Almost all closings today require a lender funding number in order to disburse. Getting funding approval entails getting a funding number from the lender AND receiving the lender and closing parties’ funds. When funding authorization is required, the closing attorney cannot disburse any money including your real estate commission until all funding conditions are satisfied.
After the borrower signs the loan documents most lenders require the closing attorney to email several documents to their funding department for final review. Prior to TRID typical funding documents included the HUD, TILA and the good faith estimate. Post-TRID funding documents include the settlement statement and closing disclosure. The lender may require more documents and some lenders require almost the entire package.
After the closing attorney emails the documents to the lender, the lender’s processor reviews the documents to ensure proper signing and that all closing conditions have been cleared. Typically the loan originator is not involved in the funding process. Therefore, the loan originator will not know if funding has been approved by the processor. Some originators confuse their “clear to close” with funding approval. A closing attorney may not disburse the loan based on approval from the loan officer, rather funding comes from the loan processor. Depending on the lender and the day of the month the process can take as little as 5 minutes or as long as several hours. Closings occurring late in the day, on Fridays or toward the end of the month typically take longer for funding authorization and in some cases do not fund until the following day.
After the lender is satisfied, the lender’s processor will issue the closing attorney a funding number authorizing disbursement.
The second aspect of funding is the receipt of both the lender’s and parties’ funds. Obviously, the closing attorney cannot disburse if the attorney does not have all funds. Some lenders wire the funds the day before closing but most wire the day of closing or even after closing. When a wire is sent from the lender, please note that the wire must work its way through the Federal Reserve. This process can take up to several hours. The loan officer confirming that the wire has been sent is not the same as the wire actually being received by the closing attorney. Only the closing attorney will know if the funds have made it into the attorney’s account.
If your client has questions or concerns about the length of time to fund after closing, it is best to ask the closing attorney for an explanation as to the status. Just last week a borrower asked me why the attorney who closed the sale of his house disbursed shortly after closing while this closing was taking more time. After explaining the process, the borrower understood that disbursing the loan has more to do with the different lender’s funding requirements and timing than it does with the closing attorney’s processes. Educating the client about funding and possible funding delays will help ensure happy clients at closing.
Today’s historical fact: Not much is known about the naming of Devine Street. Several maps of Columbia show the street spelled “Divine”. Many historians surmise that street was named for the cotton bloom as it was considered “divine” due to its critical importance to the South Carolina economy. Blossom Street was also named honoring the cotton industry.
I hope everyone has a safe and blessed holiday.
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