I got a call from a young unmarried couple this week that went to school with my two sons, and whom a Realtor that I partner with referred to me. This young couple had been Pre-Qualified by one of the major Internet Lenders that advertises a lot in my area. This Realtor has been around long enough, and burned enough times by this type of Lender, that he does not trust their Pre-Qualification Letters.
The Pre-Qualification Letter from the Internet Lender was just on the female member of this relationship, because his credit scores were in the low 500’s. Her middle credit score (which is what we use) was 701, and the Pre-Qualification was for a “Stated Loan”. I don’t know about other Loan Officers, but I do not have any Stated Loan Programs for credit scores in the low 700’s.
When I got the call I did what I always do, I asked a lot of questions. I particularly ask if they know what their credit is before I run it, and what their income is. From the initial response that I got it was clear that I could not qualify them on just her income for the amount they wanted to be qualified for. So I suggested that we first look at both their credit, because sometimes we can fix someone’s credit very quickly. When I looked at the Credit Report, it was obvious that it would take a few months to correct his scores, and they wanted to purchase a Condo right away.
It was clear to me why the other Loan Officer was trying to do a Stated Loan on her only. She is a Waitress, and even though she receives a base hourly rate, a large part of her income is from tips, and she does not claim all the money that she receives in tips (a way of not paying taxes, but not good for mortgages). I asked her if she had any documents from the other Loan Officer, she said she did and would e-mail them to me.
I quickly looked at the documents as soon as I received them, and I did not like what I was seeing. Right off the bat the interest rate was one point higher than my rate, and the Closing Costs were $1,000 higher. The other Loan Officer also grossly understated the taxes and condo fees for that area. It became even clearer what was happening when I looked at the income that he was stating. He was stating both her income and his, even though she was the only one on the loan.
I called her back and went over with her what I was seeing, and then told her to read the disclosures that she had received VERY carefully. The disclosures stated that she was giving them permission to verify the income, by giving them permission to request her tax returns. It went on to say that tax returns might be pulled at time of application or by Quality Control after the loan closes. It also warned her in several place about providing false information.
This Loan Officer was encouraging them to sign documents that obviously contained false information. That is not only FRAUD on the part of the person signing the documents, but also FRAUD on the part of the Loan Officer encouraging them to sign documents that he knew contained false information.
I showed the Realtor the documents that they had received from the other Loan Officer, but he was already aware of them, because she had also forward them to him. He told me that he was not going to have anything to do with this, should this young couple decide to go forward with this Internet Lender.
He and I have advised them of the consequences if they go forward with this, as well as the games that will probably be played with them along the way. Should they do this, they will be doing it with full knowledge that this is Mortgage Fraud. I am also going to encourage them to report this Lender to the Banking Commission, should they decide not to go further with them.
So be careful out there, even though things have slowed down a little bit, and Lending Guidelines have tightened, the unscrupulous are still around, and spinning their web of corruption.
George, you need to walk around with a T-shirt with this printed on it. Super George to the rescue!
Very sad George. Do you think they will take your advice? I hope so. It is soooo easy for someone to get on that 'high' of wanting a house and ignoring what is staring you right in the face. I hope they listen. You explained it well but then I should not be surprised!