refi...is this a 'dry closing'

davidrt28 (zone 7)February 16, 2009

Hi folks.

I am refinancing in an Eastern state where "Dry closings" are illegal. I was told that tomorrow (2/17) would be the closing date ("settlement date" on HUD-1), and that I would get the HUD-1 last Wednesday. Well, I did not get the HUD-1 until late this morning. I immediately noticed an irregularity. They are charging me over $500 more than Well Fargo loan payoff calculator says I need to pay, even if I set the payoff date to the "Disbursement date", which is 2/23. The closer said in an email that:

"I can use the payoff you have provided, however, please note, we add 7 days of per diem after the date of disbursement to allow time for mailing and processing"

WTF? I show up tomorrow and sign a bunch of paperwork, and they can't even mail the freakin check to Wells Fargo until NEXT monday? THEN I might have to wait 7 days? From Well's point of view, the mortgage is an obligation until it is paid off. She went on to say "any overage will be refunded directly to you from Wells Fargo." Well, Wells Fargo doesn't give a crap about what happens with the title at the courthouse - I owe them interest until the loan is paid off in full. They aren't going to say "you poor baby, you actually had collateralized the house to someone else 2 weeks ago, we will give you a refund for the difference." FURTHERMORE I am prepaying the new interest from 2/23 onwards, as is typical practice. If the title company idiots can't manage to pay off my old loan for almost 2 weeks, I shouldn't have to pay for 1 week of interest to the new loan. It's like they are trying to force more than a week of overlap in the paperwork, but probably actually pocketing the difference.

When I sold a house, I got the wire transfer into my bank account THREE days after closing and that seemed like an eternity. Why will this almost take 2 weeks? Sometimes tells me they are up to something. One thing that worries me is the settlement company is a division or subsidiary of the lender.

NB I have over an 800 credit score and the loan was supposedly underwritten fully almost 2 weeks ago. So getting the money from the lender should not be the issue.

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dave_donhoff

Hi David,

I feel for you... you're experiencing the "joys" of an administrative process manned by salaried clerks (some in the government levels as well) who have no incentive to satisfaction or results.

Is there a request or question we can answer for you?

Dave Donhoff
Leverage Planner

    Bookmark   February 16, 2009 at 8:10PM
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davidrt28 (zone 7)

Ok I've read more about this nonsense. There has to be a slight delay between settlement and disbursement in a refi, versus a home purchase, because of the 3 day right-of-rescission period. Fine. I understand that. Did not know that before because even though I've bought 2 and sold 1 house this is my first refi.

What is probably "innocently" going on in this case is that the closing company is simply too lazy to do a wire transfer on 2/23. That would cost them, what, a whopping $25 and about $5 of the time of a $20 an hour administrative assistant, to save me potentially a week of interest. It's easier for them to just to mail the check and make me cover the difference. Not really acceptable in my view, but probably standard practice at some places. Unless it is sent registered mail Wells has no reason not wait to cash it on the day they can get all the money.

I suspect the dry closing law...which I wondered might be broken in this case...only applies to purchases. Just as the right to reverse law only applies to refis. Because 2 parties are involved in a sale, the point is to make it irrevocable, hence the law's interest in stopping dry closings.

    Bookmark   February 16, 2009 at 8:29PM
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graywings123

I'm guessing Virginia?

    Bookmark   February 17, 2009 at 7:24PM
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hgli2003

As you rightly assumed, in a refi, there is a 3 day right of recission under Federal and many state's laws. You sign all the paperwork, but don't get the money until the 3 days (business days) have expired. You can't waive the right.

What's happening is that the closing company is protecting themselves and you. The settlement or funding date is the first date they can send out the payoff funds to the bank. The payoff letter can be written several ways, with an exact payoff amount on a certain day with a per diem for additional days or it can give a payoff amount effective through a future date (often the end of the month). The closing agent will figure out the amount for the payoff as of the funding date plus 1 and then will add a few extra days cushion. Why? If FedEx is late, if the clerk at the bank doesn't process it, whatever, if the funds are insufficient, then your loan is not paid off until the bank gets that extra hundred fifty bucks you wouldn't let the closing agent send. You get additional per diems and alot of hassle. You blame the closing agent and the bank, they blame you. Fun all around.

Of course if you send too much, the bank is supposed to refund you the difference and they will....eventually.

I usually see 2-3 days extra after the settlement day +1, so 7 days is a bit much, but you will get the difference back and you will be reassured that enough money was sent to payoff the loan.

    Bookmark   February 18, 2009 at 12:06AM
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