That breeze you felt last week was the collective sigh of relief from loan officers, closing attorneys and title insurers after the U.S. Senate granted a three-month extension to the closing deadline for homebuyers hoping to collect on federal tax credits.
We’ve reported in recent weeks on the huge surge in business at local closing offices as buyers, armed with their signed purchase and sales contracts inked before April 30, then turned their attention towards lining up financing and title ahead of what was a June 30 closing deadline.
Well, it seems that surge turned into a flood, one that threatened to overwhelm the system and leave otherwise well-prepared, law-abiding homebuyers in the cold through no fault of their own.
It has been reported that nationwide, there was a backlog of 180,000 homebuyers waiting to close before June 30, a number almost impossible to efficiently process in two months, let alone two weeks.
It seems that the same mad dash experienced by real estate agents and brokers in March and April, had carried over into the loan pipeline, with decidedly more disastrous results. It’s one thing to get buyer and seller to agree on a sale. It’s quite another to arrange appropriate financing for said sale.
Home financing deals at any time are already complex transactions. Throw in the vagaries of FHA backing (because, let’s be honest, the FHA was, is, and will continue to be the prime mover in the housing market) and its associated mortgage insurance, pre-qualifications and administrative minutiae, and it’s no wonder closing professionals were sweating these past few weeks.
On first blush, it might be easy to dismiss or scoff at the idea of this latest extension as overly consumer-friendly. After all, if prior to this extension’s passage, homebuyers had been told to arrange the closing on or before June 30, then it seems safe to assume that the vast majority hopefully already had business taken care of. Good real estate agents would demand nothing less, and take all measures necessary to provide for their clients. To that unorganized few unable to line up their ducks, well, at the risk of sounding harsh – tough cookies.
But such an outright dismissal shows an incomplete understanding of the dynamics at work.
Just as the $6,500 or $8,000 tax credits themselves were never really wholly aimed at buyers, but rather allowed sellers to cushion home values in the wake of jaw-dropping price cuts, this latest extension isn’t aimed at consumers. Instead, it allows lenders and title insurers room to breathe.
Though fashionable to imagine bankers and insurers as faceless, nameless automatons working like robots as slaves to the bottom line, the fact is, even the best home financing professionals are human. Working long hours at complex and amazingly detailed formulas, under strict deadlines, and with many hundreds of thousands of dollars at stake, if not millions, well, mistakes are bound to happen.
And the United States Senate, prone as it is to mistakes of its own, is correct to take measures to try and avert as many of those mix-ups as possible.
We’re occasionally a hardhearted, Darwinian bunch here at Banker & Tradesman, but even we think it would be a shame if an otherwise well-prepared and well-educated homebuyer were to lose out on their share of federal tax credit treasure if, through no fault of their own, a number was miscalculated, or a form misfiled under deadline duress.
Shoddy underwriting and incomplete or forged paperwork, absent any real deadlines, is, in part, what got us into this mess in the first place. There’s no sense in re-creating those conditions out of some unnecessary sense of haste.
Homebuyers applying for the federal tax credits have already agreed to purchase their homes. So in essence, nothing really changes here. Giving lenders more time to get the job done right, and not just quickly, is something we will always get behind.
