Lender Fails To Close

[Larry W Boyd]

Started with 6 month Bridge loan, Oct, 2022. Started refi to long term fixed rate rental loan, April, 2023. After 3 extensions and 7 months time, costing $4900 in points, and not including appraisal fees, lender informs buyer they can't close the loan. Borrower is now faced with finding a new loan source, defaulting on the bridge loan or selling the property. What responsibility does the lender bear for not getting the refinance closed? Are there any legal remedies for the borrower?

[Doug Smith]

They usually don't have responsibility, but the thing that stuck out at me was "costing $4900 in points". Points are earned when the loan is signed, not during application. If a lender is charging up front fees (exclusing legit third party fees such as the appraisal fee that is typically paid directly to the appraiser or appraisal management company), then they likely aren't legit and likely aren't going to close. I've always preached to our loan offices that "a quick no is better than a long maybe". It shouldn't take that long to know if a deal won't fly. That's not to say that things don't pop up like low appraisals or title issues that no one expected, but 7 months means the lender was either not legitimate or they were struggling with funding and didn't tell the borrower. As for legal remedies, there likely aren't any.