Here are the details:

  • FHA pre-approved Short Sale with Wells Fargo.
  • Conventional, 20% down buyer (how many of those are out there??)
  • No variances, no requests for seller paid closing costs. No repairs.
  • Now--ONE DAY BEFORE CLOSING--HUD is rejected by Wells Fargo because Buyer is receiving a credit from the BUYER'S LENDER of her rate float fee.
(Note that this fee does NOT come from the seller, nor affect the net to Wells Fargo IN ANY WAY.
The proceeds (seller side) are EXACTLY AS I PREPARED THEM 30 days ago.This fee is strictly from the lender to the buyer--money she paid upfront.)

So, here are the questions:

1) What right does a Short Sale lender have to SEE the buyer side figures? This has never been required from Wells Fargo before...

2) How can they strong arm a CONVENTIONAL buyer into losing her upfront fees to the lender? And yes, we tried changing the language on that line...

A manager's response is that this is in compliance with HUD guidelines:

"They can not have a refund reflected on the HUD.  If there is an excess of funds you are welcome to do a principle reduction. This file is an FHA file and
approved by HUD.  We have to follow HUD guidelines.  There is no room for
negotiation. Thanks,   Michael D. Sander"


3) Where are those guidelines?I have read every published letter, note, memo and PFS guideline I can find from FHA, HUD and Wells Fargo. Now, I understand if it were a SELLER refund or PAID by the Seller....but that is not the case here. And wouldn't it be fraud if they failed to refund her float fee when the rate went down?


The only recourse I have is to publish these INSANE rules that continue to make helping homeowners avoid foreclosure so frustrating. I only hope someone with the power to HELP will read this...


It's exactly like playing with a schoolyard bully...if they are unhappy, they just change the rules!


Keep fighting!



Views: 290

Replies to This Discussion

You can resubmit a corrected HUD. If the float fee is a killer for the deal, consult your closer/broker/agent/ attorney and have them figure out the proper way to expense the excess, or eliminate it.
"And yes, we tried changing the language on that line..." New lender won't eliminate it. Wells will only allow it as a principal reduction to the loan...which is not accurate at all!



Alan Remigio said:
You can resubmit a corrected HUD. If the float fee is a killer for the deal, consult your closer/broker/agent/ attorney and have them figure out the proper way to expense the excess, or eliminate it.
Stephanie,

I am making several assumptions here, so please don't treat this as "the rule". This is odd. The float down fee has the opposite effect of a rate lock. It allows a borrower to take advantage of a better rate and usually the request is applied once, when requested, and non-refundable. Did rates change which would give the lender a more favorable loan/points situation, creating a better benefit to the lender, if the rate remains the same? I think so. If this is a mortgage broker setting up the loan, double shame on that person for not going to bat for the borrower. My opinion is based on what you have satated so far and nothing more.

If you are pressed for time, ask the closer for an extension to address this. You have options. Extend the closing date first. If you are listing agent, share your concerns with buyer agent. If you represent the buyer, question the float down fee. If it is a refund, I suspect an unwillingness by the lender to honor the float down fee...find the reason and get it done.
Who knows where they get off dictating all parts of a deal. I don't know why they think it is their business to look at the buyers side of the HUD anyways. It is none of their business. They are not a party to the transaction. They should only care about their net. But then again, they are pushing themselves into the real estate business.
But the best thing to do is to figure out how to get that off of the HUD.
Nevertheless, the buyer should not be buying a house if a few dollars is going to really hurt her or him.
You've probably already resolved this, but I would just have the lender charge it on the HUD and send her a refund of that fee after closing.
Thanks everyone, we did get a resolution at the 11th hour. Essentially we had to change the HUD so that the language was allowable on the buyer side (however inaccurate) for the closing dept. to sign off on the HUD. Stupid, but true.

Remember that this is an ENDURANCE race and the lenders will try to "cull the herd." They make it hard so Realtors will give up and they can move on to the next file.

Find any solution to save your customers from foreclosure, do NOT give up.

Best wishes to everyone in the fight!

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