When Lisa, Natalie or I represent buyers we refer them to experienced mortgage lenders or mortgage brokers.  When I represent the home seller, I don’t have direct contact with the buyer and am only able to talk with the buyer’s lender.  I ask questions; determine loan progress (or lack thereof).

Recently it seems that incompetence inexperience is plaguing much of the mortgage industry. Three recent examples:

1)   ISSUE: Buyer is employed by a family member.  Loan processor does not notice that the verification of employment (VOE) was signed by someone with the same last name as the buyer. Once the file is forwarded to the underwriter for final loan approval, in addition to paycheck stubs and the W-2 already in file, the underwriter requires two years of tax returns.  Now the underwriter decides to average income over the last two years. 

RESULT: Buyer with 800+ Fico and a little over 20% down must now increase his down payment.  (Even though the buyer is salaried as verified by W-2, tax returns and paycheck stub) averaging the last two years tax returns have resulted in a lower figure being used than his present salary.

GOOD NEWS: We closed escrow and the buyer will be painting and then moving in.

2)   ISSUE: Buyer owns four rental properties. Buyer completes loan application which notes that buyer owns four rental homes and that the buyer’s existing residence will now be a rental.  Weekly, I phone buyer’s lender for loan status.  I am told that there are no problems and that the buyer’s debt to income ratio is only 11%.

RESULT: Under a recent FNMA rule, buyer’s reserves and down payment requirements are more restrictive.

Good News: Buyer increased his downpayment to 25% and will be closing escrow this month.

3)   Issue: Buyer is currently a tenant and submits loan application to lender.  Weekly I phone the buyer’s lender for loan status.  After several weeks in the loan process I am told all that is needed is the appraisal.  Appraisal is finally received. BUT the loan processer never followed up on verification of the buyer’s rental history.   (This buyer also had FICO’s of over 800).  

RESULT:  Now after waiting over a week for the appraisal, the approval was stalled while the buyer frantically searched for bank statements to verify that he has paid his rent on time.

Good News:  Buyer is closing escrow next week.