Court Opinion

ID: 5648149
Source: CourtListenerOpinion
Date Created: 2022-01-11 07:05:37.021096+00
Date Added: 2024-06-11T08:38:26.684076
License: Public Domain

Blackburn, Judge,
concurring specially.
I concur fully with the majority opinion, as it accurately reflects the current state of the law. However, I write separately to express my concern about the inequities resulting from an application of the law to the business of real estate loans as generally practiced.
OCGA § 13-5-30 was amended in 1988 to require that “[a]ny commitment to lend money” be in writing in order to be enforceable. OCGA § 13-5-30 (7). As discussed in the majority opinion, case law establishes that, unless agreement is reached on all terms and conditions and nothing is left to future negotiations, a purported agreement is merely an “agreement to agree” and is unenforceable. Bridges v. Reliance Trust Co., 205 Ga. App. 400, 402 (2) (422 SE2d 277) (1992).
In residential loan transactions, a prospective borrower will either deal directly with the lender or, as in the present case, utilize a loan broker who undertakes to obtain a loan from a third party. In either case, the borrower is typically induced to submit a loan application by the lender’s or broker’s representation that doing so will “lock in” an interest rate for a period of time. The “lock-in” documents rarely contain more than the interest rate, the term of the loan and the period for which it is “locked in.” It would no doubt surprise many borrowers to learn that, under the current state of the law as reflected in the majority opinion, few “lock-in” agreements could be enforced. As such lock-in agreements do not constitute a commitment to lend money, under the present law, the borrower has no enforceable rights under his “agreement.” This is true even if the borrower is approved for the loan and totally performs his obligations. The borrower often does not learn of this fact until the time of closing when it may be too late as a practical matter to seek another lender or refuse to close.
Similarly, once a borrower has submitted all required documentation, he often receives a letter from the lender or broker informing him that he has been “approved” for the loan at a stated rate and *403term. However, unless these approval letters contain the additional terms of the loan, they are unenforceable as commitments to lend money under the present law.
Decided January 13, 1998
Reconsideration denied February 2, 1998
Morris. Schneider & Prior, Larry W. Johnson, for appellant (case no. A97A1740).
Stephen J. Sasine, for appellant (case no. A97A1741).
Gregg Loomis, for appellees.
It should be noted that the borrower’s reliance upon the largely unenforceable “lock-in” agreement has very real consequences to the prospective borrower and the seller. A “lock-in” agreement obtained at the time of loan application induces the borrower to refrain from seeking financing from another source. An “approval” letter assures the borrower that the promised funding, with the agreed upon terms, will, in fact, occur and induces him to take no further action prior to closing. In addition, as in the present case, such a letter is often addressed “To Whom It May Concern” and is intended to assure the seller that the borrower will be able to perform at closing.
The fact that these agreements are usually totally unenforceable should concern all parties, particularly since they are generally understood to be “agreements” and are often couched in binding language. The law, as it stands, invites fraud and abuse on the part of unscrupulous lenders and brokers. This Court, however, must apply the law as it stands, and only the legislature is authorized to address this problem.