earnest money disposition- all contingencies removed

[Ray Ochs]

We used a California Residential Purchase Agreement RPA-CA revised (4/10) without a realtor to purchase a condo. We placed down a $30K earnest money deposit to escrow. We were informed by our loan agent that the loan approval was approved but is going back for second check by underwriter.  We then released all contingencies from the contract by using a Contingency Removal Form. (C.A.R, Form Revised CR, 11/13). (thye loan officer never commented on a problem.) About a week later the loan officer came back and said the flood insurance may not be adequate so they can't grant the loan. (They are still deciding if the flood insurance is appropriate for a Fannie Mae loan.) Because the decision may not be made and the deal closed with the 30 days as stated on the contract the seller is threatening to file a "Notice to Perform" to cancel the contract and take our $30K. Since nothing causing the loan to not happen was within our control can he do this? Our agreement contains the statement that "release of funds will require mutual signed release instructions from buyer and seller, judicial decision or arbitration award." We WANT to purchase the condo and not cancel out of the deal, but we may need a different loan. We have a different Mortgage broker ready to take our loan if necessary. We offered to pay expenses incurred in the extra wait time to get a new loan. The seller now thinks he can get more than we offered and wants to cancel the deal. What are our rights?