Although I am now VP – New Media and Education for Chicago Title Agency, in my recent past I managed a branch operation for the company for ten years. During those ten years, I witnessed thousands of different HLDE’s (Hectic Last Days of Escrow). A quick disclaimer – I am writing about residential real estate transactions in Arizona. Each state has their own rules.
It is important to note that 90% of the work on an escrow file occurs in the first few days after opening and in the last few days before recordation. There is calmness to a file a couple weeks out from closing. It would be great if this work could be evenly spread throughout the escrow period, but like the excitement of an NBA regular season game, it all happens in the last two minutes. Or for escrow, in the HLDE.
There is no way to change this. Arrival of the loan documents signals the HLDE. In a perfect world, the loan documents arrive 3 days prior (or better yet, earlier) to close of escrow. This is required in the AAR Residential Purchase Contract. Unfortunately, circumstances arise that delay delivery of the loan documents to escrow a large percentage of the time. Please note that the lender is not always responsible for these delays. The number one culprit is the borrower. They need to get documentation to their lender quickly.
(Sidebar – If you are a lender that delivers loan documents 100% of the time to escrow on time, scream that message from the top of every brokerage in the valley!)
The delayed arrival of the loan package to escrow guarantees a more tension filled HLDE. It can’t be helped. The buyer wants to move into the house. The seller (or bank in the case of a short sale) wants their proceeds. Both agents want to close so they can be paid. Same for the lender. And all this pressure reverts to the escrow officer. By the way, escrow officers are paid to handle this type of pressure. Some are very good at it. In fact, a few are so exceptional, agents and lenders never know how much stress they are under. These are the superstars. If you find one, hold on to that escrow officer.
My reason for picking this topic for this post is to let you know what happens during the HLDE. I also want to suggest one tiny edit to a phrase uttered by loan officers all over the valley every day that can help reduce the stress and tension of most HLDE. I’ll get to that sentence in a minute. First, the HLDE timeline.
Upon arrival of the loan package, the escrow officer must read the entire set of loan instructions. These vary for each lender, and can be anywhere from 4 to 25 pages long. Escrow officers must follow these instructions to the letter, because if they don’t, the lender can file a claim on their ALTA policy and seek the entire amount of the loan. This happens more than you think.
After reading the instructions, the escrow officer prepares the pre-audit, or preliminary HUD-1. This is then sent to the lender, buyer agent and listing agent for approval. This is an important step. Everyone needs to approve the numbers. Once approved, the buyers and sellers are scheduled for signings. By the way, by lender I mean the funding department or document department, not the loan officer.
Once the signatures are obtained, the loan package is prepared per the lender’s instructions and either scanned or delivered for funding. Escrow also prepares a recording package with all the recordable documents as well as instructions for the title department regarding recordation of the file. (I just used recording in one form or another three times in one sentence! Awesome!)
After reviewing the loan package to make sure escrow complied with their instructions, the lender ( once again, not the loan officer) either calls or emails a funding approval to the escrow officer. Funding is not to be confused with the receipt of the lenders funds. Funding is simply the funder and escrow officer agreeing on the amount the lender will be forwarding to escrow. The funder then requests a wire to be sent to escrow, and upon receipt of the wire, the escrow officer instructs the title department to record the file with the County Recorder. Whew! Buyer now gets the keys and seller gets the proceeds!
As you can see, a lot of work is crammed into just a few hours of a typical thirty day escrow. Combine that with the fact that a good escrow officer closes between 30-50 files a month and you can see why I’ve called it HLDE. I do, however, have an idea or two that can help ease the tension associated with HLDE. It involves setting expectations properly.
Here is my idea: (excuse me while I climb my soapbox)
Nearly every lender will call the buyer agent (and usually the listing agent) as soon as docs are delivered to escrow. They usually say something like “The loan docs are at title”, or maybe “The docs are now at title so we can get buyers in to sign.” While both of these statements are true, I feel they are incomplete. We learned above that a lot of prep and approval is needed before escrow can schedule a signing. My mission is to get lenders valley-wide to append their phone call in the following way. “Loan docs are at title, so in a couple hours or so you should be receiving a pre audit to review and approve so we can get the buyers in to sign. We are expecting one as well, so we will make sure everything is good to go.” As I mentioned before, it’s all about setting expectations. Reasonable expectations.
I will try not to sound like a grumpy old man, but that is getting more and more difficult (probably has something to do with me getting older). Countless times in my branch we would receive docs at 4:45 in the afternoon and the lender would insist on the buyer coming in at 5pm to sign. Really? This is the most important financial transaction in our client’s lives and we are supposed to rush through the prep process? I don’t see how we are serving the clients interest when we do that. As a branch manager, I’ve done many things to get a deal closed. Drive to Marana to get signatures from an inmate. Memorize all the FEDEX pickup times from Mesa to Sky Harbor. Meet a client for signatures in the hospital. And I know many other escrow officers that have done the same types of things. However, rushing through the prep process while clients wait in the lobby is just not good business.
So, in closing, let’s consider my request. Let’s all work together to make sure our buyers and sellers are taken care of professionally. Let’s work on setting each other up for success, which will lead to future successes. And while we’re at it, we can ratchet down the stress of the dreaded HLDE just a bit…