I signed a term sheet and paid the good faith deposit with a bank for a cash out refinance on my property 2 months ago. We are supposed to close next week, but the bank is just now telling me that the agreed upon DSCR is not acceptable even though they proposed it on the term sheet to me and signed the term sheet. Adjusting the DSCR significantly lowers the loan amount. Has this happened to anyone before? If so, how did you handle it? Lawsuit???
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Sorry buddy - find a new lender. Term sheets are always non-binding. You're not the first guy to have this happen over the past few months and definitely wont be the last.
Find a new lender and tell the old one to go fuck themselves
Luckily I have a relationship with another lender and they will be able to close the loans on time. I would have been royally fucked and likely would have had to pursue legal action if I didn't have the other lender
If you don't have loan commitment, you don't have a legally binding deal, just a shitty lender
I believe in this case the term sheet was being used as the commitment letter. In the area i'm in, some lenders have a term sheet and then a formal commitment letter while others just have a term sheet that acts as the commitment letter. In this case, the lender already received the appraisal, ran title, and was finishing up underwriting. We were very deep in the lending process and closing was supposed to be in the next couple days, which lead me to think that they just don't do commitment letters and use the term sheet
Lender's don't want to use loan commitments unless forced, they are expensive legal docs that bind the lender. So, it's very common to have the term sheet/LOI serve as the only document until actual loan docs are generated. Lenders can back out at the very last second, even after they wire funds to escrow agent, shitty part of the deal. You can check with attorney, but I would bet they "disclosed" the possibility of this on various docs and gave themselves right to back out
Good to know! Next time I'll be sure to ask for a commitment letter before proceeding any further in the loan process
Yeah, just be prepared to pay a 'commitment fee' (usually the 1% or whatever would be charged at closing as points/fees) plus some lender's attorney fees for the privilege, no free lunch in this world. Also, if you back out for some reason, there could be recourse or additional fees/expenses. There is a reason why borrowers don't always demand them.
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