Legal Question in Real Estate Law in Texas

During the course of a refinance with a cash out option, my husband signed and submitted the 4506 Tax Transcript Request document on May 24. The week prior to closing, the loan officer verbally indicated that it was the loan processor's duty to submit this to the IRS. However, sometime between the emails I received from the loan processor dated June 17 and the date we closed, June 22, the loan processor went on vacation and was not in the office. The loan officer later told me that another processor was "picking up the slack while she's on vacation". Apparently, first, it seems that the first processor dropped the ball on not submitting that request to the IRS within the previous month, and second, the IRS kept kicking back the 4506 form, as there was a discrepancy with the address. I remained COMPLETELY unaware of this issue until the loan officer called me, either the Wednesday or Thursday prior to June 22 close date, to confirm whether my MAILING address, or my PHYSICAL address was used on the last tax return. They have had BOTH addresses since the beginning of this process, but only the physical address was used by the second processor.

My husband signed the closing paperwork on June 22 at 4pm. The escrow officer we dealt with and the paperwork that we signed said that our 48-hour recision period expired at 4pm on Friday, June 26. It also stated that we would be funded on Monday, June 28, and wired approximately $2600.

At around 3PM, about an hour before the scheduled closing time, on June 22, my husband received a phone call from the second loan processor, stating that they needed the most recent tax return, as well as a signed letter from him, stating that I was the recipient of unemployment benefits during the year 2008 (which must have showed on the TAX INFO, since I had not disclosed my earnings because I'm NOT on the loan!). It was at that time that he asked if we should still even GO to closing, since apparently they still needed some last minute information, to which she told him "yes, go on and do the closing, but I need to have this information to get you funded". Never having dealt with anyone but the loan officer, I called her on our way to closing to verify that this information was needed, and she confirmed that it was necessary to complete the entire transaction. Furthermore, I was concerned about the phone call my husband received, and I asked the loan officer if we should proceed with closing in about 5 minutes, to which she replied "yes, otherwise we'll have to draw all the documents again". So, I scanned and emailed both requested documents on June 23.

The morning of Monday, June 28, my husband verbally OK'd the transaction to move forward as planned, with the rep from the title company. Just near 4pm on June 28, he received a phone call again from the title company, who told him that although she had sent emails "every hour on the hour" to the loan processor throughout the day attempting to learn of the status of the funding, she received several emails back from the loan processor stating that she was waiting for her manager to approve the funding, and offered no further information. The escrow agent from the title company told my husband that even though we were scheduled to fund on June 28, the funds would not be wired into our account. He asked about receiving funds the following day, and she simply replied "there is no guarantee".

I immediately called the loan officer (the only person there that I have directly spoken to) at about 4:15. At that time, she said that she was not aware of any problem preventing funding, but would find out what was going on and call me back ASAP. The loan officer called me back at 630pm and told me this time that the option to do the refi with cash-out was no longer an option, because:

1. the tax return that I provided to them on June 23, as requested, showed an "unreimbursed business expense for $1806.00". I explained that this amount was claimed on our taxes as expenses that were required for my husband's employment, such as mandatory uniform cleaning (which is also itemized on paystubs!), work boots, and other miscellaneous costs. She told me that the $1806 amount was divided by 12 months, which averages to about $150 per month that must be DEDUCTED from his gross income, thereby increasing his debt-to-income ratio from 35% to 46%.

2. The loan officer told me during this conversation that we would no longer qualify for the $144k loan with $20k cash-out, and that this type of refi would no longer be an option, due to the debt to income ratio increase. Now, the absolute ONLY way they would be able to "make this work" was if the previous contract (the one we JUST signed on June 22!!) was null and void, and we now would only be eligible to do a "rate and term refinance", for which she emailed me yet ONE MORE detailed mortgage estimate, to estimate approximate costs, etc.

The email I received from the loan officer, on May 28 (nearly a month BEFORE closing!), stated that she got the approval for the loan of $144k. No conditions were mentioned then, nor were any conditions set forth in our closing paperwork, or at any time in between, which would have indicated a provisional extension of credit.

We elected to proceed with a cash out option of $20k. Using approximately $13,500 of our cash out funds, the lender was requiring that the credit card and my car loan were paid in full. The credit card payment was due on June 25. Because payment in full was expected on this account on June 28, the monthly payment was not made. Additionally, expecting that the funding would be wired into our account on June 28, other payments had been made toward past due office visits, groceries, etc. The CURRENT mortgage payment is due on July 1, and although I have never been late on any mortgage payment, this time, the funds will not be available in my account, as this loan was also supposed to be paid in full. On top of all that, my husband had to miss work to sign closing loan documents - for nothing. I feel like we are being severely penalized for the mistakes the lender/mortgage company made.

Please, PLEASE help: did the lender violate any part of the contract (or extension of credit) in all of this? Was it not the responsibility of the lender/underwriter to ensure that ALL of the documents had been carefully reviewed, including the tax transcripts and/or tax return, PRIOR to approving the loan? Is there any way that the lender or mortgage company can be held legally responsible for any of this? Are the lenders the ONLY parties that are protected after closing on a loan? Are the borrowers of such a transaction given ONLY a three day right to rescind, but the lenders can rescind at any time, even six calendar days after the borrowers signed the closing documents? Should I seek counsel, or at least advice? If so, are you able to refer me?

Any help you might possibly be able to provide would be wonderful! Thank you!!!!!

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