Arizona Licensed Mortgage Companies Completing and Signing the Pre-Qualification Form and the Loan Status Update Form

The Arizona Association of Realtors (AAR) has prepared a Pre-Qualification Form and Loan Status Update form for its member real estate brokers and their agents to use in conjunction with its standard real estate purchase contract.  The real estate agent requests that the loan originator sign these forms and the forms contain signature lines specifically for the loan originator.  The purchase contract prepared by the AAR requires the buyer to have a lender provide loan status updates to the seller and the real estate agents involved in the transaction using the specific Loan Status Update form.

One issue of concern is that the forms are drafted for signature by the loan originator.  Many mortgage companies would prefer to have personnel in the underwriting or processing areas prepare and sign these forms and to have a person of authority at the mortgage company approve or oversee the preparation of these forms.  As a loan originator is an employee of the mortgage company, and its agent, in most cases he or she would have the authority to bind the company if he or she signs this form.  Mortgage companies licensed in Arizona should develop and implement a policy as to whether they will use these forms and who is authorized to prepare the forms and approve them for signature.

Another area of concern is that the buyer is contractually obligated to have a lender prepare the Loan Status Update form in the format drafted by the AAR which includes the signature by the loan originator.  If a mortgage company wants to make a change to the form, arguably even changing the signatory, an amendment to the purchase contract would be necessary.

In addition, the Pre-Qualification Form obligates the lender to provide loan status updates using the Loan Status Update form within ten (10) days after contract acceptance and upon request thereafter.   Using this form creates another calendaring obligation for the mortgage company.   In addition, a loan originator could sign this form and create this timing obligation and not inform the employing lender.

Moreover, if mistakes were made in completing the form, a party to the transaction could allege misrepresentation by the lender and file a civil action for damages in particular if the sale of the home did not close.

Real estate agents clearly want mortgage companies to agree to using these forms.  The forms are prepared by their trade association, the Arizona Association of Realtors, and many employing real estate brokers instruct the agents to use these forms.  Some agents have expressed to loan originators that there is a law requiring the use of the forms, however, this is not the case.  However, some mortgage companies are refusing to use these forms.  The risks and benefits of agreeing to using the forms should be fully explored and considered.

If a company decides to use the forms, I would suggest a policy be created as to the approval process for preparing and signing the forms so that loan originators do not sign them without the proper authorization or without the knowledge of the employing lender.   If a company decides not to use the forms, the loan originators should be instructed not to sign the forms as they will be approached directly for signature.

2018-01-16T23:03:11+00:00January 16, 2018|