Tip 5-2010: Problem with GFE & VAR Contract - Financing Contingency

One of the requirements with the new GFE is that the lender can not collect any fees until the day after the completed GFE has been received by the Purchaser. This GFE does not have to be completed and mailed to the Purchaser until three business days after receipt of the completed loan application, which must include the fully ratified contract.

The VAR Contract (Form 600) in Paragraph 5 “Financing” requires the Buyer to make written application for financing within five business days of the acceptance of the contract. Written application must include, according to Paragraph 5, “the payment of any required application, credit or appraisal fees”. As a result of the new GFE and the inability of the lender to collect these fees at the initial application, most Buyers will not meet the five day requirement, and will technically be in breach of the financing contingency.

Until there is a permanent change to the VAR Form 600, the best course would be to change the contract in Paragraph 5(a) by crossing out the clause “including the payment of any required application, credit or appraisal fees”, or by changing the clause to read “including the payment when allowed by the new GFE procedures of any required application, credit or appraisal fees”.

Please contact me if you have any questions.

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/

Tip 4-2010: Short Sales & 2nd Deeds of Trust

Recently, it has become more difficult to obtain short sale consent from the second lien holder. In the past, the first lien holder would offer the second a token payment of between $1000 to $3000, which the second would agreed to accept as they will get nothing from a foreclosure by the first. Now however, the second lien holder is insisting that they want more money than the token payment in order to approve the short sale.

Their argument is that the first lien holder needs to offer the second more money, or the first can go ahead and foreclose and incur the tremendous costs involved with the foreclosure. The other side of this argument is that the second lender gets nothing if there is a foreclosure. It sometimes becomes a “game of chicken” between the two lenders. If nothing else, expect that a short sale with two or more lenders may take a longer time for both approvals.

Please contact me if you have any questions.

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/