True Life Borrowing Experiences

This is an actual email from a real life potential client:

“Subject: Consultation for Mortgage inquiry

To whom it may concern,

I was wondering if it would be possible to set up an initial consultation in person, regarding an issue that I am having with understanding my rights as a first time home-buyer.  I am a first time-home buyer, originally looking to have closed on my house on April 1st, 2016. I was already approved from my lender back on Jan. 26, 2016 and was cleared to close. I have paid for the home inspection and appraisal already. On Sunday  night, I received an email from the senior loan officer of my lender that said that they suddenly need a cosigner for my loan and that I would most likely not be able to close on 4-1 anymore. The lender admitted that he knew of this information since the previous Friday! I am currently complying with their requests, but am afraid that I am going to lose out on this house. He told me that FHA required the cosigner, but I called FHA and they said that they do not approve or deny loans.

I am unaware of my rights as a first time homeowner and just want to know more about how this process works before I think the worst.

Thanks –  Anonymous.”

We responded:

“Loan application management is a very difficult and changing area of the law.  The industry was turned on its head last October when all the provisions of the Dodd-Frank Act were implemented.    The lenders across the country  are still struggling to satisfy the requirements of the new  law.  Many smaller lenders have gone out of business.     What was supposed to be a consumer protection law, may ultimately hurt innocent borrowers like yourself because : (1) there is less competition for your loan and therefore  it may be harder to shop for lowest rates;  (2)  average times required to close have nearly doubled!   That means that deals that are time sensitive, e.g., purchase of homes that are scheduled for foreclosure, are falling apart before they can close; and (3) as I suspect may have happened to you, lenders are internally indecisive on how best to comply with the multiplicity of underwriting guidelines they must satisfy. A lender in a loan like yours may have to address FHA guidelines, Dodd-Frank compliance, AND the requirements of an investor or wholesale purchaser that will help to fund the loan.    I’ve had several loans this spring that our firm has closed where the lenders have  “done a 180” and completely changed the underwriting approach a few days before closing.

I genuinely hope that you and your realtor can keep the sellers in the deal with an addendum to extend the time for closing.  If your sellers have a distressed loan or a short sale, they may well be under extreme pressure right now.   Or worse, the sellers may have a better offer waiting in the wings and want to sell to a higher bidder if you stumble on your way to the loan finish line.

But I have to be honest with you and tell you that I do not see any major negligence on the part of the lender or other cause of action for which you could hold them legally responsible.  The one area of  greatest vulnerability that many lenders fear is the area of “discriminatory lending”.  If you had reason to believe that you were required to secure a co-signer based on your race, gender, national origin, etc.,  and if you had evidence of such discrimination, you could put the  fear of God into the lender by suggesting that you may ask for an FHA investigation of their lending practices.     But aside from discrimination, and based on what little you have shared with me, I do not think you have suffered a  lender abuse that would entitle you to damages if you lose your contract right to buy the home you are hoping for.  I think the time and expense you would spend trying to:  (1)  prove the lender wrongdoing or negligence; and (2) proving a direct causation of that wrongdoing to your damages  . . . would have a slim chance of success and would distract you from finding another house to buy now that you have apparently satisfy all the lending guidelines to get a mortgage to buy a home.

Our firm specializes in keeping deals on track and helping everyone achieve the goals set forth in the Purchase Agreement.  Please call my team and set up an appointment if we can help you with that objective.   We are not currently staffed to help with litigation or holding lenders accountable for wrongdoing but if you need a recommendation for law firms that could help you with that,  I am happy to help with that as well.

Thank you for your inquiry.”

Charlie      –      Charles D. Pittman, Jr., & Assoc., P.C.

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