1) Most people don't understand how mortgage fraud is facilitated (more than likely kperez was unaware the credit score they had wasn't accurate) or what to look for.
2) Everyone is making assumptions about the lender with little factual basis to go on
3) This second loan may not be as bad as it sounds.
1) John sufficiently covered this with his link to the Fannie Mae article on credit cleaning/mortgage fraud, if you don't understand why this is an issue for lenders and why it invalidates one's credit score, read this article and ask one of us for clarification if you're trying to avoid getting stung the same way. (search this thread for "fannie", go to that link).
2) It seems to me that if this was discovered so late in the process, the lender the borrower was using does upfront processing and then underwrites the file when they have a full file. Most brokers actually submit files like this and many bankers do as well (I prefer this method to be honest because it ensures quick underwrites as only full files are submitted reducing the garbage submissions that clog up underwriting I see at other companies). The processor and loan officer aren't underwriters and while it's unfortunate that neither caught/knew to look for the authorized user issue, we can hardly say they didn't do their job.
3) The second loan they talked about may be a portfolio loan that they don't have to sell to a secondary investor (Fannie Mae/Freddie Mac/Ginnie Mae are the primary examples) which would explain why the rate was higher, especially if it's a higher risk loan (thin tradelines most places would be considered higher risk). I'm not advocating taking this approach but I'm also not saying it's a bad option especially if the non-authorized user accounts are minimal and may not produce a credit score at all.
The rapid rescore not being allowed is quite common actually amongst lenders (bankers/brokers/banks). If a file defaulted and only qualified because of a rapid rescore the investor could use that as leverage to make the lender buy back the loan. If your company doesn't prohibit the use of rapid rescores for qualifying purposes, don't take it for granted or abuse it or you may one day be on the other side of that coin.
kperez, if you can get it closed with your new lender, great, if not, you know what you'll need to do in the next couple of months to ensure you won't have any issues the next time around.
P.S. I see way too much self promotion in this thread, if I could give someone negative votes, I would. Go pay for advertising, you know who you are.
I'm very sorry to hear about your nightmare......FYI, there are 6 things to remember NOT to do when applying for a mortgage. They are:
1. Don't deposit large amounts of cash in your banking account
2. No large purchases, car, boat, furniture, etc.
3. Don't co-sign a loan
4. Don't change bank accounts
5. Don't apply for new credit cards
6. Don't close any credit accounts
Number 6 did you in......this is pretty much standard procedure for lenders today. Unfortunate as it is, one would have to believe that you should have been made aware of this by your lending agent.
I know this is after the fact and no help at this time but something others may learn from.
Neither here nor there, I say ask for an extension and shop another lender. Hopefully your Realtor has better choices. You should be able to transfer the appraisal since you paid for it.
Green Home Realty
Here you go.
Freddie Mac guidelines chapter 37.5(c)?
(c)Usable Credit/FICO scoresThe Seller must determine that each Credit Score (FICO) score received is usable. For a FICO score to be usable it must be based on sufficient, accurate information. Too little information, or information that is significantly inaccurate, makes the FICO score unusable for Mortgage underwriting. This is important both to ensure that the FICO score is adequately indicative of a Borrower's credit reputation and to ensure fairness for Borrowers in using Credit Scores to evaluate their overall credit reputation.
Insufficient informationAlthough FICO scores may be generated if a repository's file includes only one Tradeline, the Seller must not use any FICO score based on fewer than three Tradelines. This is important both to ensure that the FICO score is adequately indicative of a Borrower's credit reputation and to ensure fairness for Borrowers in using Credit Scores to evaluate their overall credit reputation.Because a merged credit report or Residential Mortgage Credit Report (RMCR) may show more Tradelines than were included in the particular repository's file used to generate the FICO score, the Seller should request that the credit reporting company indicate on the credit report the number of Tradelines that were used to create each FICO score.Alternatively, the Seller may wish to obtain the in-file report used to create each FICO score and use the in-file report to determine if the FICO score was based on at least three Tradelines.
Inaccurate informationIf the credit reporting company reports that the repository file used to create a FICO score contains inaccurate information about a Borrower's credit history, the Seller must determine if the inaccuracy is significant and, if so, it must disregard that FICO score and explain the decision on Form 1077, Uniform Underwriting and Transmittal Summary, or another document in the Mortgage file. However, minor discrepancies in the balances owed or payment amounts on open accounts belonging to the Borrower are not to be considered significant. FICO scores based on information that includes minor discrepancies must be used to select an Underwriting Score for each Borrower and identify an Indicator Score for the Mortgage.The Seller must disregard FICO scores based on significant inaccuracies. Significant inaccuracies include:
Public records information on a bankruptcy, foreclosure, judgment or collection that does not belong to the Borrower
Delinquencies that are reported in error
One or more Tradelines that do not belong to the Borrower
Tradelines for accounts for which the Borrower is not the primary account holder, but is listed as an authorized user (Authorized User Accounts). Authorized User Accounts will not cause the FICO score to be disregarded for significant inaccuracies if there is proof in the Mortgage file of at least one of the following:
Another Borrower on the Mortgage owns the Tradeline in question,
The Tradeline is owned by a spouse, or
The Borrower has been making the payments on the account for the last 12 months.
The Seller must not attempt to adjust the value of a FICO score because some information used to create the score is inaccurate. The Seller may obtain and use a different FICO score from another repository if the score obtained from that repository was not based on similar inaccurate information. This is important both to ensure that the FICO score is adequately indicative of a Borrower's credit reputation and to ensure fairness for Borrowers in using Credit Scores to evaluate their overall credit reputation.
Like I said before, you're better off switching to an FHA loan if you really want to close in the near future on this home.
Feel free to contact me.
Maybe you should email me or call my cell, I can keep helping this way but it'll take days to get answers that may otherwise be done in a few minutes. I (or anyone else) don't know enough about your loan details to assist you further, without dragging this out and you're on a short leash as far as time goes.
As far as releasing your contingency, your earnest money is already gone, you just have to decide if you're closing on the home or not, if you must (and want to) close before you can get a new lender or have a couple review your package then do what you must, otherwise see what happens this weekend.
Let me know if you have specific questions.
If your current loan is a FHA loan and you ask them to deny it now so you can move to a different lender, you may find problems at the new lender because FHA connection stores the denial reasons often times (depends on the mortgage company's policy or if they feel like making the note) when a FHA file a previous lender was working on, denies it. If they were to do this, the new lender, upon receiving your FHA case # will see the reason for the denial, you'll have the same issue with the new lender unless they don't care about the authorized user items (I can't see this being the case though). You could ask if they make a note in FHA connection but often times that'll just alert them that they should so it's a catch-22. It may actually be better to withdraw your file and transfer to a new lender but if you decided not to move forward or could not, you'd have to have the later lender issue a denial for your earnest money, assuming it was still refundable at that point in time.
Best of luck to you.
You want to make sure you are making the best decision before you take on a higher interest rate which means higher payments. Depending on the house you're buying who knows when you'll be able to refinance or if you'll qualify.
Get more advice before you make the final decision. But if you choose to leave this lender make sure you get a denial loan letter in writing with the correct date, just in case your lawyer has to get back your down payment if this deal doesn't work out......... but hopefully it will.
Local Mortgage Bankers are where it's at. I'm just sayin'...
The truth is you may well have issues and the lender may well be telling you the truth, however this doesn't absolve them from their completely inexcusable and unprofessional behavior. You should have been told this weeks before closing, If you were truly preapproved (as opposed to prequalified which means nothing) you should have known about the issue before you even made your offer.
The Lender did a lousy job and should not be excused. They had your contract at least 6 weeks before the closing was scheduled if not longer and had they bothered to do their job properly you would have been notified of the problem well in advance.
@Trevor, as I stated, I don't think the question and thread in crystal clear enough to throw another mortgage person under a bus. However, you might want to start with knowing California is an escrow state, not an attorney state....so there are no attorney's involved in the transaction.
Important question is "Do you have your own agent?" If so, I would not assume you have to take the deal or that your depostit is absolutely in peril. An in house lender can close pretty quickly and I do recommend getting a second or third lender's opinion. Wishing you the best.
Now we have to ask for an extension from Wells Fargo to extend the closing date on the short sale which who knows will even get approved. Has anyone ever heard of a situation like this? Is this even legal? Now we may lose out on a house we waited a year to get a short sale approved on. Any advice will be greatly appreciated!
Here are brochures and a needs list of documents I will need to issue a loan approval. I can run a DU approval which is what we go by as a LOAN APPROVAL.
CHF Access half percent down flyer, pdf
CHF Access half percent down brochure, pdf
Sheryl Arndt, standard needs list checked, pdf
Why Rent brochure
CHF Access income limits http://tinyurl.com/8lzf8he
Sheryl Arndt, Broker â€“ Sr. Loan Officer
I am sorry to hear this and I hope you cn resolve this. If I can be of assistance please feel free to contact me, my team and I are very knowledgable with these type of situations. Thank you.
I am sorry to hear your having such trouble to get your loan approved. I work for a Direct Lender and we are more flexible then a lot of other lenders out there not to mention we have competitive rates. I would like to help you out so that you can get a good loan and get into the home you want. Please give me a call so we can speak further about this.
In House Lender
We have an A+ with the Better Business Bureau.
I hope you bought the home. When it comes time to refinance, call me. I have a referral for a great lender here in OC. Good luck.
Not sure what local financing is like now (I was working Nationwide until 2004), but "back in the day" I was routinely seeing comparative GFE's at 2 to 4 points for the same pricing I was doing for 1 point. I am all about "local" financing in today's convoluted financing process (discount/online lending right now is a great way to lose a house, IMHO); however, that kind of spread is just highway robbery (again, just my humble opin).
Love it! Incredibly well-said. I like the "Captain" analogy. And, I have to agree with you about folks wanting the shortest route to prequalification. I find potential clients quickly chill to my insistence on a full document review and face to face meeting. The ones who see it through are the ones with success stories on their home purchases.
I guess I mis-spoke about NY being the "ONLY" state to require attorneys; but only 7-9 states is kinda sad when you think about it. Part of the reason we're in this mess to begin with, I think.
And, yes, we have some rather stringent requirements on closing mortgage loans here in New York State; but those requirements protect borrowers tremendously, and I'm glad for that.
I hope your situation has been resolved by now....and hope you will post to let us all know.
Not surprisingly, I have heard comments like @Augtust and @Amanda before. Ironically, the mortgage industry is getting more and more complicated and more nuanced than ever.
First, @August: The biggest issue I see (in relation to your comment) is that there are far too many loan officers (in my world, I differenitate between a "loan officer" (order taker) and a "mortgage professional" (a consultant/educator/advocator for the borrower)) who issue "preapprovals" that are nothing more than a "prequal". The two words are truly worlds apart in the mortgage industry. Many "lolan officers" issue preapproval letters on the fly, without validating any of the information provided by the borrower. And, of course, the borrower may, or may not, know how the information will affect the qualification process.
I do find; however, that many first time home buyers are more inclined to want to listen to the loan officer who glosses over the details and gets them out looking at houses with as little fan fare as possible. The problem is that the issues that should have been resolved at the beginning of the process tend to come to light at the end of the process. In that case, then I would have to agree with you that it is "just cruel, mean and unfair". Personally, I don't want any client out looking for their dream home until we are 100% certain they can have what they are longing for.
@Amanda, Without spending a great deal of time explaining and pontificating about the issues of credit scoring, let me just say that any "mortgage professional" (see previous statement) KNOWS that paying out old collections or debts WILL lower credit scores. The rule of thumb is NEVER, NEVER, NEVER instruct a borrower to pay off old collections prior to the close of the loan. Let the underwriter stipulate that the collection has to be paid at the closing...the requirements for the loan are satisfied and the fact that paying the collection will result in a lower score doesn't matter because the borrower has already moved into their home.
For all first time home buyers: The home buying process is a TEAM event....and the mortgage consultant (like it or not) is really the Captain of the Team. If he/she does not have the leadership skills, or the experience, to manage the plays to "score a touchdown" it is likely the "Team" is not going to win the SuperBowl. That said, a Captain does not always tells the Team everything they want to hear. Nonetheless, the Team has to rely on the experience and motivation of the Captain to get the finish line. Sorry for the metaphor...but it really does apply.
True mortgage professionals are advocates for consumers and partners with real estate professionals....and there is a lot of evidence in the advice threads here on Trulia. We truly are horrified when we see/hear the horror stories such as kperez has brought forth. It does take nuance, experience and a Team to close a loan. Borrowers would do well to look for leaders, more than shop for the cheapest rate. Ironically, there is often a very small savings for working with discount brokerage or online lender who is little equipped to finesse a first time home buyer through the mortgage process.
@Trevor: Sorry, but New York is not the only attorney state. In fact, there are somewhere around 7-9 (Florida, Virginia, Massachusetts, Illinois to name a few), Having closing loans in all fifty states, I will tell you New York has some the "kinkiest" requirements in the mortgage industry, however. LOL!
I'm so sorry you had such terrible experiences trying to buy your homes. The shame of it is the mortgage people and banks you entrusted with your dreams were not worth that trust.
The sooner that folks begin using Local Mortgage Bankers again, the fewer nightmare stories like this we'll hear. The regular banks don't give a hoot about homebuyers' dreams; loan applicants are just numbers to these monolithic corporations. Further, the sales people are NOT Licensed, only Registered. The poor quality of their work as demonstrated through the stories of these families' plight is a clear definition of the difference between a Licensed Mortgage Loan Originator and a registered one.
PROUD Local Mortgage Banker in New York State!
Licensed Mortgage Loan Originator: NMLS #40140
I am trying my best to help make other people aware of what happened to me, because I think they took for granted the fact that my husband and I were new home buyers and are new to the process. I think they should have worked with us especially since they listed that out in their contract all of the debts by name that had to be paid first before we could get the loan. And since I had my receipts at the end and told them why my credit score lowered, I believe they owed me that much. But instead I got the door shut in my face. I did turn right around and ask to speak to the manager above the manager, because it is my belief that a mortgage company should know the consequences of tampering with collection accounts if they are going to use that to either approve or deny your loan. The funny thing was the manager I was talking to on the phone tried everything in his power to keep from giving me his bosses name.. even going so far as to try to transfer me to another department after being on hold for 25 minutes, but finally I drug it out of him piece by piece. Something dosnt sound right to me......
I decided to call and check on the status of the loan on the 7th and was informed that USAA had run my husband and my credit again without our knowledge or approval and when they did they discovered my credit score for Equifax had dropped. Because of that our loan was kicked out of refer approved status to refer eligible status and needed to go back into underwriting. I called Equifax to see if anything had changed, any debts added etc. and was told nothing has changed. I was told however that because I paid off all the old debt in collections it took my score down because of the age of the accounts and it being brought into recent history.
I provided every receipt to the manager of USAA showing the debts had been paid off and told them the reason my score went down and guess what...... I was informed on May 10th, a day AFTER our closing date that our loan was rejected. They told me it was because of our recent credit scores..... the scores that dropped, because of the debts that THEY told us to pay off to get the loan. I have written to the attorney general, consumer reports, I wrote to a local news station to run a trouble shooting report on their company and my husband has contacted IAVA. Would anyone else like to join us in a battle against USAA?
I found a house worth 365K. My kids are all excited and already choosing furnitures and colors of their room. I got the purchase contract, went to escrow and ready to close then loan officer all of a sudden just emailed me that my loan is denied due to some kinks on my credit history. All I thought the credit history review was way over due to the preapproval I received. But prior to declining me this guy asked for a downpayment and I told him this is a VA Loan and my mortgage officer agreed to a zero down. He told me he will contact again the mortgage officer and he never talked to me again after that until I received his email declining me. To me this practice is unethical and cruel, telling someone to find a property that you like and in the end tells you that you cant have it!
And also I spent almost close to $2000 for earnest money, inspections, etc. I would bet none of you guys would give me $2000 for nothing.
If there's any lawyer here I would love to sign a class action lawsuit against these guys!
I agree wholeheartedly with you; the problem here is this deal is in California. They don't use attorneys in California. Only we New Yorkers are crazy enough to insist a Seller and a Purchaser are represented by counsel. Madness, I know.
Further, this loan was originated by one of the BIG BANKS (aka "Evil Empire"); these players skirt the Federal regulations day in and day out. They make "Change of Circumstance" look like it only applies to lil' ol' Local Mortgage Bankers.
Best of luck!
Its almost as though some lenders use this trick to get you into a higher rate. I have seen this a lot, especially with Buyers shopping "online lenders" for lower rates - rather than going into a local lending institution in the town you live in. Whatever your circumstances are, I feel your pain. Sounds like you only have one choice. Perhaps you should seek legal counsel.
I wish you the best.
Michael Saunders & Company
Rhonda is right: go to the other Lender(s) before you agree to the higher rate. While we consumers may feel empowered that we're going to trash-talk a big corporation, the fact is our loudly bashing a big corporation has zero effect on said big corporation. You're a number, not a person. They really don't care about you today, tomorrow, or about what you have to say.
Try to get the time to switch to a Lender who will make this happen at terms that are more acceptable to you.
kperez, Home Buyer, Brea, CA
Response to a Rapidi Rescore:
LO's response: "Unfortunately the old credit report stays with you for 90 days and if it is re-run we will not use the updated one unless the credit score drops. The credit report is tied to the loan number The only way it can be used is if the loan is re-submitted so a new loan number is generated"
0 votes â€¢ Comment â€¢ Flag â€¢ Yesterday at 4:05pm
If you have sufficient trades then your FICO should be fine. Taking the time to consult with another Mortgage Banker would probably involve one afternoon. I get lots of "911" calls of this sort in my market and I typically render a prequalification decision (with Underwriter review because we're Direct Lenders) in less than 2 hours (including 1 hour to meet with the client).
If you do that, at least you'll have a sensible answer to the question of whether you're qualified, or not.
@Deborah: Yes, I know CA is an escrow state; my remark about attorneys was a New Yorker's snarky way of saying you guys should do things our way. This is a shining example of the reasons why attorneys should be involved in the real estate purchase transaction. And as to throwing the other mortgage person under the bus, I wouldn't have called him an IDIOT if he'd only had the problem with the authorized accounts (I wouldn't have been kind, but a bit more forgiving). The L.O. qualifies as an IDIOT because of the turnaround to a higher rate loan. This is an L.O. who hasn't taken the time to study Underwriting guideline fundamentals nor has he taken the time to properly prequalify kperez' situation. In the many "911" calls I get here in New York, I see the same thing all too often. When I interview the client about their interaction with the previous L.O. sure enough, the previous L.O. didn't pay attention to details and didn't understand basic Underwriting standards.
Kperez: I wish you the best of luck. Get in front of an experienced Mortgage Banker to review your prequalifications. If she/he says you're good to go,switch your application and get your new Mortgage Banker on the phone with the Realtors to buy you the time you need for approval and closing. You'll get it.
DO NOT TAKE THE HIGHER RATE LOAN. This is incredibly unethical.
Instead, have your attorney explain the situation to the Seller's attorney; then move on to a different Lender. Get a referral to an experienced (15 years+) Mortgage Banker. Check her License on nmls.consumeraccess.org to verify she is Licensed and how long she's been originating mortgages.
Start over if the Seller will give you more time. In this market with the challenges in lending, Sellers are more likely to agree to a time extension.
Problem is this: because of the tradeline requirements (minimum 2 active and open with balances for at least 12 months) you might not be qualified for a mortgage at this time. Best thing to do is get in front of a qualified, experienced Loan Originator and get away from the IDIOT that put you in this mess in the first place.