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What is a person to do when they find out the application they filled out and the application turned in are different?

I got a call yesterday from a person that asked a question that I couldn't answer and I told them I had a great network across North America and someone was bound to have the answer.

I took this person at their word over the phone and I really do want to help them despite them already having lost their home. The situation was that about 3 years ago they were looking to get equity out of their home to help make ends meet. (I know a lot of people did.)

They did a stated income refinance loan on their home and turned in an application based on what their business had been making them. The loan was given and for much more than they thought. It helped them through some lean times at their business, but there were consequences! About a year later they needed money again because the economy started to turn. Now they had no more equity and their APR was about to adjust, and they just couldn't make the payments anymore.

They tried everything to stay. They didn't want to do a short sale and in the end they lost their home. But, they got a call from the auditing department of the bank and they had questions about the amount they made in 2006 versus what the IRS showed they made. (There was a major difference!)

They thought this was weird and told the person on the phone to hold on because they kept everything. They pulled out the application and it was actually lower than the amount than she claimed on her taxes. (The last couple months were better than expected.)

The auditor was confused by this and wanted to have her come down to their local offices with the copy of the original application because there was a difference. What this person now wants to know is who can she sue and also report this loan officer to? This person got a loan that it turns out, according to the auditor, should have never been given for that amount. The true amount should have been about $100,000 less, but someone changed the numbers on the application.

This person is calling me back on Friday and I would love to hear some advice from my fellow Rainers on what I should tell her to do besides contact a good real estate attorney?

Todd Clark - broker
Kastings & Associates
Phone: (503)524-9494
Fax: (503)622-8739

Posted by Todd Clark (Broker) (503)524-9494 (Beaverton, Oregon Real Estate Expert) on 11/06/2008 08:32 AM

Comments (17)

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Originally posted at: Living Beaverton - Your guide to everything Beaverton: What is a person to do when they find out the application they filled out and the application turned in are different?

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17 Comments on What is a person to do when they find out the application they filled out and the application turned in are different?

NOV

2008

I'm an attorney as well in Illinois. I would call the state regulators. I would call HUD to file a complaint. Call the State's Attorney and the Attorney General's Office. They'd have a field day with this.

She should certainly report this to the Department of Banking (or what ever entity regulates such things) in her State as for who she can sue, I would say that she address that question to an attorney. I know you were looking for a different answer but I don't think there is one. My personal opinion which is only an opinion and shouldn't be construed as advice is that she is without recourse, if not legally certainly ethically.

TC,

Just a suggestion...I would peruse Fannie and Freddie websites to see if there isn't someone there to help with this...!!! Thanks, Fran

Todd, this sounds like a "Go to Jail! Go directly to Jail!" situation. I wonder what the auditors do with this kind of information.

Though it may not result in any gain for the person with the altered application, an example should be made of the people involved in this.

Wow, many people are finding themselves in these situations. You stated that the amount on the application was lower than the amount on the taxes seemed as though this part is odd. Most self employed people I have ever come across right down aa much as possible. As this was a "stated" loan they should consult an attorney, state banking department, and the attorney general. There is now a national registry for loan officers. I would suggest they chcck and see if this person who wrote the loan is listed or not. Good luck helping them.

This is unbelievable - my husband and I own several businesses so I know all about cash flow and bank loans. But didn't they have to sign at closing the loan app? Is the Lender still in business? This may be one of the ones that has flown the coop. Please let us know what happens.

I would call the state attourney's office. I'm sure if they aren't the appropriate entity to handle this, they will know who is. This is precisely the reason we're in such a mess. Unscrupulous lenders doing anything to make a buck.

While it infuriates me that these practices were being made by lenders, I am a firm believer in individual responsibility. While you can't bame someone for not knowing all the rules and regulations of the morgage industry, and Lord knows there are plenty, often times these consumers got more money than they expected or a bigger loan than they expected and didn't question why. If it's to good to be true...

That being said, I do feel terrible that so many people, naive or otherwise, have been taken advantage of by dishonest, greedy lenders, both brokers and banks alike. It has made the task of proving there are honest, ethical brokers like myself out there, much more difficult. The good news is, what goes around, comes around and eventually, if we can weather this financial storm, we good guys will come out the other side.

My sympathies to your clients and...

GO GET 'EM!

Hi Todd, I agree with Larry Bettag in the first comment above. Let us know the outcome.

Yes this does sound very fishy too me. i wonder how this activity could have gone on. Please let us all know

Todd, We are going to be hearing a lot of these stories over the next few years. I hope they have the original contract to prove they didn't lie on the application. This is one of the first questions I ask folks who are needing to d a short sale "Did you buy this property with a stated income loan and if so will your tax returns match the income you stated?" Lenders are going to be looking at this stuff real hard.

I hope things workout for these folks.

NOV

2008

Self employed persons can "state income" and project what their income for the year would be. If they are including any part of a year that has not arrived, they can do a year to date statement.

The fact that the bank officer changed the income on the application shows mortgage fraud on the part of the bank officer. I don't see any violations on the part of the borrower.

However, I have a question. The Fannie Mae Form 1003 is reviewed and signed again at closings. Every attempt is made to determine that the borrower's financial qualifications haven't changed since making the original application.

So, at this point. I'm wondering. . . . . . .

It's funny how things come to mind when a piece of the puzzle is missing. What is missing here is the final typed Form 1003 and the borrower's final statement on the final typed Form 1003.

The original Form 1003 is not as important, IMO, as the final one signed at closing.

NOV

2008

Todd,

Amazing. I think everyone I can think of to notify has already been mentiond. So I will just give you three initials FBI.

NOV

2008

UPDATE: I gave this person the link to this site and she has read all your advice and contacted an attorney as well as the state Attorney Generals Office.

Larry - I passed on this post and she is going to go after this person and maybe, just maybe she can have some closure with this that may help her get her next home.

Beth - Thank you for your advice, she was amazed at how many people answered and gave advice....I think we have a new Activerain fan out there in the world.

Fran - Never thought of that, that is a good idea, since they are probably the ones who bought the loan anyway.

Patricia - I hope send that person to jail...I'm just glad this isn't one of my clients and I didn't have anything to do with them hiring this mortgage broker.

Rob or Jeannie - I agree, an example does need to be set and this broker needs to be in jail.

Eric - I didn't want to ask to many questions and I didn't even ask for her last name as I didn't want to get involved to much because then I could be involved in what could be an ugly court battle. That is for lawyers, not me!

Kathy - I'm guessing like most people they just skimmed over everything, saw that it was the loan application and just assumed it was the same as what she filled out originally.

Richard - I have a feeling a lot of people that were out to make a quick buck at the end of the mortgage high are now out of the business and counting their winnings, but I would love to see them be caught and spend some time in jail for what they did.

Shirley - I don't know if she will call me back after she has went after this person, but I told her to, because we would all like to know what happened to this person.

Sharon - I think it is a lot easier than we think. Remember at the closing table these people are signing 400 copies of everything and one little number missed could lead to something like this happening.

Bryant - She did have the original and she was very grateful she did that. Most people would have kept the original or even kept the paperwork after they lost their home. She is just one of the lucky ones!

NOV

2008

Hey Todd, I'm looking forward to your next blog on this topic. Thanks!

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