Posted by James Dawson on 11/14/10 11:13am
Msg #361252

Ever read the compliance agreement?

Had a signing yesterday with a V P of a Global Venture Capital Investment firm (yes we talked ) Who refused the sign the agreement. He explained it to me. He had issue with a section I have recreated and posted below in part.....

The borrower(s) for and in consideration of the Lender funding the closing of this loan agrees, if requested by Lender or Closing Agent for Lender, to fully cooperate and adjust for clerical errors, any or all loan closing documentation if deemed necessary or desirable in the reasonable discretion of Lender to enable Lender to sell, convey, seek guaranty or market said loan to any entity, including but not limited to an investor, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, Federal Housing Administration or the Department of Veterans Affairs, or any Municipal Bonding Authority.

...This is what he disagreed with and said absolutely not!

The borrower(s) agree(s) to comply with all above noted requests by the Lender within 30 days from date of mailing of said requests. Borrower(s) agree(s) to assume all costs including, by way of illustration and not limitation, actual expenses, legal fees and marketing losses for failing to comply with correction requests in the above noted time period. The borrower(s) do hereby so agree and covenant in order to assure that this loan documentation executed this date will conform and be acceptable in the marketplace in the instance of transfer, sale or conveyance by Lender of its interest in and to said loan documentation, and to assure marketable title in the said borrower(s).

This is the first time I have ever had anyone refuse.....we'll see if the loan goes through.

Any comments?

Reply by Linda_H/FL on 11/14/10 11:18am
Msg #361253

If he has no problem complying with their

correction request, why would he not understand that he is responsible for any losses incurred by the lender as a result of his failure to cooperate.

Never had anyone refuse to sign one.

Reply by James Dawson on 11/14/10 11:46am
Msg #361261

Re: If he has no problem complying with their

Hard headed I suppose.....I appreciated you and Renee's comment and certainly will keep you posted of the outcome. I also like Renee's explanation of why it's needed, I didn't know it was THAT thorough.

Reply by ReneeK_MI on 11/14/10 11:23am
Msg #361255

The Compliance Agreement is used to 'motivate' buyers and/or borrowers who are historically lacking in post-funding motivation. They get their loan, and then don't want to even open their mail let alone return something corrected/signed.

Say, by way of example, the Note has a signature varience issue. Investors can be extremely particular about such things. The lender knows by experience (& written guidelines) what that particular investor will accept - or refuse. Say this loan has funded, and was u/w & intended for a particular portfolio. If the borrower refuses to help the lender in making the issue compliant for that investor - the Lender might be owning yet another loan, and that's NOT the intended game plan.

As a wholesale closer, forcing this 'issue' was one of my duties in the very rare instances that the Settlement Agent couldn't succeed with on their own with it.

Depending upon the particular investor - the LACK of an executed Compliance Agreement will render this loan unmarketable, and therefore unfundable.

Reply by Linda_H/FL on 11/14/10 11:27am
Msg #361257

"Depending upon the particular investor - the LACK of an executed Compliance Agreement will render this loan unmarketable, and therefore unfundable"

And when dealing with borrowers such as this one I sometimes almost hope that's exactly what happens - failure to fund - maybe put them in their place and teach them a lesson about calling all the shots - they had it coming.

Reply by James Dawson on 11/14/10 11:40am
Msg #361260

my feelings echoed both of yours, but I was shocked at his unwillingness to sign. Earlier I made the mistake of saying, "If you don't sign this, the loan might not fund.." and this forum made sure I knew that was not up to me to say, so I didn.t. I really don't want to wish anyone ill will but, Linda...right on about the loan funding. IMO So much for V Ps and I must say, a l o v e l y home on the end of a stupid cliff!

Reply by Les_CO on 11/14/10 3:20pm
Msg #361268

I’ve had this happen to me before, sometimes I go into details....sometimes not, depending on the borrower. Just because some guy is a VP of something, (like the USA) doesn’t mean he has the intellect to understand the documents he’s signing, or what they purport to do. Short story I’d have said exactly what you did not say.

Reply by James Dawson on 11/14/10 3:28pm
Msg #361269

I agree with you. I felt this happening was gonna create a bad smell and I just didn't want to be a part of it. I'm smelling squeaky clean right now.

Reply by Lee/AR on 11/14/10 11:36am
Msg #361259

In this or, frankly, any imaginary dispute about whatever... I have the same simple speech:
It's the Golden Rule--he who has the gold, makes the rules.
It's their money; you want to borrow it, you go along with their terms.
You don't like their terms, don't sign the papers; don't get the loan; go elsewhere.

Now I may phrase it gentler, but it's really quite simple and works virtually all the time.

Reply by GOLDGIRL/CA on 11/14/10 3:47pm
Msg #361270

Yikes!

This is amazing. I looked at a couple of Compliance/Correction docs I have on upcoming signings and can honestly say nobody would sign them if they actually read them. The Chase one says that if borrower does not comply with any corrected and/or replacement docs that they are in default and the loan is due and payable immediately. And they are also on the hook for any attorney fees or losses Chase and/or the TC may incur. I always thought that these were mostly for touch-ups - like misspelled street names, minor stuff. Thanks to JD and Renee, I am enlightened! But I have never heard of any lender jumping all over a borrower for anything subsequent to a signing - they just wouldn't fund the loan. To actually enforce all this would probably be beating a dead horse.

Reply by CopperheadVA on 11/14/10 4:00pm
Msg #361271

Re: Yikes!

A couple of times, I've been sent out two years after the original loan signed to get a replacement DOT signed. During an audit, it was found that the original DOT was never recorded for whatever reason, and the borrowers were contacted (via the compliance agreement) to re-sign a copy of the original DOT (notarized for current date) so the DOT could be filed with the county.

If a borrower refused to comply with this type of request, I think it would be quite reasonable for the lender to accelerate the loan and charge the borrowers for any attorney fees and such. Of course, without a DOT on file the may not be able to foreclose if they did accelerate the loan!

Reply by James Dawson on 11/14/10 4:05pm
Msg #361272

Re: Yikes!

What a beautiful example of why it must be signed..thanks. But, we're not suppose to give advice.

I wonder how this example could be incorporated into in explanation of the compliance agreement without it being considered..ADVICE./UPL

Reply by Linda_H/FL on 11/14/10 4:08pm
Msg #361274

This is the Compliance Agreement

Should they find any errors or omissions in the paperwork, you agree to cooperate in getting the errors corrected as soon as possible after you're notified.

Reply by James Dawson on 11/14/10 4:29pm
Msg #361277

Re: This is the Compliance Agreement

that was not the borrowers interpretation of what it said.

Reply by Linda_H/FL on 11/14/10 4:38pm
Msg #361281

Then he was brain dead...per your first post

it was right there..

"The borrower(s) .... agrees, if requested by Lender or Closing Agent for Lender, to fully cooperate and adjust for clerical errors, any or all loan closing documentation...." blah blah blah

Reply by Linda_H/FL on 11/14/10 4:40pm
Msg #361283

woops...dangit

Sounds like your borrower may have just been looking for an argument...

Reply by James Dawson on 11/14/10 4:43pm
Msg #361284

Re: woops...dangit

Bingo.....balked at the "statement of information" , Six RTC's and Domestic Partners form also.

Reply by MichiganAl on 11/14/10 7:36pm
Msg #361334

He refused to sign other forms as well???

In that case, in lieu of being able to reach anyone, I would have ended the signing at some point and said "you're obviously not ready to complete this transaction at this time. We'll have to reschedule this when you're comfortable with all of this." I'd then make sure the title company and lender knows not to bother sending someone else out until the borrower has seen the entire package ahead of time and agrees to sign every document.

Reply by James Dawson on 11/15/10 12:27am
Msg #361358

Re: He refused to sign other forms as well???

I did send an email (Sat morn) right afterwards to LO and Title right afterwards, hoping to follow up tomorrow.

Reply by jba/fl on 11/14/10 5:18pm
Msg #361293

Re: This is the Compliance Agreement

Not advice - just a statement.

That is all I give them - fact is, if this is not signed you run the risk of the entire deal not being accepted.

Sounds to me like this guy would rather give orders than take them. I'll bet the president of his company watches his back all the time.

Reply by MichiganAl on 11/14/10 4:07pm
Msg #361273

Never had someone refuse to sign a compliance agreement

Seems like common sense that you would agree to cooperate on your own loan and understand if you don't, any cost incurred is on you. I'd be surprised if the loan funded with that doc signed.

However, a few weeks ago I did have someone refuse to sign the Limited Power of Attorney agreement. That's one that you can usually get away with not having signed if the borrower has an issue with it (with t.c. permission of course, but the few times it's come up the t.c. has always said no problem). It's done more for convenience than necessity.

You did try to reach someone from the closing, right? I'd be trying to reach the signing service, title company, loan officer, anyone before I left without a doc signed. As a last resort, I usually find that the borrower has the loan officer's cell phone number. I want someone to know the situation before I leave.

Reply by James Dawson on 11/14/10 4:33pm
Msg #361280

Re: Never had someone refuse to sign a compliance agreement

Actually LO called borrower and me to let us know he would be unavailable. Ask BWR if there were any problems and then made me aware he have covered everything w borrower and the signing should go smoothly.

Reply by GOLDGIRL/CA on 11/14/10 5:27pm
Msg #361295

Re: Never had someone refuse to sign a compliance agreement

Gee, JD, where have we heard that before?

Reply by James Dawson on 11/15/10 4:25pm
Msg #361423

FOLLOW-UP

I Called Escrow officer first thing this A M (said he'd call me back) and followed it up with an email about the situation. That was SEVEN hours ago...haven't gotten a call or email.