Hello, I just got news that my financing back is no longer funding my deal...

I am under contract to purchase a 2 family home in The Bronx (NY). After getting the loan approved and getting a clear to close, the bank has decided not to fund the deal. According to them, their investors have pulled their funding and therefor they can no longer find the deal despite already signing my closing disclosure and getting a final clear to close. I am not stuck scrambling to get alternative financing via a Conventional route rather then a no income verification/no doc loan. Homebridge, the bank who was funding the deal tells me that they are no longer doing these types of loans.

Now To make things worse, the seller is refusing to refund my 70k downpayment because according to my contract, once I got a clear to close and a commitment I would be responsible to close no matter what.

The purchase is a brick REO and these banks make buyers sign really tight contracts. I am hopping that I can get some feedback on how to proceed with this issue. This pandemic has put me in a position to potentially lose 70k if I can't get financing. No one knows what to do as these are uncharted waters. Help please!

@Andy Perez I wish I could provide more help then, you are not alone.  These are uncharted waters and banks are pulling funding at the 11th hour on many deals.  

Is the seller willing to give you a contract extension to try to find another bank?  

The market for loans of $1 million+ is still moving.  The criteria has gotten tighter but deals are still being done.  I run a site that matches borrowers and lenders and the lower end of the market has slowed.  You need to find lenders that are self funding and not relying on money from the few major capital players that most of the lenders in that space get their funding from.

If the alternative is losing $70k, reach out to private lenders, HML, friends/relatives, etc.

Originally posted by @Andy Perez :

Hello, I just got news that my financing back is no longer funding my deal...
To make things worse, the seller is refusing to refund my 70k downpayment. Help please!

 Post numbers and whether the property is in bankable condition or in need of too many repairs for conventional lenders. 

Sometimes bankable can mean water heater straps and carbon monoxide detectors. Know what bankable looks like in your state. Did it appraise ok? 

EM is not a 'downpayment'. We know what you mean, but best to use accurate terms when dealing with lenders and potential partners.

If you can't get an extension from the seller, consider getting legal advice.  Unprecedented times et al. 

No problem getting advice here on BP, but really your attorney needs to be leading this effort. You say the contract was based on "clear to close" but is that the exact wording? If it is contingent on financing, the financing has been pulled. I would think you could make a case that you were unable to meet the contingency. 

Your attorney needs to be the one communicating. Part of the message should be that these are unprecedented times. You expect the seller to work with you in a reasonable manner to work through this situation. If they want to be rotten in a time of national crisis, ask them how they think their actions will appear in court or worse if brought to the attention of social media? 

Sounds like a common situation. This is what is happening. non-QM is based on investor credit lines, when the market spooked, everyone pulled out and liquidity was erased practicality overnight. You're only option is to go with a bridge lender on this that is still funding. What LTV do you need to close? if it's a good deal in a good neighborhood, it might go 75%.

Good advice from Joe Splitrock.  That is what I would follow.

@Salvatore Lentini

Thank you

@Steve Vaughan

The sale price is 700k and it appraised properly.

@Joe Splitrock

This is great advice. Thank you

@Andy Perez

Andy, I feel for you. Same thing happened to me with the Homebridge Mortgage. We had a settlement scheduled to close on March 27 @ 3pm when we were told that the investors had pulled their funding and that my client would not receive the loan at 1:34pm the same day. 

Through a lot of digging and searching we found a lender that was able to work through some of my clients challenges and approved his loan yesterday afternoon around 4pm for a much better conventional loan. Hang in there and find a way. You got this. 

I would suggest trying to work out an extension, although the bank may request more money upfront in exchange for a financing extension, at least this gives you more time to tap a another non-QM lender.

I also agree if you had a financing contingency in the PAS agreement, you should try to make this claim if all else fails and definitely be strategizing with your attorney.

This pandemic has caught everyone off guard, unfortunately it's just bad timing.

@Andy Perez

I feel like I’m missing something here. You gave the seller a 70k deposit or downpayment? I thought the downpayment would go to your bank and not the seller.

The same thing happened in 2008.  Part of the cycle tightening and then loosening.