Home Buying in 92129>Question Details

Iting47,  in 92129

Lender requests me to refine. my current condo where I am living in into a non-owner occupied mortgage, do I need to do that??

Asked by Iting47, 92129 Sat Apr 28, 2012

I am purchasing a new home. And I just did a refine on the current condo with owner occupy rate to bring down the mortgage, so that I would qualify the loan for the new house. Do I need to refine my current residence to a non-owner occupied mortgage? The thing is I am still living in the current condo, and the lender request me to refine it to a non-owner occupy mortgage. Is it legal?? It does not make sense to me. Please let me know if I have to follow lender's request?

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Irina Karan’s answer
No one can make you do anything. However, if you are buying a new property and that one will be owner occupied, then you have to choose the property where you'll be residing as your principal residence. You shouldn't be owner occupant in both.

I think that's what they meant, and they are right that all should be legal.
But, they can't "make" you do that. You have to choose where you'll be the resident and they (mortgage people) will need to work with that, even though it might leave you without a mortgage.

Hope this helps,

Irina Karan
Beachfront Realty, Inc.
IrinaKaran@gmail.com
1 vote Thank Flag Link Tue May 8, 2012
In response to your second post...

It does make a big deal as some underwriters and the lenders 'rules of the road' say that you cannot refinance with the intent of being an owner occupied when you clearly wanted to rent out the condo as you stated in the second post. I am assuming you refinanced fairly recently.

Intent is the problem and borne out by the MERS report. Here's what your current lender should have told you rather than 'just the facts': The refinance borders on possible or the appearance of 'fraud' and by refinancing 'non-owner occupant' (perception is reality in lending these days), it clears up the matter for the purchase lender. If you disclosed the real reason to refinance to your loan officer when you refinanced, this should have been told to you. Again, being an owner occupant at the time of applying for an owner occupant does not determine intent. Your current action of buying does and cannot be hidden or explained away in a letter of explanation.

Please understand the mortgage crisis has brought an overaction in underwriting policy across the board and all lenders fear having a home loan not purchased after it has closed (most all home loans are sold in the secondary mortgage market). No lender is going to go beyond the findings of MERS unless it is a portfolio lender who does not intend and never intends to sell the home loan into a mortgage backed security and there are really no portfolio lenders left.

What to do: Wait for a 'reasonable time' to pass so the refinance is no longer a concern and does not pop up as a MERS concern. Again, I don't know when you refinanced and no one knows what a 'reasonable time' is; yes, the unwritten rule that lenders don't know either. Or do as your lender says which I say is crazy to do but completely understandable from a lender's point of view and how bad you really want to buy the next home.

Take care,

Vic
3 votes Thank Flag Link Sun Apr 29, 2012
Hi Vic,
Thank you for the response.
One of my option is to wait a bit longer, too.
The downside is the we love the house and the location.
If we refuse to refi, and lender does not lend me the money, I guess this is the situation of "I am not qualify for the loan?" I want to make sure I can get my deposit back. That is the condition to get the money back.
Flag Mon Apr 30, 2012
Wow... I can't believe some of the responses and comments I'm reading.

Don't they teach you guys what mortgage fraud is in your CE/yearly training modules for your mortgage companies? I saw someone suggesting how to structure a fraudulent transaction (at least that's how it was worded), I saw someone else say you can refi as owner occupied knowing full well your intent is to make that property an investment property before the year is up despite having to sign an occupancy affidavit at closing and I've seen others who are just giving bad advice.

Please lting47, be careful about who's advice you take, this is a public forum and if you unknowingly commit fraud and it's discovered you knew and were instructed how to do it online, you're going to be in hot water and so is the person who said it.

This thread has some good information in it but your typical borrower won't have the knowledge lting47 does to determine who's giving good or bad advice (I saw some of your comments lting47, good job).

Good luck to anyone reading this thread in the future.
Web Reference: http://RobWeber.com
1 vote Thank Flag Link Tue May 8, 2012
As Vic has very eloquently stated, it is all about "intent". From your comments, it appears your intent was always to rent out the condo and buy a new property. I have never had a lender require the refinance of the existing property to a non-owner occupied loan; however, I have had a lender refuse to finance the new property as an owner occupied loan.

I wonder what your previous mortgage consultant advised you on your goal to buy a new home. Was is a topic of conversation? If not, it should have been. IMHO, immediate, short and long term goals should be examined with every finance transaction. There are strategies that could have been developed to avoid the situation you are now in. The fact remains that occupany fraud is one the biggest issues in mortgage financing and lenders are loathe to go anywhere near a transaction that possibly constitutes fraud.

I suggest you talk with a mortgage professional who can get some answers for you. I have a couple thoughts (much o cumbersome to share here); however, the fact is that you can only have one owner occupied property unless there are extremely extenuating reasons (death, medical, etc). The fact is that you may need to pick and choose which home to finance as a owner occupied home (the condo or the new property). If that is the case, it all comes down to numbers.

Again, and most important for all borrowers, CONSULT with a mortgage professional BEFORE deciding on a course of action. This situation is exactly why I am often heard stating "It is not always about rate!!!!". A discount lender or inexperienced loan officer may have just got you a great rate on a refinance; however, to coin a phrase, "you have just shot yourself in the foot". My best to you.
1 vote Thank Flag Link Tue May 1, 2012
That's ridiculous. If you refinanced as owner occupied and in fact, it was your primary residence, you are fine. You don't have to refinance anything to buy a new primary residence.
Web Reference: http://HarpSupport.Com
1 vote Thank Flag Link Mon Apr 30, 2012
My broaker is checking with the lender for my condo refi. to make sure the occupany requirment.
Flag Mon Apr 30, 2012
Unfortunately you are not correct. You must read the occupancy affidavit. It is quite clear.
Flag Mon Apr 30, 2012
Unfortunately you are not correct. You must read the occupancy affidavit. It is quite clear.
Flag Mon Apr 30, 2012
Hi,

The short and long of the answer is that lender regulations and requirements today have changed. Vic has it right in terms of why all of the new regulations have been passed. You can try to go around it by going with a direct lender to a mortgage banker for your new purchase. However, the lender on your condo may be able to claim mortgage fraud if they can show you refinanced with the intention to rent the condo and purchase a new home, regardless of the reasoning for the new purchase.

When you signed the loan docs for the refinance, they would state that this is your primary residence. It also states that you know this to be true and there are penalties if it proves to be false.

Our advice is it is to consult a mortgage compliance attorney before you move forward so you fully understand the possible ramifications of what ever you choose to do.

Best of luck,

Mark & Kari Shea
Shea Real Estate
Home Listing Specialists
Home Valuation Specialist
Land Listing, Acquisitions & Consulting
Serving Greater San Diego
1 vote Thank Flag Link Sun Apr 29, 2012
Hi Mark &Kari,
Thank you for the response.
Do you know any good mortgage compliance attorney I can try to get in touch with?
Flag Mon Apr 30, 2012
Hello,

Questions;
1. How long ago did you refinance the condo?
2. What is the purpose of your new home purchase? Is it due to your family growing? Moving?

Get back to me with these questions answered an I would be very happy to discuss the scenario and advise you.

John Georges
Senior Mortgage Banker
1-888-619-4858, ext. 12
1 vote Thank Flag Link Sat Apr 28, 2012
It looks like my office is in your neighborhood (Rancho Penasquitos).

What I believe the lender is saying is that the only way you could acquire a NEW property and declare it as your primary residence is if you were to have declared the condo as a rental property. Unfortunately, in your situation, that would be difficult to do because you are currently residing in it.

Also keep in mind that the lender for the new property may challenge whether you can declare it as your primary residence, especially if it is close to the current residence and not the same market value.

Hope this helps.

Jdeblanco@kinecta.org
0 votes Thank Flag Link Tue May 8, 2012
There is no person on this or any other planet that can force you to refinance your mortgage. Judges in divorce court cannot even force a party to refinance to get the other party off the note. As Deborah pointed out, the remedy would be that they would refuse to finance your new property as owner occupied and quote you investment property rates. If someone wanted to go after you for occupancy fraud based on your last refinance, they can surely do that as well, but that still won't force you to refinance anything.
0 votes Thank Flag Link Tue May 1, 2012
Steve,

I enjoyed viewing your website. Good luck to you!
0 votes Thank Flag Link Tue May 1, 2012
Iting47:

Two of the most important documents Escrow should have provided during your refinance are your Promissory Note and Deed of Trust.

The Promissory Note is the contract between you and the Lender where you commit to pay back the loan provided.

The Deed of Trust is the security instrument that binds the property to the lender in case you default on the loan. You should find your Deed of Trust to review what it says regarding your occupancy.

For example, I refinanced in Jan. The link below provides the page in the Deed of Trust covering Occupancy, which states, "...shall continue to occupy the Property as Borrower's principal residence for at least one year after date of occupancy...”
http://docs.Steven-Anthony.com/FannieFreddie3005-Occupancy.pdf

Bottom line:
Whether or not you must stay in your Condo for one year is a legal question at this point and you should seek a legal opinion from a Real Estate lawyer to protect yourself. Additionally, whether in fact you legally have to convert to a non-owner occupied loan per the request of the new lender in order to buy your new home is another legal question.

Moving on:
Under "J, Broker, Greensboro, NC" you have provided a comment that you are trying to buy from a Builder. Here's a very informative link why you should involve a Realtor® when buying from a Builder:
http://docs.Steven-Anthony.com/BuilderRealtorAgent.pdf

-Steve
0 votes Thank Flag Link Tue May 1, 2012
Your lender is shuffling through reported housing status variables. Depending on the status that your home is being reported determines the benefits you will get related to offered loan programs through the government or other investors of real estate transactions.

You just did a refi that more than likely cost you money, and shuffling housing products will cost you money. I would be interested to know the amount of fees you are/will be charged when all is completed. Most importantly, is your lender working within the system which comes with loop holes, or will he unintentionally breach himself and you along the way? Please let us know what happens. Good luck to you!
0 votes Thank Flag Link Mon Apr 30, 2012
Hi J,
Thank you for the response.
The refi. I just did is a no fee no cost with owner occupy rate. I did it through my agent/broaker.
The loan officer I am dealing with is with the new home builder. He requests me to refi the condo to non-owner occupy rate and put down another 10k to make the 70% ratio. and it has a closing cost around 2~3k.
Right now, I hear both voices here about his request, I will try to negotiate with him a bit.
Flag Mon Apr 30, 2012
I think your best bet is to talk to a couple of lenders to get different perspectives. I have never had a client need to refi into a non owner occupied, but it might be due to the lack of time since your refi. You might need to wait 6 months or so. If you need some lenders to talk, I have a list of really great ones. Feel free to contact me.

Thanks!
Sinead McAllister
Broker
McAllister Homes Real Estate
858-205-5215
brokermcallister@gmail.com
0 votes Thank Flag Link Sun Apr 29, 2012
What is your intention with your current condo? Do you intend to rent it out or sell it? Knowing that would help distinguish whether you have to make that change or not.

If you do intend to keep the current home, rent it out, and purchase a new one, you may well need to do what the lender suggested in order to qualify for another purchase.

When in doubt though, I recommend speaking with two or three lenders to see if it's just one lender's requuirementy or if they all say the same thing.

Good luck.
0 votes Thank Flag Link Sat Apr 28, 2012
You probably should refinance if your intention was to move. Lender data bases are quite extensive now. When you refinanced the property your most probably agreed to occupy the property for 1 year. The lenders usually catch this when you go back to the same lender or investor for additional financing. That is most probably what you did. Now to answer your original question, if you refinance the loan with the intent of moving shortly then you broke the terms of the mortgage and they could insist you refinance to a non-owner. Now if you did not know at the time of the refinance that you were going to buy another owner occupied dwelling then they have a tougher case to make. However, the burden of proof may be yours.

If the intent was to remain an owner occupant at the time of the refinance, then find out if your refinanced loan is Freddy Mac or Fannie Mae. Go to a different lender and request a loan that is the opposite of who the investor is on your loan. So if you have a Fannie Mae loan go to Freddy Mac. As long as you haven't moved, they cannot force you to refinance another loan.

Money Man
0 votes Thank Flag Link Sat Apr 28, 2012
Hi Money Man, I will check with both broaker. Hope that will work.
And I indeed still live in the condo.
Flag Mon Apr 30, 2012
congratulations on the new addition!
My lender can take care of you

Hector R. Gastelum
Realty Executives Dillon
REALTOR #01382940
hectorgastelum@yaho..com
619-954-2225
125*142*10754
efax 619-270-2516
0 votes Thank Flag Link Sat Apr 28, 2012
I can send you a couple of other lenders if you want some other opinions. One is a direct lender with in-house underwriting that can close pretty quickly, and they can find out if this can work directly from the processor, and the other is a direct lender AND broker, so they may have more options. Are you in even in escrow yet? If so, when are you supposed to close, and when is your loan contingency due to be removed?

I'm wondering why your agent hasn't given you some lenders to call!

Warm Regards,

Cory La Scala, REALTOR
Independence Realty
619-825-6421
0 votes Thank Flag Link Sat Apr 28, 2012
Hi, Cory,
Thank you for the response. Since I am buying the new home, using builder selected lender, I can get $15,000 as closing cost fee.
Flag Sat Apr 28, 2012
Hi Thank you all for the quick response and questions.
The purpose of the new purchase is for primary residence. It is a new home. I am putting down 20% and borrow 417K for my primary mortgage, and open the line of credit on the new house to cover rest of payment. The reason we purchase this new home is we just had new addition to the family, with grandparents in the house visiting, we are really out of room. Also, we like the poway school zone.

We plan to rent out the current condo after I move, since it will be big lost of money if I sell it now. When the market goes back up, I might sell it then.
The recent refine was happend in the past March 2012. I did that, so I own less at the condo and I can get the loan on the new house.

And we have good credit scores(close to 780) and never behind the mortgage payments.

What lender saying is they have to search in the MERS Report.
This report shows any new loan and then we are required to verify the details by FNMA and FHLMC.
And this report did showed the recent refine. I had on the current condo, but so what.
I don't think I need to refine it again to a non-owner occupied loan at this moment.
It would make sense if I do the refine again after I move to the new house and rent the condo out, right??
0 votes Thank Flag Link Sat Apr 28, 2012
Give me a call, I can set you up with my lender. He tells you non owner because he wants to do both loans and you can only do 1 owner occupied at a time with a lender. The loan application asks you on pg. 4 Do you intend to occupy the property as your primary residence?

Hector R. Gastelum
Realty Executives Dillon
REALTOR #01382940
hectorgastelum@yaho..com
619-954-2225
125*142*10754
efax 619-270-2516
0 votes Thank Flag Link Sat Apr 28, 2012
Hector,
Thank you for the response. Please see my reponse above. The loan on the current condo was already done in March. To my point, there should be only one loan for the new house. I should not need another refine on the current condo.
Flag Sat Apr 28, 2012
It would only be required if you were searching for a hard money loan with a high loan to value ratio percentage. If that is not the case, it is not neccesary. Are you behind on your payments?
0 votes Thank Flag Link Sat Apr 28, 2012
Carlos, the ratio on the new house loan will be a bit high. But lender mentioned we can borrow the 417K with 20% and open line of credit on the new house. The reason they ask the refine is because they are required to verify the details by FNMA and FHLMC. But it does not make sense to refine my current condo to a non-owner occupied loan especially I am still living in it.
Flag Sat Apr 28, 2012
No. You don't need to do that.

Your existing mortgage is just that--your existing mortgage. You bought your current condo saying it'd be owner-occupied, and you were honest. It was. Now you're buying a new place.

The lender on the new property may be concerned that you're trying to get a lower rate on the new condo by falsely stating that it'll be owner-occupied. So they want to get a new mortgage on the old property.

However, the lender on the new home may well search for and find some reason not to give you a loan on the new property. That's what's at risk.

I've never heard of a lender requiring the refinance of an existing property from owner-occupied to non-owner-occupied.

Ask your Realtor whether you should search around for other lenders.

Good luck.
0 votes Thank Flag Link Sat Apr 28, 2012
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
Contact
Well you cannot have 2 owner occupied mortgages. Are you planning to rent the condo out? or sell it?
0 votes Thank Flag Link Sat Apr 28, 2012
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