Cross-collateralized transactional funding on a double close: who has actually read the security instrument before signing

The distinction between wire-delay-caused-by-title and wire-delay-caused-by-buyer matters more than most people realize, because the cure language in better-drafted instruments ties the penalty trigger to "funds not received by lender" regardless of whose fault that is. You are the borrower on the A-to-B leg, so the lender's remedy runs against you whether the delay originates with your buyer, their lender, or the receiving title company's wire cutoff window. The structure where this risk is smallest is a true same-day double close in a state where the two legs can be sequenced within a single closing session, because the B-to-C wire can be confirmed before the A-to-B disbursement fully settles, compressing the exposure window to hours rather than overnight. The structure where it is largest is a next-day close in a state that requires the A-to-B deed to record before the B-to-C leg can open, because you now have an overnight gap where the recorded lien is live, you have no legal interest in the property, and any wire disruption on the buyer's side lands entirely on your exposure under that penalty clause. What I would want to know before signing is whether the security instrument contains a force majeure or title-company-delay carve-out, and whether the transactional lender will put an agreed maximum penalty cap in writing as a rider, because the term sheet almost never addresses it and page six almost never caps it.

The assumption you are naming is the right one, and most operators never get to page six.

A few structural points worth adding to what you laid out.

The wire timing risk is asymmetric by party. Your transactional lender's clock starts when their wire leaves, and their remedy clock is not synchronized to the title company's disbursement schedule or the receiving bank's processing window. Fedwire has cutoffs. If the B-to-C closing falls on a day where the receiving institution processes same-day wires on a cut before 4pm local, a late submission by the end buyer's attorney becomes a next-day settlement regardless of who is at fault. The security instrument almost never cares about that distinction. The default and cure clause typically reads against the borrower on the clock, full stop.

The per diem penalty structure is the part that compounds the problem. Two points on a 1.6M transaction is $32,000 in transactional funding cost already. A 1.5 point per diem penalty does not mean 1.5 points annually prorated. Confirm with your lender in writing whether that per diem figure is applied against the original loan principal or the outstanding balance after partial settlement, because the language varies and the difference on a multi-day delay is material.

There is also a title insurance angle that your post gestures at but does not fully land. If the lender's lien does not release before B-to-C closes, some title underwriters will not insure the end buyer's title position clean, which gives the buyer's attorney a legitimate basis to pause or renegotiate. At the 1.6M price point, that conversation gets expensive fast.

The risk you have not mentioned is the transactional lender's capacity to extend at all. Some instruments include an election clause where the lender can demand full payoff rather than extend at penalty rate if the delay breaches a defined cure window. That is the scenario where you are personally liable for a gap that your end buyer created.

Does your security instrument define a cure period with a specific hour count, or is it written against a calendar day with no intraday precision?