banner
article3photo
byline
in this issue
article1
article2
article3
article4

 
California Civil Code Section 2948.5 restricts lenders from charging more than one day interest from the date the loan is funding until the date the funds are disbursed for the benefit of the borrower. In most cases, the settlement agent makes all the disbursements. As a result many lenders require the settlement agent to disburse timely, or the closing agent will be required to refund the additional days of interest charged to the borrower. Read on to find out what action one lender took when their instructions were not followed.

On September 18, 2012, Provident Funding® sent loan funds to Chicago Title. The funds were received late in the day and the settlement agent was unable to record the file until the next day. On September 20th, the file was disbursed.

On October 4, 2012, Provident Funding contacted the settlement agent pointing out the language in their closing instructions which states:

"The lender requires that the loan proceeds be disbursed within one (1) calendar day of the loan funding as required by CFC Section 50204. In the instance the funds are not disbursed within one (1) calendar day, the closing agent will be required to refund the additional days of interest charged to the borrower until the funds are disbursed."

The lender advised the settlement agent to reimburse the additional day's interest and send over an amended HUD–1. The settlement agent ignored the request. Again, on October 29, 2012 the lender contacted the settlement agent with the same instructions. The settlement agent did not respond.

On January 30, 2013, the lender sent an email to the settlement agent stating:

"Your office is no longer permitted to close loans on behalf of Provident Funding."

The settlement agent's failure to comply with timely disbursement and to respond to the lender's requests resulted in her entire office being forbidden from closing new loans for the lender.

 

 
 

MORAL OF THE STORY

It is important to read, understand and comply with the lender's closing instructions. If you are unable to comply, be sure to communicate this with the lender to find an alternative. Failure to comply can result in you – as well as your entire office – being forbidden from closing future transactions with a lender.

 
 
 
 
footer_line
 
stop fraud! share
 
footer_line
 
 
FNF Home