Home buyers and refinancers applying for a mortgage are being caught off guard in what all lenders are asking for when approving a loan.
The Wall Street Journal reports an incident where a borrower was even asked for a copy of her divorce decree â€” from two years ago â€” and asked to explain a deposit of about $200 into her bank account when applying for a mortgage.
Lenders are being more careful in who they issue a loan to nowadays, tightening underwriting standards and carefully documenting applicantsâ€™ finances and ability to repay the loan.
Practically nothing is off the table these days when it comes to what a lender may ask for. Lenders may question any deposits to bank accounts, increases in a borrowerâ€™s income, and any disputed balance over a late payment, even if it was from years ago. Some lenders are even requesting college transcripts and diplomas in verifying employment history.
Any credit inquiries on a personâ€™s credit invites red flags and more questions from lenders, Rhonda Porter, a loan officer in Seattle, told The Wall Street Journal.
"I have customers who know they're a strong [borrower], and they're still asked for documentation," Porter says. "Some of them get their feathers ruffled."
Some borrowers â€” particularly refinancers â€” are getting so frustrated by the extra paperwork and questions that they are increasingly just stopping the process, according to news reports.
Stella Adams, a fair housing advocate in North Carolina, says banks need to lighten up. Banks should return to "solid, old-fashioned underwriting" standards that were used prior to the housing boom and stop making it so difficult for people to get financing.
Source: "Lenders Want to Know Everything," The Wall Street Journal (May 12, 2012)