Real Estate and Home Mortgages - My buyers Lender isn't being truthful and I think something is up

As most of you know from my countless threads, I sold my home by owner. My buyer did not have a realtor either.

My buyer had lending denied once already b/c she couldn't show she earned enough money. Then she went to another lender/broker and he told her he could get her approved. He faxed me an approval letter and as of 3 weeks ago her loan went to underwriting according to the broker. As of Monday this week and per her broker to my buyer, "underwriting is backlogged". So we had to cancel our closing that was scheduled for May 1st. I spoke w/ the title company and they tell me the broker told them he has to find an investor to fund her loan.

So, I have a gut feeling that he isn't going to be able to get her approved. From what I understand, she doesn't have bad credit, her credit if fine, she just doesn't make enough money.

I left a msg for the her lender on Monday and he has yet to call me and inform me of anything. I doubt he's obligated to but he's called me back every time I have called him. Anyway, I feel like my buyer is being truthful and what not, it's the broker I have issues with.

Based off what I have told here and those of you with lending exp, can you tell me if my gut feeling is right? Do I need to put my FSBO sign back in the yard?

This screws not only us but the sellers of the home we are buying. We can't close until our home is sold or leased. The buyer is willing to do a lease option even though she would rather just purchase it but as a measure of last resort we already discussed a 1 yr lease option. This is NOT the route we really want to go and we really need the funds from the sell to pay for appliences and our honeymoon that is coming up.

[sigh]

Just from what you've mentioned, I'm surprised he didn't find an investor to *begin* with. Just IMO, I have the same gut feeling. The thing is, it's still possible for the loan to be approved. Just hard to tell w/out knowing what your buyer's scenario really is. If the buyer's income doesn't qualify her for the loan, basically, she can't get a loan. Don't know what miracle they're going to pull off here. On the positive side, she still has a chance. Don't know how they're going to do it, but I've seen it happen. For example, we get potential buyers but they don't even prequalify and/or even qualify at time of underwriting. They go elsewhere and get approved. Sometimes I wonder how that happened! As a Lender or Broker, we don't want to lose business!

Sorry to hear you are going through all this. Sometimes you get the good ones, then, sometimes you get the bad ones.

As far as putting that sign back up... I can't say. Guess it depends on what your contract says between you and the buyer.

I'm sure others will chime in here, but I wanted to give you my 2 cents for the meanwhile.

Hang in there. Hope the Broker calls ya back soon. On the positive side, at least he hasn't called you back yet to tell you she's "not" approved. That means there's still hope.

Thanks you for the response and kind words.

Here is the update: Which appears to be "good".

I called the broker this AM and he informed me that he "Bank of America" was backlogged 2 wks in underwriting and they were kicking loans back to the brokers so he took hers to another bank to get it processed faster. (Her loan should have went to underwriting 3 wks ago as of today). Anyway, he tells me that yesterday someone from the bank went over the loan for an hour w/ him and today they are verifying her employment and that was all that needed to be done. I then asked him for honest opinion on how confident he was that she would get approved and he assured me he was very confident.

So, I hope that I'll hear something this evening or in the AM that we are either closing Friday or Monday. [keeps fingers crossed]

At this point, I will hope for the best and expect the worse as I have been.

Thanks again!

:thumbup:

So glad to hear things are looking good. If they can close that quick, that would be great too! Just remember to give them some time to do the loan docs, sign them and get it back to review and THEN fund/close. Even that takes time, but... not 3 weeks :D

DIYAddict, I think she already signed all the needed papers. Her broker told the buyer on Monday that we should be able to close Friday and then yesterday he told me the same thing. As far as I am concerned he doesn't know I talked w/ the buyer on Monday after he talked to her.

So yesterday I asked if we'd be able to close by Friday and he said yes. I informed him that I believe the buyer usually works on Fri (reason it was set up to close on Tuesday b/c she is off that day) and that if we need to close Monday that is fine. BUT if we don't close by Monday we may have to push back our closing on our new home which is on Wed b/c our broker needs to show underwritig that we sold our home before we can close.

So you see the mess I am in and the time crunch and why I am so uptight. lol If this deal falls through it screws us on our new home too. And we didn't have a contingency that our home must sell first. The sellers wouldn't accept one which I think is dumb on their part.


Thank you again for your time DIYA.

Even during the refi boom, I never had a lender backlogged for 2 weeks. That's insane.

What I think is happening here is happening to a LOT of us: mortgage lending is changing tremendously right now with lenders pulling programs with NO warning whatsoever. Apparently she's using a stated income program, which is a loan type being very hard hit. If she's trying to do this with no down payment, there are only a few lenders doing these now. I had my own headache with this issue, believe me---I kept my borrower informed on what was going on though.

One thing to point out: if the buyer doesn't make enough to buy the house, then they have no business buying the house at all. You don't FORCE a bad loan. If she simply has hard to document income, that's different, and that's what stated income and no income loans are for.

I don't think you could put a sign in the yard if your contract is not expired.


DIYaddict:
"For example, we get potential buyers but they don't even prequalify and/or even qualify at time of underwriting. They go elsewhere and get approved. Sometimes I wonder how that happened! As a Lender or Broker, we don't want to lose business!"

I know just what you mean. Some people have ways of manipulating DO/LP, or other means of forcing loans. They can HAVE those loans, and I tell all of my realtors that. If they want to work with those guys, then I need to distance myself from that realtor--when those things blow up, they smack a lot of people. That's mortgage fraud and very serious. They might get away with it for now, but eventually they end up on the news. ;) The loan closing is just the START of the life of a loan and file reviews. A lot of eyes look at these things after the loan funds, over several years.
1 loan isn't worth up to 10 years in jail and a $10k fine. Per loan.

Family guy, I see what you're saying and I agree that ppl who cannot afford a home have no business buying a home. Honestly, I have no idea what she makes and I am only going off of what the first lender stated.

Here is ANOTHER update as of 2p today:

My buyer decided to finally call the broker that I have used twice now in buying a home who I recommended and who I believe really knows what he's doing and is upfront and honest. Anyway, my broker already has her loan in underwriting and got the approval from submitting it electronically. So as far as we can tell, we should be good to go and there shouldn't be any issues.

Basically in a nut shell she called up the other broker and finally told him he was taking to long and that she was going to go with this other broker.

{fingers crossed}

Thanks for the info Family Guy. It is really helpful to know the ins and outs of this business.

Glad it's getting worked out. With automated underwriting (actually, pre-underwriting) these things just don't take as long as they used to. The automated findings are practically a checklist for the loan officer and the underwriter to go by. The underwriter just has to apply the lender-specific guidelines at that point.

I'm also glad that you gave your trusted broker a referral. They earned it by being good at what they do, but they have you to thank for that too. That's what keeps us in business. :)

Thanks for explaining that automated thingy. I have a better understanding of it now.

My broker did earn my business the first time and now. At first we didn't call him b/c the fiance wanted to stay with his bank, USAA. Anyway, we ended up going to see my broker after USAA failed to meet our expectations and I am once again VERY happy that we did.

Also, whenever I had a potiential buyer come through my home, I gave them the info to my broker. However, I believe most of them didnt' contact him. I think most of them were prolly afraid I was incahoots w/ the buy.

He's deff made some business or will in the future off of me. The realtor we used to help us purchase another home is now using his information to give to her customers.

When I receive good service like this, I like to help out in anyway possible. Heck, I am going to talk with him about putting a sign in the yard of the new home for a month or so to advertise his company (he's part owner, small business). Of course, no cost to him and again, I like supporting small business owners, ma and pops, etc etc.

Thanks again everyone for the words of encouragement. I will update as soon as I hear something.

update:

the "mirical" she pulled to get approved was falsfying her taxes. She was approved to purchase the home based on what she REALLY makes but when the lender went the last step to check w/ the IRS they found she did not claim what she REALLY makes and the loan fell through.

We signed a RTO w/ her b/c of the loss we'd take if we didn't. We hope she backs out and doesn't move in or defaults on her payments (i wrote it up in the lease that she pays rent on the 1st, has till the 5th then $25 late charges are applied each day until the 10th then eviction process is started).

We can afford both mortgages but the only way we could get our loan approved on the new home was either selling or having a signed 12 month lease. B/c of last minute decisions we went ahead and had her sign the lease. We didn't really want to but its worth the risk to us and we would have lost another $1500 if we didn't and we've already lost $1000 from her sale not going through. And there is our sellers who've been through this once already and I feel for them and I don't want to put them through another failed sale either. Especially if we can move forward.

That's unfortunate, but I've seen it before. We caught someone a few months ago doing that. The tax returns they gave us (filled out by their accountant, BTW) were much more favorable to their situation that what they actually filed with the IRS. Routine quality control caught it and both borrower and the CPA are having to deal with the consequences now. That's what that form 4506-T is for that everyone signs for most loan programs.
People assume that whatever they throw under the loan officers nose is not questioned--nothing could be further from the truth. Others assume that once the loan closes that they're in the clear. This, too, is not true. The closing is the START of the life of a loan. That file will go through a lot of hands and is subject to spot review by at least a dozen government agencies that have an interest in mortgage lending. Even if your buyer had gotten through to closing, they could've very well gotten caught a few years from now.
You don't want to be involved with a person like this, they tend to bring others down with them when they take their fall. Have no doubt: that was mortgage fraud. It's good that it got caught.

Yes, and I hope others reading this take note. Don't waste sellers time and not to put yourself in a stupid situation like this.

I am prepared to take legal action if needed but I will keep my fingers crossed that she is a good renter and makes up for her stupid mistake by working w/ my broker in fixing this issue so that she can move Fw w/ purchasing the home at a later date.

The lease was written so that if she was more than 5 days late on rent eviction process will be started. I did have a real estate attorney look it over as well.