Consumer complaint received 2023-07-09 00:00:00
Product: Mortgage — VA mortgage
Issue: Closing on a mortgage — 
Company: NAVY FEDERAL CREDIT UNION
State: NY

Complaint narrative:
My wife and I closed on our home in XXXX, NY on XXXX XX/XX/2023 with XXXX XXXX. At the time of closing the landscaping was incomplete, which included ; final grading of the lot for positive drainage within 50 feet of the home, power/auto raking of the lot in preparation of grass, adding of on-site top soil, and installation of a starter lawn via hydro-seeding within a 50 foot perimeter of the home. 

Closing before the home is 100 % complete is allowed by the XXXX XXXX  XXXX XXXX as long as the XXXX XXXXXXXX XXXX XXXX VA XXXX XXXX ) XXXX XXXX Section XXXX is followed by the lender. The section limits the types of incomplete work to walkways, driveways, retaining walls, exterior painting, landscaping, and garages. The XXXX  permits this work to be postponed along with an escrow of funds necessary to complete the work later. The lender must withhold 1.5 times the dollar amount necessary to complete the postponed items ( as estimated by a third party ) from the proceeds due to the seller at closing. 

Lenders are not required - but are still permitted- to withhold funds in escrow if the work is limited to the installation of landscaping due to inclement weather, the estimate of the cost to complete the work is not greater than {$2500.00}, and there is assurance that the work will be completed timely and satisfactorily ( 90 to 120 days ). 

During the weeks leading up to closing on our home, Navy Federal failed to follow the guidance as outlined within the XXXX XXXXXXXX XXXX which has now led to us having to contract the incomplete work to a third party in excess of {$10000.00}. Navy Federal sent an e-mail to the seller/builder on XXXX XX/XX/2023 stating that an escrow hold back would not be required if the cost was under {$2500.00}. The seller/builder responded the same day stating that seeding is typically a {$700.00} hold back with the town. Navy Federal used this as the estimate to forgo establishing an escrow hold back despite knowing that the work to be postponed included more than seeding, as outlined and explained by the VA 's XXXX, and against VA guidance of using a third party estimate. Additionally, XXXX XXXX failed to perform any due diligence to verify a hold back with the town was established to provide assurance the work would be complete within XXXX to 120 days, or use alternate means ( such as use of VA XXXX XXXX ) to establish adequate assurance. It was later discovered that there was no hold back with the town, and we are currently at day XXXX post closing with the work still not completed. 

I have worked for the past few months with Navy Federal and the VA in an effort to get the builder to complete the contracted work. However, since Navy Federal failed to follow the escrow requirements for postponed work, there is no leverage over the builder to get the work completed - other than the VA 's rights to sanction program participants. The VA has since sent ( around XXXX XX/XX/2023 ) the builder a Limited Denial of Participation for failure to follow VA XXXX XXXX requirements and is sending the loan to their central office for review for noncompliance ( around XXXX XX/XX/2023 ). The central office will determine if the noncompliance was egregious enough to warrant retraction of the VA XXXX XXXX - this is because per XXXX  XXXX Section XXXX, it is the lender 's responsibility to ensure the work is completed. 

Although the builder/seller is not faultless in this, it is Navy Federal 's failure to follow the XXXX XXXX  guidance and obtain a third party estimate that has led to the additional cost of over {$10000.00} to have the work completed. Had Navy Federal received a third party estimate they would have found that seeding alone would have cost over the {$2500.00} maximum to forgo an escrow. This would have led to roughly {$15000.00} being held in escrow which would have leveraged/encouraged the builder to complete the contracted work - or to be used to pay another XXXX to complete the work. Additionally, it would have prevented hours and hours of personal time being spent trying to correct this issue over the past months, and hours of XXXX  personnel time working with the lender and builder. 

Please see attached email threads for additional information.

Company public response: Company believes it acted appropriately as authorized by contract or law
Company response to consumer: Closed with explanation