We were approved for a Fannie Mae loan but the lender denied us because of an incorrect default which isn't on our credit report. How can we be?

Asked by Chris, American Canyon, CA Thu Oct 28, 2010

denied My husband has good credit over 700, my credit is in the 660's, and we have 20% down. We've been waiting since April on a short sale property that we really want because the schools and the community are much better than where we live now and we have 4 kids all in school. We've gone through everything and ended up getting approved for a Fannie Mae Loan and we were supposed to close escrow within the next week but the lender denied us because of a "default" of payment on our current home. The problem is we never defaulted on our current home, 2 yrs ago we went through a loan modification and our mortgage company put a "freeze" on our account during the modification process and this supposed "default" doesn't come up on our credit report. So I'm confused as to why this is happening to us. Can someone explain why this is happening? Thank you.

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Annette Levi…, , New York, NY
Thu Oct 28, 2010
I loan modification is held against you for 3 years.
Your approval was that a commitment? I don't think you had a commitment since no underwriter would have signed that commitment. Also your FICO is too low for Fannie Mae. They require 680+.
I feel you recieved a preapproval from a mortgage originator-not worth the paper it is written on.
You do not qualify for a mortgage until 3 years has passed from your modification and the lender puts down that you have paid as agreed for 36 months you are nonmortgagable.
1 vote
Don Maher, Mortgage Broker Or Lender, Woodland Hills, CA
Thu Oct 28, 2010
Hi Chris

What is the explanation that your broker gave you? I am curious how the mortgage appears on your credit report. Did you stop making mortgage payments during your loan modification? Are you refinancing with the same lender that owns your loan now. There are some missing pieces to the puzzle here.

Feel free to call should you want to talk about it.

Don Maher
Universal Capital Mortgage Corp
(800) 736-0565
Web Reference:  http://www.donmaher.com
1 vote
Rudy McDowell, Mortgage Broker Or Lender, Bloomfield Hills, MI
Thu Oct 28, 2010
Hi, Chris. Do you have your current credit report showing a clean history with regards to your current mortgage? If this is the issue, it should of been caught and corrected at the start of your preapproval process. Based on what you shared, if this had of been a problem, it could be easily corrected by having the credit report agency contact the lender to verify they never reported you late. The Agency would then do a supplement noting that fact and that your present mortgage is 0X30 and current. I don't understand why this is an issue. Especially this late in the game. I betting its something else that was overlooked.
0 votes
Jacob Varghe…, , San Jose, CA
Thu Oct 28, 2010
Hi Chris,

Did you remoe your loan contingency for the new property?

Loan modication has killed many deals. The lenders say something, do something and report something.

You should be really talking to a real estate attorney, to find the best course of action, if you feel, the new home is worth the time and money you will be spending.

Do you think the seller will give you time to sort out the issue without loosing your deposit.

DRE 0190347
NMLS - 327086

0 votes
Caroline Choi, Agent, Los Angeles, CA
Thu Oct 28, 2010
Hi Chris, this must be extremely frustrating for you. Unfortunately, this isn't just happening to you. Based on experiences with my buyer clients, I've seen lenders approve a loan, and then find something that raises a red flag and rescinds the approval. The lending market is definitely a moving minefield right now and even my client who had an 800 FICO, 30% down, and steady income got denied with the first lender.

I would suggest speaking to your realtor and loan broker to see if there are any alternatives for you. If Homepath or whichever loan you are using isn't going to work, see if the loan broker knows of another lender who may be able to do the loan so you don't lose out on this house. Best of luck, Caroline
0 votes
Chris, Home Buyer, American Canyon, CA
Thu Oct 28, 2010
The mortgage company that we are currently with is the one we went through the modification with. During our modification they told us to pay but what we were paying the put in a "suspense account" so they told us to stop paying and the account would be frozen during the modification so no foreclosure or default should have happened which apparently we didn't foreclosure because we got the modification. And if we defaulted on the house shouldn't this have shown up on our credit reports? This is why I'm confused, we're trying to purchase a new home and we ALREADY got APPROVED at the beginning of October for the Fannie Mae Loan and we're supposed to close escrow w/in the next week so if what happened 2 yrs ago is not on our credit reports and we shouldn't have any "defaults" on our records how could be denied now after we were already approved through Fannie Mae?
0 votes
FSBOsuccess, Home Seller, 28590
Thu Oct 28, 2010
You state that you did miss payments and then requested the modification, that's the problem. You stopped paying your mortgage and that is why you were denied.
0 votes
Dan Tavares, , Ventura County, CA
Thu Oct 28, 2010
Best advice I can give is to talk to a real estate attorney. Realize I'm no attorney, but if you did stop making payments during the 'freeze' then it will report.
0 votes
Chris, Home Buyer, American Canyon, CA
Thu Oct 28, 2010
Thank you for your time Don. We are actually trying to purchase a new home, we're not refinancing. The broker just said that the default is showing up "somewhere" but not on our credit reports. We did stop paying for a few months on our current home, which we did end up getting a modification for, but we were told that our account would be "frozen" that they couldn't foreclose or put our house in default if we were going through the modification at the time so thats why I'm confused as to why they are denying us for what happened 2 yrs ago. First we were told that we could not have been late on house payments within the past 2 yrs if we're trying to purchase a house. Well as of 10/8 its been over 2 yrs now we're being told last minute that we "defaulted" and we can't buy a house for four yrs. But the default never showed up on our credit reports and we should have never been in default, this is whats confusing me.
0 votes
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