My question for today... Why is it Common Sense for me, but not Common Sense to you?
A recently loan I closed was delayed last week when the Underwriter noticed that the 'Lead Based Paint Addendum' was checked on the sales contract (page 7). This would make a ton of sense, except the home was built in 2004.
It is required by Law to disclose to a buyer/renter when a home uses Lead Based Paint, but only for those homes built on or before 1978. This is what HUD states about the law:
Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992, also known as Title X, to protect families from exposure to lead from paint, dust, and soil. Section 1018 of this law directed HUD and EPA to require the disclosure of known information on lead-based paint and lead-based paint hazards before the sale or lease of most housing built before 1978.
Basically, its required by law that the seller or landlord must disclose how to identify and control lead based paint hazards. In addition, the seller/landlord must tell the buyers/renters how to treat the area, provide any historical records, and also allow the sellers a 10 day period to do some thorough research about Lead Based Paint.
Two questions are asked when I receive this type of 'condition' for the loan.
1 - Why didn't we catch this before sending it to the underwriter? In this case, we had reviewed the document completely, but because it was a 'docusign' contract the lender asked for a new 'wet signature' contract. The sellers and buyers signed a docusign version, which we assumed (and you know what they say about assuming) was the same contract. Turns out that when it was reprinted, the agent accidentally clicked the addendum.
2 - Why is the underwriter making this a condition 'Prior To Docs' instead of 'prior to funding'? I understand wanting to have an updated version, but you KNOW the home does not need the addendum. Why delay the documents from being generated when it is much easier to make this a Funding Condition.
I asked the Underwriter to make this a 'Funding Condition' rather than 'prior to docs'. Since they will both be at the closing table, its much easier to have them sign it on closing day. When asked this to the underwriter, they replied that they would need 'MANAGEMENT OVERRIDE'.... WHAT?!?!
Management Override took 2 days. Why can an Underwriter not make that 'judgement call' instead of holding up the closing of the loan?
Perhaps that just makes sense to me. Does it make sense to you?
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The silliest things can hold up loans these days. They're really looking for any reason...
Tom
Hi John-
How frustrating! It's too bad that they don't understand that any lead-containing paint used on a house built in 2004, would have to have been stored for decades since it's manufacture. Surely someone at the lender's office should have been able to get this loan moved along once a sastisfactory explanation of the error was made!
Patience, patience. it just takes so much lately...
--Sara in San Antonio
Our world use to be full of common sense. Our Government does our thinking for us now!
Hope you had a great week John!
Paul
Hi John,
I'm in complete agreement with you.
But I've got 2 questions, are you at liberty to say what lender it was that required "wet' sigs? I'm trying to get a handle on those that do, therefore being better prepared when I can.
Also, if/when that happens why not have them sign the original contract again, right next to the doc-u-sign mark?
John, with all of the scrutiny that loans go through, it is no wonder there was a problem. Now you just have to go through the paperwork thoroughly.
Tom - You have that right. Sometimes it IS the easiest things.
Sara - I agree. Something like this can easily be explained and corrected at the closing table. No reason to put things on hold while I send a letter to the seller and buyer... not this close to closing. Lets make the adjustment and move forward.
Paul - Dont get me started on the Government changes that effect our lending standards now...
Lynda - The lender is Provident Funding. There are not many lenders that will require the wet sign, but they are certainly one of them. I had actually written a post about them not too long ago because it was odd to me that FNMA is okay with the docusign but individual lenders are not?.?.?.?
As for the water marks, we certainly could have had them sign next to the water marks.. and actually, we thought they did which is why we did not re-review the contract when it came back. The realtor that printed the contract did not use the original, they printed a new version that had the stamped signatures and had the seller/buyer sign next to the stamp. But apparently when they reprinted the document, they checked the box inadvertently.
Wade - you are absolutely correct. Had we not 'assumed' it was the same document, we could have avoided the issue all together. Lesson learned.
Common sense is not as common as it used to be...
Its really not Jeff. Thanks for the comment.
I'm with you however, anytime more than two people agree on anything I get really nervous! It feels as if lending regs are changing faster than a loan can be processed.
How about this?
We are in a dry state that requires a wet signature. Hah. Go figure. I just thought it was funny.
Things do not have to make sense to begin with, John. That's why you are trying to go insane trying to figure it out.
It is almost like they need to find something to justify their position. These people are hired on an hourly basis most likely. I would rather see them spend more time in processing short sales than being so nick picking for such trivial things that were not even required anyway.
Charles - you are right that things seem to change all the time. All though I will say that the changes have slowed down, which is nice. This is just something I personally feel could have been a judgment call. Certainly we could have saved ourselves 2 days or waiting so that other things could be done.
Loreena - Im sure if we had done our part, we would have caught the problem even before it went to the underwriter. That would have been easier to deal with. Ultimately, the loan closed so everyone is happy.
Don - I am assuming you are a Short Sale Realtor? :-) Lenders could certainly use some help in that area. Soo many short sales and not enough staff.
Where did the common sense go? Nobody seems to be able to make a decision and take responsibility for it these days either. I get very impatient with these kind.
Im right there with you Ricki. Perhaps they will remember this situation if it comes up again and just approve it because they know the manager will approve it. Who knows. I know that for sure I'll be checking the contract once again to ensure its accurate when it comes back 'just in case'.
Good to know it closed and everyone is happy. The agent that checked it was probably kicking themselves too. To err is human, to forgive is divine.
Hi John,
Thanks for the info, I had to check back for your answer. Btw, not using the "original" and having them sign another would also be of concern to me for the same reason, the possibility of making a mistake. I've just had them re-sign next to the doc-u-sign stamp.
Teral - I was upset with our processor for not catching it when it was sent in, but it happens. I've missed things before. If you do enough deals its bound to happen at some point. Some things just become to 'normal' so you expect its not an issue. Keeps us on our toes when this time of thing happens.
Lynda - Using the original would have been much easier. We would have just scratched it out and had the buyer/seller initial it. I guess whats done is done. We learned from it and the expectation should always be to double check it before sending it off to the lender.
Hi John...I think undewriters too often are looking for their "15 minutes" and while their objections may get them that...they drive everyone else a little crazy in addition to the fact that the use of common sense too often is not part of their objection. We don't use the lead paint for newer construction...and that some lawyer made it 3 pages long makes me wonder if the state, NAR...everyone doesn't have stock in paper mills...3 sentences should do it... ! Blog on.
Thank you Sally/David. :-)
I certainly want the Underwriters to do their job and ensure that things are accurate. But as you stated, Lead Based Paint Addendum is something for older homes which this is not. I believe that the underwriter could have required a correction, but dont hold up the file for it. Thanks for the comment.
John, love the graphic for your blog, perfect! One would assume Management Override would have sped the situation up...yeah I know do not assume.
Hey are doing the Macarena in your photo?
Cynthia - Im actually not doing the Macarena, however there is a video on YouTube where I am doing the Macarena... I believe its at the same dance. :-)
Hi John, Common sense is just so hard to find these days...
LOL You have that right Shirley.
Oh there is so little common sense in the underwriting process. And so little reading of contracts until the last minute. Turns out a contract I've had at the lender for about a month now was missing page 3 (yes was my bad I checked it but must have missed it because my copy was missing it too). But I got a call a week before closing asking for it. Seems like someone else might have noticed it between my transaction coordinator, the title company, the loan officer, his assitant, the processor. No one noticed. Lenders are also using little common sense and lots of redundancy in the condition process with loans. Rather than actually reading the contract, they waste time asking for 4 different sources of employment verification from a 20 year government employee. Or send out a 2nd inspector for minor repairs that have receipts to prove they were done. Sorry for the rant, perhaps this should be my next blog!
Coral - You are SOO right. I've experienced that before as well. For some reason the copy we uploaded to the lender of the contract (not on this deal, but another deal) didnt have page 4 of the contract. They didnt ask me about the missing page until about a week or so before hand. Luckiy I had the complete copy and assume that my processor left it out somehow.... not really sure still but oh well. Cant imagine it missing EVERYONE like that though... Title, Lender, Originator, Processor, etc.