Lender backing out of Homepath loan at the last minute. Do I have recourse for damages?

Asked by Jmartin57, Tahlequah, OK Tue Aug 13, 2013

I am purchasing a Fannie Mae home with a Homepath Renovation loan. The lender contacted me today saying they could not do the loan. They say that I must finance this house as a second home.
I own a house that I mortgaged in March of this year. It was my primary residence. I was relocated by my employer in June and put an offer in for this house at that time. It is in my new work location. I intend to keep my old house as my son is living there while going to college. I intend to live in the new house.
the underwriter says that I knew I would be moving when I financed my first house and misrepresented it as my primary residence. This is simply not true and I can back that up, but they never bothered to ask me.
At this point, 45 days into the process, I dont see how I can manage to close within Fannie Maes timeline if I find another lender. If the deal falls through, I am out the house and also the money I have spent for inspections, etc.
Can I recover these costs from the lender?

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Wed Aug 14, 2013
That is a tough situation you're in. If I'm wearing my loan officer hat, I take you at your word, trust your intentions, and am really disappointed that the underwriter is making this judgement.

If I'm wearing my underwriter hat, I realize that one of the top sources of fraud in today's mortgage market is occupancy fraud - where borrowers fraudulently misrepresent homes as owner occupied when they ar not. This can cost the lender money because it's not priced properly according to the risk and the loan may not be sellable back to Fannie Mae. So I trust no one and require an air-tight case to make an exception.

At the end of the day, if the deal falls through then you can probably get your earnest money deposit back, but any money you spend on inspections and an appraisal is likely down the tubes.

My advice is to get your loan officer, and potentially his superior involved to help fight this. Provide as much information and supporting documentation as you can - a dated offer letter from your employer detailing the transfer, proof that you actually occupied the home up until the transfer, etc. Take this up the food chain and ask what is required of you to prove your intent.

I'm not saying this will work, but it's worth a shot. The Homepath program does allow you to buy this as a 2nd home. It's just that the rate is probably a bit higher and instead of only a 3% down payment you'd need to find a way to put 10% down, asssuming the lender offers the program on 2nd homes.

So to recap, your 4 options are to 1) try and work with your lender to get through 2) Re-structure your loan program 3) approach another lender 4) walk away

I hope this helps. Best of luck to you!
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