Found an issue on this page? Let us know and we will look into it as soon as possible.
Can a builder compel me to use an affiliated lending company because I signed a lender switch addendum ?
Anonymous3 views2 answers
In Nevada, the builder's lending arm proposed a loan estimate to get my business and I signed a lender switch addendum within 30 days from the close of escrow. Shortly after a retail bank, that I had already been working with previously on the same mortgage, offered a better rate and overall proposition to get me back on board. the builder says they would not accept a lender switch because we are 2 weeks away from close of escrow (apparently they do not do lender switches within 30 days of close escrow, even though they did for their own affiliated lending company). However, the retail bank does have all the information and states that they can close on time. Can a builder refuse my loan if I sign the loan documents with a bank different from the one in the addendum? what is the best course of action to take advantage of the best overall mortgage proposal even though it is not in line with the lender addendum switch?
The seller of a home, under federal law can NOT force you to use a preferred or associated lender as a required term of the sale; the CFPB would have a field day with such a builder.
However, if you have already agreed, depending on the terms of the contract, they can contractually stop you from changing midstream. It depends on the contract you have with the builder, and the terms it contains.
With that said, people violate contracts all the time, and still conduct the underlying business. The next question is, if you violate the contract and switch lenders, is this a material breach of the contract? As the primary goal of the contract is to ensure the successful sale, and an ultimate on-time close; if you were able to close on time with another lender, and they refused to allow the close simply because you changed lenders, they would likely lose a breach of contract action and, under specific performance, the court would order the seller to close the transaction.
The key problem is litigation is expensive and time consuming. Yes, it is possible to force their hand, a good real estate attorney can tie up the property, and make it where, during the litigation, they could not sell the house to anyone else... So then they would likely capitulate.
On the flip side, then seller would all but certainly refuse to give you any lending related concessions they had promised for using their preferred lender, i.e. closing costs, assistance with real property transfer taxes, free appliances....
So yes, they can refuse to allow the change, and yes, you can likely defeat that refusal, but at what cost? I recommend taking to an attorney that can help you evaluate the situation.
