. Title companies doing a title search behind an earlier Ameriquest loan often found a ton of headaches. I had a few borrowers who could not close their new loan at all because title issues could not be cleared up.

We are not holding onto applications. I assure you we have no incentive to do that. We're just following the law.

Read here:
http://activerain.com/blogsview/1179558/changes-to-the-truth-in-lending-act-and-regulation-z

Or read it on the FDIC site:
http://www.fdic.gov/news/news/financial/2009/fil09026.html