The Conditional Loan Approval (CLA) is now know as the Loan Status Report (LSR effective May 2005

The Arizona Association of REALTORS® (“AAR”) Conditional Loan Approval form (“CLA”) has been revised and renamed to correspond with the newly-revised AAR Residential Resale Real Estate Purchase Contract (“Contract”). The CLA is now called the “Loan Status Report” (“LSR”). The LSR was drafted in large part by a group of volunteer mortgage brokers/bankers to more accurately reflect the lending process. After the workgroup completed a draft, the LSR was sent to the AAR Contract Steering Group, the AAR Large Forms Group and ultimately to the “loop,” which included individual lenders and lending organizations, for comment and feedback. The new AAR Contract, which requires the use of the LSR, will be available for use after May 2005. Thereafter, the LSR describing the current status of the buyer’s proposed loan should be included in virtually every offer to purchase resale residential property involving financing, even if the buyer has not consulted with a lender. The Buyer’s Loan Information Section The buyer will complete the first section of the LSR, which addresses purchase price, loan amount requested (both first and second, if applicable), loan to value, combined loan to value, term of loan, interest rate, loan program, and occupancy. The buyer is also asked to indicate whether the buyer is relying on the sale or lease of a property to qualify for the loan. Finally, and most importantly, the Buyer is asked whether the Buyer has had the opportunity to consult with a lender. The Lender Pre-Qualification Section If the buyer has consulted with a lender, the lender is asked to answer “yes” or “no” to the following questions: Whether the Lender has completed a verbal discussion with buyer for the specified loan strategy, and based on information provided and a Trimerged Residential Credit Report (“TMRCR”) the buyer is pre-qualified.   Whether the Lender has received a completed written signed Application/1003, and based on the information provided and a TMRCR the buyer is pre-qualified.   Whether the Lender has received and reviewed a written signed Application/1003 with all requested disclosures and supporting documentation, and based on information the provided and a TMRCR the buyer is pre-qualified.   Whether the Lender has provided the buyer with a Good Faith Estimate. If the answer is “yes” to any of these questions, the lender is asked to indicate the date the action was accomplished. Loan Status Update (“LSU”) The LSU is a companion form to the LSR. In the Contract, the buyer authorizes the lender to provide loan status updates to the seller. These updates may be provided on the LSU form. The LSU is divided into three sub-sections: Documentation, Underwriting and Approval, and Closing. The first sub-section asks whether the lender has received the Contract and whether the appraisal has been ordered or received. (Note: The buyer has five days from notice that the property did not appraise for the sales price to cancel the Contract or waive the appraisal contingency). The Underwriting and Approval sub-section asks whether the lender has obtained loan approval with or without prior to doc conditions. The Closing sub-section addresses closing documents and prior to funding conditions. AAR Contract Loan Contingency and Related Financing Provisions The Contract is contingent upon buyer obtaining loan approval for the loan described in the LSR without conditions on or before close of escrow. If the buyer fails to obtain loan approval without conditions, the buyer is obligated to deliver a notice of the failure to obtain loan approval without conditions to the escrow company no later than the close of escrow date. The Contract also provides that unless previously completed, the buyer must deliver a completed loan application to the lender with requested disclosures and documentation; grant the lender permission to access buyer’s TMRCR; and pay all required loan application fees within five (5) days after Contract acceptance. The buyer is also obligated to diligently work to obtain the loan and promptly provide the lender with all additional required documentation. The buyer must immediately notify the seller of any changes in the loan program, financing terms, or lender described in the LSR and may only make any such changes without the prior written consent of seller if such changes do not adversely affect buyer’s ability to obtain loan approval, increase seller’s closing costs, or delay closing. The Contract requires the buyer to sign all loan documents three (3) days prior to close of escrow. This requirement was added to the Contract in an effort to insure that the funds can be ordered and delivered to the escrow company by the close of escrow date. Benefits of the LSR From a Mortgage Broker’s Perspective Anna Bowers with Freedom Financial & Mortgage Services Corporation writes: “The Loan Status Report will be an essential tool for the seller and his/her agent to determine the suitability of the prospective buyers on said property. It will keep the seller current on the lender’s process with the seller and allow him/her to see which buyer seems to be more motivated about the purchase. Furthermore, this will be used as a means for the lender to show the seller how prompt their service is.” The LSR and LSU are available on the AAR Website These two new forms will be available in the near future at no cost on the AAR website in a fillable PDF format.  AAR would like to acknowledge and thank the members of the workgroup that drafted these forms: Richard Blair, Anna Bowers, Jerry Craig, Deborah Lange, Kelly Powers, and Amy Swaney. Michelle Lind is general counsel to the Arizona Association of REALTORS® (“AAR”), a professional trade association representing approximately 40,000 real estate brokers, agents and other individuals involved in the real estate industry. Prior to joining AAR, she spent ten years in private practice. Michelle received her undergraduate degree from A.S.U., graduating summa cum laude, and her Juris Doctor degree, graduating cum laude, from A.S.U. College of Law. She is a State Bar board certified real estate specialist.