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HEATHER FELDMAN
EQUITY REAL ESTATE LUXURY GROUP

Experiencing Mortgage Loan Hell?

Mortgage Loan Hell. Means something different to each person you ask.
Renters respond with ignorant bliss and an innocent questioning look on their faces. Borrowers trying to obtain a loan show a face of rage and frustration. Those caught up in the hell of bank mistakes and mismanagement show a face hardly recognizable as human.


What is it going to take for the Mortgage loan industry to get it together?
Case in point - Borrower X, excellent credit history and scores, plenty of income, sounds like it should be a slam dunk, right? Give this borrower a loan! Not so fast. This borrower has some complications that underwriters can't seem to grasp. This borrower was divorced in the last year, and as divorces go property and assets were split. In this case, the couple owned two successful businesses, each party receiving one of the two businesses in the divorce.

As we start the loan process prior to offering on a property, the loan officer gathers all of the required and customary papers to document this borrowers information. It is sent off to underwriting, approval should take 10 days or so. The first bank decides there is no history of this borrower running the business - the same one the borrower has owned and run for the last 5 years!!!

The underwriters then begin to ask for a litany of additional documentation - they want 12 months of payment evidence on a vehicle only owned for 10 months  - really?!?  and can't understand why 12 months isn't available. Then unreasonable paperwork shuffling :After 2 months of document gathering, with each updated bank statement or piece of documentation requested they have a list of 5 more requests  to verify the same thing they already verified 2 weeks ago, but since it has taken them 2 months they need updated information and have to re verify all of the updated information. It is beyond ridiculous. This has now taken more than  2 months and they continue gathering information. Again, all from a borrower making plenty of documented income and great credit.

The underwriters seem to have a difficult time deciphering complicated tax returns and income scenarios.

 It's almost like they are fast food kids and 

retail workers given a crash course in 

paper pushing with no concept of anything 

more than a weekly paycheck and a W2 scenario, and are terrified to make a decision. 

The frustration is doubled as the Utah Housing Corp has started advertising programs for down payment assisted loans available. Loans for people that have not been able to save a down payment and only a 620 credit score is required. Seriously? And this qualified, well funded borrower is being put through 2 months of HELL to get a loan?

How about borrowers that are self employed and take full advantage of all legal tax write offs? Loans are calculated on the net income, so the choice for the self employed borrower is to not take legal, allowed write offs for at least 2 years, paying a sizable tax increase to show more net income, or simply buy only what they can mostly pay cash for. Case in point - borrower Z, husband and wife are self employed, have mid 700 credit scores, good income and want to refinance the loan they took out 5 years ago down to a current lower rate. They owe $400k, their home is worth $1M. No can do. Even though they have made every payment on time and have great credit history, no lender will touch them because their net income shown is not sufficient for their current loan. Yet, there are loans out there for people that have no down payment.


I suppose it could be worse. Click on the link I found below from The Fiscal Times about loan hell stories from those caught up in the mistakes and mismanagement of existing loans.


Article from The Fiscal times with Loan Hell examples

UPDATE - 

THE BUYER REFERENCED IN THE FIRST PART OF THIS POST GOT THEIR LOAN AND CLOSED ON THEIR HOME. TOO BAD IT HAD TO BE SUCH A DIFFICULT PROCESS FOR THEM!