I had a pretty crazy week.   I have done many transactions in my career, but this week two of my borrower's did such egregious acts, that I am at a complete loss.  A third potential borrower wasted hours and hours of my time and his agents.    All three lied.  One committed a criminal act.

Are things really that desperate today?

ACT I:  I am doing an FHA loan for a woman.  She is a single mom and she takes care of her young son and, she told me, her disabled mother.   

The loan was declined through FHA's automated underwriting system so we went for a manual underwrite to get loan approval as we felt the loan had merit. 

There are some credit issues that needed to be explained for us to persuade the underwriter.  

Nearly all of the issues took place around the time that this woman said her mother became permanently disabled, UNABLE TO WORK, and then had to move in with her.  

Having to suddenly care for three people drained her of her finances, created the credit mess, but got through it.  Now she has a better job and its no problem managing her debt. 

Great explanation!    I was certain we would win.

The underwriter asked for some back-up.  A note from the doctor, detailing her mother's disability, she suggested.  The borrower said she would call the doctor. 

A week later she said she could not provide the letter.   She said the Doctor is in Florida and they don't remember his name. 

I then suggested, "how about some of the medical records?"  "They are in storage in Florida," she said.  "And no one has access to the storage unit there." 

I then called a doctor friend of mine, Dr. Simon, and asked him if he could see the borrower's mom and then write his medical opinion.  He said, "no problem." 

I called the borrower and told her Dr. Simon would call her to set up the appointment for her mother.   She was very appreciative.

With the real estate agents on both sides really leaning on me now for answers and the closing date rapidly approaching, I called Dr. Simon and asked that he get her in quickly.  Dr. Simon called her right then.  

Then he called me back minutes later.  "Aaron, the mom can't come in until Tuesday....because that's her NEXT DAY OFF OF WORK."  Unbelievable.

ACT II:   My processor comes into my office on Wednesday with a look of shock on her face. 

I asked, "What's the problem?"   She said, "look at this."   She handed me the borrower's paycheck stub.   It showed that he had made $65,000 so far this year. 

Next she handed me a form we use called a Verification of Employment.  It is filled out by the borrower's employer.  It showed that he had made $45,000 so far this year.    

I called the borrower, thinking that his employer screwed up the form somehow, which is pretty common because it can be confusing.

"Oh, no, that is right...I fabricated the paycheck stub for another lender I was going to use before you," he said.    Incredible.

The sad part is he easily qualifies with the $45,000 and didn't even need the $65,000 forgery. 

ACT III:  An agent I do a lot of business with has been working with a renter for over a month now.   Unfortunately, the guy would not let us pull his credit. 

He simply said his score was in the "600 range" but he had identity theft RECENTLY that he was working with a credit specialist on so he didn't want it pulled.  

He was looking for 100% financing when the time came to buy a house.

Of course, I recommended to the agent that he not waste a lot of time until we pull credit but he liked the guy and felt sorry for his plight.   We did confirm that this prospect makes a great living, with a lot of income, so that was enough for the agent to start showing him houses.

Last week, the borrower finally let us pull his credit.  The score was below 500, which makes him ineligible for anything other than a hard money loan that would likely require a 20-30% down payment.

We also confirmed that the identity theft had happened TEN YEARS AGO in 1997 and had nothing to do with this guy's poor credit history.  He simply doesn't manage his finances correctly.  Four weeks wasted.   Amazing.

The bottom line is it is crucial that you let your clients know that it is of the utmost importance that they be honest with their lender from the very first day, no matter how bad they think their situation is.   

In nearly every case, we are going to find out the truth sometime during the process anyway, so you might as well be truthful upfront.

When the borrower is honest at the beginning, most experienced lenders can work around the bad things and still get you a loan.  When we get blind-sided by lies at the 11th hour, it may kill your deal.