FAQ About the AAR Loan Status Update | January 2011
Posted on January 27, 2013 by Michelle Lind, Esq
Q: Why is the Loan Status Update (“LSU”) with lines 1-40 completed required five days after Contract acceptance?
A: The LSU is required five days after Contract acceptance to establish that the buyer intends to proceed with the lender indicated in the LSU on the terms described. The LSU also allows the seller and listing broker the opportunity to begin “tracking” the progress of the buyer’s loan process.
Q: Why is the information from the Pre-Qualification Form repeated in the LSU?
A: The information from the Pre-Qualification Form is repeated in the LSU because a Pre-Qualification Form may not have been submitted with the offer or the information contained in the Pre-Qualification Form submitted with the offer may have been incomplete or may have changed.
Q: Why is the “Closing Loan Documents Delivery Date” included in the LSU?
A: The buyer’s obligation to complete the sale is contingent upon the buyer obtaining loan approval for the loan described in the LSU without Prior to Document (“PTD”) conditions, and the buyer is obligated to sign all loan documents no later than three days prior to the close of escrow (“COE”) date. The “Closing Loan Documents Delivery Date” was included so that the lender and all parties will be alerted as to the date the loan documents must be at the escrow company so that the documents can be signed as required.
Q: If the Contract provides that COE is Friday, when must loan documents be signed?
A: Pursuant to Section 8i (Calculating Time Periods) of the Contract, if COE is Friday, March 11, the loan documents must be signed by 11:59 p.m. on Monday, March 7. (Note: Pursuant to Contract Section 8h, all references to “days” are calendar days.)
Q: What if the buyer fails to provide an LSU five days after Contract acceptance?
A: If the buyer fails to deliver the LSU as required, the seller may deliver a three-day cure notice to the buyer pursuant to Contract Section 7a. If the buyer does not deliver the LSU within three days after delivery of the cure notice, the failure becomes a breach of Contract, and the seller may proceed as set forth in Contract Section 7b.
Q: What if the buyer provides an LSU five days after Contract acceptance, but lines 1-40 are not completed?
A: As set forth above, the seller may deliver a three-day cure notice to the buyer.
Q: What happens if the Buyer’s Lender refuses to complete an LSU?
A: The buyer should complete and sign the LSU. The failure of the buyer’s lender to complete the LSU is not a potential breach and, therefore, is not subject to a cure period notice because the lender is not a party to the Contract.
Q: What is the Seller’s recourse if the Seller “disapproves” of the buyer’s LSU?
A: The Contract does not provide the seller an opportunity to “disapprove” the LSU. If the LSU indicates changes in the loan program, financing terms or lender described in the Pre-Qualification Form submitted with the Contract and those changes adversely affect the buyer’s ability to obtain loan approval, increase seller’s closing costs or delay close of escrow, the seller may deliver a cure notice pursuant to Contract Section 7a for the failure to obtain the Seller’s written consent. If the buyer’s offer was accepted without a Pre-Qualification Form, the seller may only issue a cure notice if the seller can establish that the buyer is not diligently working to obtain the loan as required by Contract Section 2g or is not acting in good faith.
Q: In a short sale, when is the LSU required?
A: Pursuant to the AAR Short Sale Addendum to the Contract, the date of the seller’s delivery of the Short Sale Agreement Notice to the Buyer is deemed to be the date of Contract acceptance for purposes of all applicable Contract time periods. Therefore, the buyer is required to deliver an LSU to the seller five days after delivery of the Short Sale Agreement Notice.
Q: If the buyer changes lenders after submitting the LSU, is the buyer required to submit an updated LSU?
A: No. However, pursuant to Contract Section 2l, the buyer is obligated to immediately notify the seller of any changes in the loan program, financing terms or lender described in the LSU. The buyer is entitled to make any such changes without the prior written consent of the seller if the changes do not adversely affect the buyer’s ability to obtain loan approval without conditions, increase the seller’s closing costs or delay close of escrow.
The AAR Residential Contract Revision Workgroup was led by Jim Sexton, chair, with the valuable assistance of workgroup members Amy Swaney (lender representative), John Lotardo (title/escrow representative), Kelly Hand, Martha Appel, Holly Mabery, John Foltz, Kerry Melcher, Jerome King, Paula Monthofer and AAR staff Christina Smalls and Jan Steward.