The real estate market is a tougher place today.  Underwriting guidelines are changing almost daily, rates are a roller coaster at times, and some buyers have listened to the doom and gloom of the media afraid to do anything in the real estate market.  When I received a call from what seemed to be a very well qualified buyer interested in purchasing a couple of homes to rent out and to rehab, I was more than happy to help. 

The referral came from a Realtor partner.  I spoke to Mr. Smith (name changed to protect the guilty) about the first property, he wanted to make an offer.  I gathered all of the information, which turned out to be his wifes information.  According to Mr. Smith, his wife is a doctor for a well established clinic in an upscale area and just did not have the time to provide me with a phone call.  I explained to Mr. Smith that I would prefer to speak with Mrs. Smith and in order to provide a "pre-approval" I would need supporting documentation.  I do understand that at times one spouse may have more time than the other, but when speaking with one and the loan will be only under the other spouse I am uncomfortable with that. 

I was referred to Mr. and Mrs. Smith's on staff full time accountant for all documentation necessary to provide a pre approval.  I found this to be awkward and as difficult as getting a 2 year old to understand why they cant eat candy all day.  It took almost 2 weeks to get just about everything I needed (2006/ 2007 W2's, 2 months bank statements, and other asset documentation) except the pay stubs.  I spoke with the accountant on several occasions, but the last conversation with him concerned me.  I asked about the copies of recent pay stubs and was asked if a copy of the check she received would be sufficient.  I explained that I would need the stub as this would provide me with all the detailed information as well as year to date income, which would be necessary for underwriting at a later date anyway.  Mr. Accountant informed me that Mrs. Smith is no longer a W2 employee, she is 1099.  Now as a 1099 employee, she is self employed.  Underwriting guidelines require 2 years self employment.  Unless automated approval only requires a YTD profit and loss or 1 year current 1040's, which she would not have.  After explaining this to Mr. Accountant within a day I received a call from the very busy Mrs. Smith.

Mrs. Smith wanted to check status on her pre-approval as well as tell me that they had put in an offer on another property and needed to close next week.  I explained the issues with needing her pay stubs and that as her accountant told me she is now self employed.  She was shocked, she does not know why her account said that, she was very sure she is still a W2 employee.  I accepted that and asked that she provide me with her current pay stubs so that I could move forward with her pre approval process. 

A couple of days later I received fax with 2 most recent pay stubs for Mrs. Smith.  The pay stubs were created from quick books. One had a pay period date of 10/1/08 - 10/15/08, the other had a pay date of 10/16/08 -  10/18/08.  The check stub was very vague, not your usual looking pay stub.  Missing was some of the usual suspects, Medicare Tax and State Tax.  I explained to Mrs. Smith that it looked like some of the deductions were missing from the pay stub.  She was unsure why it was showing up this way, but she would see what she could do to correct this.

At this point the red flags were getting bigger and bigger.  I did receive new pay stubs, with all the deductions now on the pay stubs but the dates were still unusual.  I received several calls from Mr. Smith wanting to move forward.  I informed my Realtor partner that I did not feel comfortable providing this information to my underwriter or providing a pre-approval for this borrower.  My lively hood is and has been for almost 12 years now working with people to purchase and refinance homes.  I love my work and can not and will not risk my license for something that just doesn't smell right. 

Maybe I am being silly, maybe over reacting?  My woman's intuition is telling me different.  I have not knowingly been a part of mortgage fraud and even though as a loan officer my name is mud because of the others that have, I will continue to do what is right for me.  So with all those red flags, I turned away a client.

Kim Murphy

1st Advantage Mortgage a Draper and Kramer Company

Providing Loans in Illinois for DuPage, Kane, Lake, Will and Cook Counties