Dry Funding State vs Wet Funding State
Post date: Mar 22, 2012 6:8:18 PM
Both wet and dry funding pertains to the variable periods as soon as the mortgage is considered closed when a new buyer can take ownership of the property.
"Wet payment laws" demand that lending banks pay out funds during a particular period of time as soon as the closing date of the loan, which may vary according to the specific state where the mortgage was taken out. Disbursement times may differ depending on the state where the mortgage took place and can range from the date of closing to within two days afterwards. Intentionally made-up to shield the consumer versus bank fraud, these laws prevent lending banks to postpone funds dispersal as soon as the required papers have been signed.
The terms "dry funding" and "wet funding" are slang and refer to the state where the funding was started. "Dry" states refer to those states where the paperwork required to officially close a loan does not need to be concluded on the day of closing. All the necessary documents required to close the loan should be ready and approved at the time of closure when dealing with wet funding regulations.
Alaska, Arizona, California, Hawaii, Idaho, Nevada, New Mexico, Oregon and Washington are regarded as dry funding states and all the others are as wet as they come. A dry closing happens for the benefit and convenience of both the buyer and the seller and is actually not a closing at all. No money is distributed and the parties convene only to sign documents.
The legitimacy of the sale is assured with dry funding and no fake activity can happen. With a wet loan, there is more risk, the transaction moves a lot faster and the property seller gets money either right away or very soon after the sale. With the sale occurring before the paperwork is completed the convenience and speed must be thought of against the clear probability of real estate fraud. The documentation up for evaluation in the case of a wet loan is received as soon as the funds have been disbursed, kind of like that old saying about putting the cart before the horse.
You can understand the difference between wet and dry funding by doing research on these matters. Approaching house loans with caution is always the best protection from bank fraud.