HUD ESCROW EVENTS TIMELINE & WCGW ? (What Could Go Wrong?)

1ST HALF OF THE ESCROW – (The Beginning of the Escrow = Easy)

1) Signed Contract Received From M & M  (Day  0)

2) Escrow is Opened, Put Online and Welcome Notices are sent to Buyer and their Agent

3) Earnest Money Deposit Received (Within 3 days after Escrow Opens) Open title order.
*WCGW?-Money doesn’t arrive within 3 days for various reasons
            -Buyer wants to cancel for various reasons
            -Preliminary Title Report arrives, showing owner to be former lender & not HUD

4) Escrow Instructions/Packages are Sent to All Parties (10 days after Escrow Opened)

5) Selling Broker Signed Commission In (& CDA, If Applicable) (20 days after Escrow Opens)

6) Escrow Instructions Signed by Buyer Received (20 days after Escrow Opens)

2ND HALF OF THE ESCROW – (Closing the Escrow = Not always so Easy)

7) ESCROW REQUESTS LOAN DOCUMENTS (10 days before COE)
*** THE NEED FOR MOST ESCROW EXTENSION’S IS CREATED HERE***
*WCGW? - Loan Conditions -historically, there’d be 3 - 10 per loan, but today,  there are routinely 20 to 40 Loan Conditions, and we’ve seen up to 65.
- Late Discovery of the Existence of an: HOA, New Lien or Substandard Condition
- Appraisal Issue  (date of appraisal could be too old, or, its value too low) -Unsourceble Funds  (where’s your down payment coming from again?)
- Over-bidding - A Buyer over bids to secure winning bid.  The price overage must be paid for in cash and not added to the loan for appraisal reasons.
Buyer’s don’t seem to understand this until it’s time to close escrow.
- Lenders lack of experience with HUD properties and repair holdback loans

8) Loan Docs Received (10 days before COE) *THEY JUST ARRIVE, IT’S ALWAYS A SURPRISE*
Update Demands and other file expenses requested to prepare sellers HUD-1
All Loan Documents have to be reviewed for accuracy to match the contract prior to buyer’s signature
All of the Loan Conditions must be cleared prior to Funding Loan

8.5) All Cash Deals – The only thing that could cause an issue with an all-cash deal closing would be the late discovery of an HOA or late discovery of Municipal Lien filings

9) Estimated HUD-1 is created and sent to Seller (M & M) for Approval – (once all updates are received)

10) Loan Documents are Sent Back to Lender  

11) Selling Broker’s Survey Received

12) Buyer’s HUD-1 Addendum Received

13) Buyer’s Survey Received

14) Buyer’s Final Wire/Deposit Received

15) 5 Days < COE-Extension#1: BUYER ADVISED TO APPLY FOR EXTENSION!

16) Est. HUD-1 Approved/Received From Seller

17) Grant Deed Received from M&M (5 Day Life)
*WCGW? - Race against the 5-Day Clock on the Grant Deed
- Lender comes up with – New Lender Funding Conditions
- Overnight packages and fee’s for a new Grant Deed

18) Escrow/Commission Instructions Signed By Seller Received

19) 4 Days to Closing Phone Call to Buyer & Agent

20) Non-Performance Notification to Pemco  

21) 3 Days to Closing-No Reply?  Notify PEMCO of Non-Response

22) Loan Funded & Set to Record

23) Close of Escrow (COE)
- File Closed/Confirmed  
- 1099 Tab Marked “NO” for REO  

24) Closing Notification Sent to PEMCO (Day of Recording Confirmation)

25) HUD’s Final Wire Sent (1 day > COE)

26) Checks Copied for the Escrow File (1 day > COE)

WCGW? – What Could Go Wrong?

The Big Issues That Effect Escrow / 90+% are created by the Lender

WCGW 1: Earnest Money Deposits not arriving, for various reasons
WH: We cancel the escrow on day four.        (*WH = What Happens)

WCGW 2:  Lenders general lack of experience with HUD properties and repair holdback loans
WH: This results in lots of lost escrow time educating these lenders.

WCGW 3:  Lender Loan Conditions:  Long lists of loan conditions must be satisfied before the loan is able to be signed by the buyer.  Each condition must be individually addressed in order to clear it from the list.  Historically you might find four to ten conditions that needed to be cleared per loan versus the twenty to forty plus we’re all seeing today.
WH: This can take a few minutes to a day to clear each one.   Most loans take a good day to clear their conditions list, and a fair number require work over two days.   

WCGW 4:  Lender Funding Condition’s: after the signed loan documents are returned to them, their underwriters evaluate the file again and often generate additional conditions which must be satisfied before the lender funds the loan.
WH: These are on top of all the lending conditions cleared before the buyer could sign.  This again takes time tracking down the borrower and/or their agent to get these new lender conditions satisfied.  Generally this is just a small irritating speed bump, rarely causes delays.

WCGW 5: Undiscovered HOA’s
WH: We immediately order the CC&R’s and the HOA’s payoff demand.   This issue of the existence of an HOA usually comes up after loan doc’s are received.   This is important because it is also usually a condition of sale that the buyer, as part of his due diligence, gets to read the CC&R’s and accept or reject the property based on his review of the Conditions, Covenants and Restrictions that govern the property he has under contract.   The buyer has the right to cancel during this approval time  In addition to the CC&R’s, we need to get a payoff statement for the Home Owner Association too and send a new HUD-1 in to M&M for re-approval.   This can be a pretty big speed bump on the occasions it occurs and can cost the escrow several to many days closing.

WCGW 6: Undiscovered Liens
WH: We immediately order the demand upon discovery and revise the HUD for re-approval.   This can add several does for the municipality to get us the demand, up to ten, then a few more days for an approved HUD-1 to follow.

WCGW 7: Grant Deed can expire due to G.D.’s Short Fuse of 5 Days
WH: We request a new Grant Deed from M&M when the loan is ready to fund.  If the five days have passed and we’ve not funded and recorded, we notify the M&M who sends a new Grant Deed to us, and we return the Grant Deed that had expired to them.   We then commence with the closing.  It’s not so much a speed bump as it is a fourth ball thrown in to a juggler with three balls in the air.   It becomes another moving part at the close of escrow.  If we need another, it can cost the escrow a day in closing.  

WCGW 8: NEW LENDER NEEDS THE OLD CASE NUMBER-Most Selling Agents need to know the FULL FHA CASE # of the property they just sold in order to pass it along to the new lender.  This slows the new lender down when the Realtor is unable to readily provide it.  
WH: The realtor calls us in a rush, or the lender calls us in a rush for the information and it causes a little speed bump in the beginning of the transaction.