Now, having been an infrequent contributor, and feeling a bit like a schmuck for such, I am resolved to start writing again. So, I have applied what little magic I have left to resurrect a dead horse. With my passions aflame, I will ride this undead creature until such a time as I have said my peace.
Old topic, new bitch session. I recently had another home fall out of escrow due to a lying, conniving loan officer, whose ineptitude (at best) has caused untold misery. What was purported to be (verbally, and in writing) a stellar home buyer with exemplary credit and 20% down, has miraculously transformed into a miserable wretch with a 586 mid score, who’s attempting 100% financing on stated income for a $750,000 loan. My how people change!
Who can stop this nonsense? Sweet Jesus! I always tell my clients that they’ll know the deal is done when the money is in their bank account. Well, that’s no help, but it’s the truth. And in spite of my cautious demeanor, they insisted on putting 20k (non-refundable) on a new home. Ah, the sweet smell of optimism.
So, I am firmly resolved that no buyer shall have an accepted offer on one of my homes without either a fully disclosed and documented credit report, or being thoroughly scrutinized by a lender of mine or the seller’s choosing. Don’t like it? Don’t buy the home. If my clients decide to accept an unverified offer, I take responsibility only those items that fall within my purview.
For the love and Jesus and God, and the Holy Spirit, somebody hold these people accountable for a modicum of veracity, please!
Allen
scott says:
While I can relate to your plight, unfortunately the number of completely unqualified LO’s is only matched by the number of ridiculously unqualified and unscrupulous real estate agents in this business. In CA,licensing allows one to practice both simultaneously just to make life more interesting. As an agent I always know its going to be a hell of a ride when my client wants to go see a listing by “BillyBobs Real Estate, Mortgage, Moving and Bar and Grill Specialists. Nothing like a little dabbling in deep waters to make our lives more interesting. (And even better when they are related to the seller who is upside down by 30k due to that fabulous deal BillyBob gave them 2 years ago on a really cool negative am arm.)
June 14, 2007 — 11:44 am
Will Farnsworth says:
The LO in question is definitely guilty of misrepresentation, but your clients throwing down 20k before closing on their current property does shoulder a share of the blame for this situation.
The LO will probably say something along the lines of “the client misstated income/equity/whatever” and try to pass the buck along to buyers themselves, when in fact it is their responsibliity to verify this information before any offer.
A couple of questions: don’t you have some kind of recourse against the LO/Buyers if you received paperwork or a copy of the GFE? Do the sellers receive the balance of escrow as compensation for the buyers breaking the covenant? If so, that will somewhat offset the down payment on their new home (assuming ~$750k sale price).
June 14, 2007 — 1:13 pm
Erion Shehaj says:
Isn’t strange that listing agents still demand pre approval letters from prospective buyers even though everyone knows they’re not worth the paper they’re written on? Don’t get me wrong. I ask for them as well on my listings. But like you said in your post, it is not done until that wire hits the bank. After all, even with an superb score there are other issues that could make the deal fall through that wouldn’t be evident in a credit report. The only real solution is what is being practiced by Countrywide on their REO Listing : Complete Countrywide pre approval regardless of which lender you eventually choose. On the flip side of the coin however, in this market many brokers can’t afford to push buyers away either.
June 14, 2007 — 2:58 pm
Erion Shehaj says:
Isn’t it strange that listing agents still demand pre approval letters from prospective buyers even though everyone knows they’re not worth the paper they’re written on? Don’t get me wrong. I ask for them as well on my listings. But like you said in your post, it is not done until that wire hits the bank. After all, even with an superb score there are other issues that could make the deal fall through that wouldn’t be evident in a credit report. The only real solution is what is being practiced by Countrywide on their REO Listing : Complete Countrywide pre approval regardless of which lender you eventually choose. On the flip side of the coin however, in this market many brokers can’t afford to push buyers away either.
June 14, 2007 — 2:59 pm
Allen Butler says:
Hello.
Will: The LO in question is blaming it on the funder having changed programs. The funder says they NEVER agreed to underwrite the loan the way it was portrayed by the LO. Unfortunately, we have no recouse. There is no law stating that LOs cannot “mis-represent”. It becomes a case of he said, she said. Once the funder issues a denial of credit letter, the buyer gets their earnest money back. Done deal. The buyers (whom I have come to know well) were also lied to t/o the process, so realistically, it would be infair to penalize them.
Erion: You are absolutely right. Seems to me that the best case scenario would be to have lenders issue a full loan approval to buyers pending them finding a home that fits within the funding guidelines. Easily said, not many do it.
June 14, 2007 — 3:14 pm
Russ says:
The LO must be new in the business. Any LO with with more than 2 closing under their belt knows that deal can’t be done in this market. Most lenders got rid of those programs months ago. It is even hard to get 100% financing for A paper borrowers who can go full doc now. I also wonder if the borrowers aren’t partly to blame too because I am sure if they shopped around a bit, they would have come across more than one broker who told them the loan can’t be done.
I see this all the time. You know damn well a deal can’t be done and try to tell the borrower the reality of the situation, but they believe the hype only to have it blow up in their face right before closing.
While all evidence seems to point to a shady LO (borrowers don’t go from 20% down to 100% financing overnight), AEs and lenders are known to screw up deals and leave the LO hanging in the wind to pick up the pieces. However, I highly doubt that is the case in this situation.
All of this could be prevented if borrowers simply got their financing in order first and hired quality and proven professionals to handle their deals prior to shopping for and putting offers on homes. What I am seeing is that borrowers don’t want to commit to LOs without knowing rates, but they have to commit because rates can’t be locked without a property if they really want a solid pre-approval (actually sent to an underwriter pre-approval, not AUS or a prequal). LOs certainly don’t want to be doing REAL pre-approvals if the client is still rate shopping them to death either. Until consumers get out of this Wal-mart mentality, we will continue to see fallout like this.
June 14, 2007 — 3:35 pm
Brian Brady says:
Russ’ last paragraph summarizes the problem well, Allen. Sorry this happened; it sucks.
June 14, 2007 — 6:01 pm