Rehab Lender Not Releasing Funds – Wow…

[Eric Foster]

Well the mortgage saga continues…

It seems that lenders are now taking proactive moves in an attempt to reduce further defaults… So I am told…

I have a rehab lender telling me they don’t want to advance rehab funds because they are “cutting back on their exposure”. This is my first draw request!

Wow… seems like they are shooting themselves in the foot. Maybe they are simply out of money!

They are questioning me if I will be able to refi at the end of the balloon term and asking if we are on schedule for completion, while at the same time telling me that since they have had so many problems with borrowers not completing projects and paying them off, that they have pulled back on honoring draw requests.

So basically, they are saying “pay us off, and by the way we are not going to honor our agreement with you and advance you the funds to put the house back together” so you can get a loan to pay us off. Can you say “Catch 22”

Hmmmm. It seems like they are more willing to breach their agreements and commitments and get sued, than to live up to the deals they have already made.

We have done everything we were supposed to do they just don’t want to do what they committed themselves to do.

Seems clearly like a breach of contract to me… We paid extra fees, points, and interest to have the benefit of a rehab loan, and now they are withholding they rehab funds? We could have just taken out a regular conventional loan if we knew they were going to treat a rehab loan like a regular conventional loan.

Seems to me they are setting themselves up to create their own defaults. Potentially causing borrowers financial hardships by not providing the funds they have agreed to provide.

Has this happened to anyone else?

Wow!