Okay have a problem with one of my buyers agents scheduled closings.

Buyer paid 2,500 in Earnest Money funds held in my company escrow.

Lender comes back 1 week before closing and says problem with earnest money.Buyer paid with cashiers check at their bank to send in Earnest Money.

They didn't pull out of bank account so lender wants a paper trail thinking it's a hidden loan.Instead buyer had a settlement and paid cash from that.

Now lender wants me to refund EM out of escrow to give a refund at closing and have buyer show a new deposit with a paper trail. We don't think the HUD closing attorneys will go for this.

The government has made the residential side such a headache now!

Opinions appreciated. I am calling closing attorney tomorrow to discuss as well as the lender.

That is just plain stupid. Tell me, is it an FHA loan or conventional? Of course, HUD is not going say ok to this, never..

FHA 203B

Well..they should know better...

You know, it just makes you go hmmmmmmmm....who is watching the store??

I have had FHA lenders wanting source of all deposits into the buyer's account. It was fun when they had to explain about a $1,000 that was deposited from relatives as birthday gifts. We had to get a gift letter from a relative for the amount that was deposited and also show a canceld check that it cleared the parents bank account.

Be careful of "ANY" deposit and or withdrawl and make sure the buyer's are able to document everything. If they get checks that they are depositing make a copy of the checks, and or keep a stub.

PS My one buyer cashed in some change they save thoughout the year and they use that for a family vacation. Lender wanted an LOE for this deposit that took place 3 months before closing.

The lenders right, No paper trail. If the cash from the cashiers check came from the buyers bank account there wouldn't be a problem, paper trail would exist on their bank statement.
The refund trick may not work. Better just to have buyer write new personal check to seller, give them back the first check.