I could have lost my license because you flat out lied to me?

Mortgage and Lending with Amerifirst Financial, Inc. - FHA, Conventional, Jumbo Loans

If I do my job correctly I can usually find out if a "potential client" is telling me the truth or flat outCabin Home lying to me. In this case the "potential client" wanted to refinance their 2nd home. They live in Texas and have a 2nd home in Peoria, AZ. My first question was, 2nd home in Peoria, AZ??....Little Red Flag #1Red Flag. If you're not familiar with Peoria, AZ well... let's just say it's not your typical 2nd home area, but it is possible. Here's his explanation when I asked more about his 2nd home in Peoria. "So how often do you come out to Peoria and stay?" His reply "My wife and I come out every year for about 4-6 months to visit our family and spend time with our grandchildren that live in the area." At this point, this was a believable situation and made sense to me.

I proceed with the application and get the client pre-approved based on the information he was telling me. I provide several different options and he tells me "let's move forward with option #2." I then explained that I'll be emailing him a list of the items required in order to submit the file to underwriting. Now, I usually like to wait until I receive my clients' documentation to verify everything they told me over the phone was true and accurate before I order their appraisal. I wouldn't want my clients spending $400 if there's something in their documentation that would cause a denial. The next day after I sent his needs list he called me and asked why I needed his tax returns...Little Little Red FlagRed Flag. (This wasn't as much of a red flag because most of our clients today ask why we need tax returns but since I already had a red flag I decided to keep this one in the back of my mind as a little little red flag.) He doesn't even blink an eye and INSISTS everything is good he'll FedEx the package overnight. I told him once I receive his package I will order the appraisal. He then asked me "can you order the appraisal today? SURE! I mean he is a WELL qualified borrower and is paying for the appraisal upfront. We order the appraisal and charge his credit card $400. A couple days pass and I haven't received his package yet. I make a phone call to him and he tells me he's been busy and he'll overnight it again. It happens but a couple more days pass and still no package. Little Little Red FlagRed Flag, but I understand people are busy and it is a lot of documentation to gather up. I make a phone call but this time to explain to him we should have the appraisal back within the next 24 hours and I still have not received his package. He apologizes and insists he'll overnight it today.

We receive the appraisal and the first thing I look at is this.


Ok, the appraiser apparently believes this is not a RENTAL (the little little red flags starts to fade) BUT let's look a little deeper and take a peek at the pictures.

Hmmmm, does this really look like a 2nd home?? Little Red Flag Red FlagThey are currently in Texas and it appears someone is living there right now.

 Kitchen Bedroom Bedroom Bedroom

 Now, let's give them the benefit of the doubt BUT I still have not received his package?? There's that darn Little Little Red FlagRed Flag back again.

I finally receive his package 2 days later and open it right way to go right for the tax returns. Why you might ask, to see if there's a Schedule "E" in his returns.


Schedule E

BIG Red Flag Red Flag

Not only is it listed as a "Residential Rental" but take a look at Income "rents received" and then add up Expenses #12 & #16. It equals, to the dollar "rents received". So basically someone is paying the exact amount of his mortgage payment. Let's take a guess and think who would pay the exact amount of the mortgage payment. I guess a family member but you never know.


SIDE NOTE: You may be thinking that I could be the type of Loan Officer that looks at every file and try's to find a way to NOT make it work. BUT I can promise you, that's not the case. My colleagues can tell you that I'm the very aggressive type when it comes to finding a way to making a loan fit the guidelines. I'm a think outside the box kinda guy and if it makes sense why not push the envelope.

Did you know the #1 most fraudulent loans written in today's market is OCCUPANCY! Fraud

Here's a simple breakdown, the buyers calling a home a primary when it's really an investment property or buyers calling a property a 2nd home when in fact it's an investment property.

Not only do I stress the importance to my clients about structuring the loan correctly to protect themselves and their family but I also make sure they understand that I will not take part of any fraudulent activity.

If clients would just be upfront we can either find a way to make it work the RIGHT way or save them $$$$!!!

Are you wondering how this went when I called my client back to break the news?

Here's what happened...

When I called my client back to discuss how his tax returns were reading, the truth finally came out after he argued with me for 20 minutes that it's NOT a rental. His son's family lives there year around make the mortgage payment. He tried to tell me "but we go out there every couple months so to us it's a and we don't make any money from the property".  I understand that may be the case but the bottom-line is you're reporting to the IRS that it's a rental and you receive rental income. And if you refer back to your tax returns you will see you check NO on these 2 boxes


HERE'S THE GOOD NEWS! We can switch your loan to a N/O/O (non-owner occupied) property and complete your rate & term refinance.

If clients would just be upfront we can either find a way to make it work the RIGHT way or save them $$$$!!!

SO TIP OF THE DAY: In order to qualify your home as a 2nd home (for mortgage purposes) you CANNOT RECEIVE ANY RENTAL INCOME or at least claim itWink on your tax returns.

Did you know every loan we originate will be linked and tracked back to our license number? Think investors will be watching how the loans we originate will be performing or if any have fraudulent activity? What do you think will or should happen if we start originating BAD performing loans or loans with fraudulent activity?

I have so much passion and enthusiasm about what I do that not only do I look out for my clients and their family, I also look out for what's MOST IMPORTANT to me. MY FAMILY!

 Family Photo

Posted by



Ron W. Kelleher

Licensed Mortgage Planner


Financing Available



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Melanie Hedrick
Elite Texas Properties, the best homes from McKinney to Dallas! - McKinney, TX

Got to dot the i's and cross the t's to stay in compliance.  That sure is a cute little girl in your picture -- great pony tail!

Feb 01, 2011 02:47 PM #1
Lynn B. Friedman
Atlanta Homes ODAT Realty Call/Text 404-939-2727 Buckhead - Midtown - Westside -- and more ... - Atlanta, GA
Concierge Service for Our Atlanta Sellers & Buyers

Dear Ron,

Explaining to new Clients that we have both Legal and Ethical guidelines to follow is an important initial step at our firm.  

I applaud your "taking care of my family" statement!  If the person isn't honest at the beginning - why put my family and my career at risk?  Not to mention the good reputation that I have built up for myself over the years?  

Better to skip the client and not risk license or ethical infractions in my book.

Have a happy day -

Lynn B.

Feb 01, 2011 03:24 PM #2
Joe Reed
Amerifirst Financial, Inc. - Scottsdale, AZ
Loans for Short Sales and Investors

Wow. It's a good thing you are as detail oriented as you are and you caught this early on. This could have been a major problem if you had let this get to closing or beyond.


We can all learn from your experience. Thanks, Ron.

Feb 01, 2011 06:44 PM #3
Tara Cummins
Stratagy4SuccessNow - Mesa, AZ
Marketing Concierge, Strategy4SuccessNow

Excellent post with lots of great details.  Of course you want to make deals work, but certainly not at risk of your license.  Too bad some people don't know that if they'll just be honest you may still find a way to make the loan work.

Feb 02, 2011 12:49 AM #4
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Ron Kelleher

FHA, VA, Conventional, and Jumbo Home Loans in Arizona
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