Monday, August 13, 2007

American Home Mortgage files for bankruptcy

American Home Mortgage Investment Corp., the nation's 10th largest home lender, filed for bankruptcy protection…Yesterday!How do you translate this event into your daily activities as a REALTOR®?

Easy, just imagine for a moment that you’ve just spent 6 tough weeks battling to get your buyer to the closing table with an unconditional loan approval. Yes, it was a long, hard journey; the appraisal; the BINSR; getting all the required documents to the lender; working with a seemingly uncooperative listing agent; you get the picture…but that’s all behind you now…you did it, you made it happen! You’re at escrow feeling good about your efforts. The seller and buyer have signed the papers, the buyers’ down payment and certified funds are in. The buyer can’t wait to transfer the funds from this closing to the purchase of their new home. All that’s needed at this point is for escrow to receive wired funds from the lender. But the funds never come!

Can this happen? Can this conceivably happen to you and your client? Yes it can, and sadly, it happened to many across the country just recently. As a result of AHM’s closure it happened to approximately 4000 transactions nationwide.

So what can you do to avoid this from happening to you? For starters, get to know your lender! Get intimate with the details of the LSR. Make sure it’s completed properly and accompanies your contract. Stay on top of your transaction. Track and monitor the loan process. USE the LSU! Memorize, if you must, all the steps in the loan process. Conduct planned and periodic follow-up on the lender. (The AAR residential purchase contract provides an opportunity for you to do so). Get non-conforming loan commitments in writing. Make sure your buyers have “locks” on their loans with plenty of time to close their transaction.

Remember that the buyer is your client and you have a fiduciary relationship and obligation to them. The lender doesn’t have that same relationship with your client they work for the investor.

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