I had a borrower come to our office on Monday afternoon and drove 30 miles without an appointment.  They were emotionally devastated  looking for a loan and were referred to me from a past client.   The reason they were here is that they had applied to a bank who will not be directly named but sort of like Bank of Something NA.  They had applied on June 6th, providing tax returns, assets, etc and received a formal commitment letter stating they were"Approved" for a 30 year conventional fixed rate loan @ 6.5% for $190,000 with a 95% LTV.  

On June 25, 2008 they proceeded to enter into a purchase contract on a bank owned property at $155,000 and a loan of $147,250, and a 30 day close of escrow.  So after having provided at the time of application all the required documentation and having a middle FICO score of 792, they were given the good news on July 25th the day of closing that they did not qualify and would need to bring in an additional 10% to qualify for a loan amount of $131,750.   Hard to believe huh!

Not only a "Loan Officer" but an entire supporting staff  apparently did not know what they were doing.  It took me about 30 minutes to review the 1040's, assets and pull my own credit report.  I could immediately  tell it was going to be tight.  I ran a FNMA DU submission and received an Approve/Eligible status but there is absolutely no way in hell these people would qualify for a loan exceeding $150,000.  They have virtually no debt and their overall ratio's are 41/42%.   These people spent money for appraisals, property inspections, made moving plans and then get the bad news literally the day of closing.  It is almost a criminal action in my opinion although one could never press charges.

Yes, I know guidelines are changing but incompetence has nothing to do about changing guidelines.  And yes this may be an isolated incident but do these large institutions not review the basics before wasting borrowers money & time including all the supporting services, Realtors, Title, Escrow etc?  They certainly do not accept any responsibility for their actions!

I submitted everything in less than 24 hours (After all with a couple of phone calls I had preliminary Title, Escrow, & the borrower provided assets, Income...everything but the appraisal) and will have MI approval before I waste any money on an appraisal. The approval will be subject to a satisfactory appraisal.  I am certainly not the only brokerage that can turn things around quickly.    I contacted the listing agent and gave them copies of the DU approval and what my game plan was and received a 20 day extension yesterday afternoon.   I don't know if we will pull this off but I can guarantee after underwriting confirms my findings that I will close it or within 24 more hours kill it.

Moral of the story....Just because it is a national lending institution don't count on anything.  It is never the company but as  Paul Slaybaugh will say from experience, always know the people who you are entrusting your transaction.