A young single mom was referred to me for help on refinancing her mortgage that she had with a private lender, and it is a good thing that she came to a professional. Prior to contacting me, she applied through one of the big National lender (now the biggest lender in the Country), but after 2-3 months of lack of response from them she was finally told that they could not do her loan.
She had a tough situation-about a year ago she went through her second divorce and almost lost her house which she'd owned for 9 years. She fell behind on everything, had 4 children, child support and divorce case tied up in Court, was paying 14.99% on a mortgage to a private lender which did not include her taxes and insurance. She really wanted to get a new loan but after going to the National lender for help and being turned down she was ready to give up.
Right up front, I told her that her case is tough and may not be able to help. However, after asking her a lot of questions, I determined that aside from the 480 credit score staring boldly at me and the numerous delinquent accounts on her credit there were a lot of compensating factors that I thought would make the loan work. First, she had over 20% equity in her house. I also found out that her mom lives with her and is also on title to the property-she was added to title by the private lender a year ago to qualify for that loan.
I suggested that the only viable option is to do an FHA refinance, same thing that the national lender recommended but this time we documented all the income including her mom's and structured the deal and include a nice memo for the compensating factors. We went back to the previous bank and had them transfer / release the FHA case ID# and the appraisal to us. The loan was submitted to the bank late August and received a commitment 5 days later. The commitment asked that the appraisal be in the new lender's name. We contacted the appraiser and were told that another appraisal will need to be done and it will cost another $150 to complete. Additionally, the commitment asked that we document the child support income from the 2nd ex and show that she's received it for the last 3 months. Big problem! She just started receiving it in June of this year but she received cash. Court Order does not specify that she paid in a certain form but as we know, banks need proof of forget about it. Back to the drawing board! We contacted the lender and asked that they review the loan with the child support from the 1st ex-husband only but now I'm worried that it may be denied as the debt to income ratio is more than 44%.
We advised our client that we'll hold off re-ordering the appraisal until we get the green light from the lender that they've signed off on the revised income and debt to income ratio. It just did not make sense to pay another $150 if the loan can not be worked out. So we waited a couple of days, and contacted the lender. No response! 2 days eventually turn into weeks and many correspondences between us and the bank later, we finally received the green light on September 12th. The new appraisal was ordered and had the client pay the $150. Five days later, we received a clear to close from the bank. We're all elated and I made the "good news" phone call to the client. We scheduled it 2 days out.
Opps! The day before closing in the afternoon, I received a call from the bank. They said that the underwriter had made a mistake reviewing the income, and unfortunately they can not do the loan as they were showing less income. Remain calm-I said to myself. They said no deal and they were going to deny the loan. This after giving us the green light to go ahead with the new appraisal, and giving us a clear to close!! They said that the 3 months bank statements we provided only show 3 direct deposits from the State of Maryland and they added up to $106 less than what we stated.
From the bank statements, it appeared that the lender may be right but then looking at the bank statements we noted that the last direct deposit is included in the next statement. We contacted the lender and asked that they review again the statements. They did, and they came back that they were still coming up with the same amount. Now we're thinking to ourselves that perhaps they are just trying to find a reason to deny the loan. The processor said, "I just don't think they'll do the loan". I'm not giving up that easily unless they prove me wrong because I know that the income is there.
Time to try another avenue. Perhaps if we can show all the deposits in one place, it will make it easier for the underwriter and will give her no choice but to sign off on the loan. So I called the client and asked if she had used the State's website for child support history. She didn't, so I walked her through setting one up on the phone. Afterward, she went on-line and printed 6 months history proving that indeed she had been receiving it consistently. We forwarded it to the lender but you won't believe what came next. "Paul, the borrower has not been getting the same amount each week".
To which I replied, of course it won't be the same amount! The Court Order only specify that she receives an amount each month and when you add all 4 deposits it matches what the Court Order mandate!
We closed last Thursday, and funded today. The clients are thrilled. It was a tough loan but in the end, she's saving $1152 a month and that includes her escrow.
Bottom line-deals can still be done. It might take longer but if it can be done we'll get it done and if it can't , we'll be upfront with your client. It might just be a case of working on some things first before it can happen. Now more than ever, an experienced mortgage professional, who is knowledgeable, is ever more important.