Turning away clients...never easy, but sometimes necessary!

Mortgage and Lending with Draper and Kramer NMLS# 189006

The real estate market is a tougher place today.  Underwriting guidelines are changing almost daily, rates are a roller coaster at times, and some buyers have listened to the doom and gloom of the media afraid to do anything in the real estate market.  When I received a call from what seemed to be a very well qualified buyer interested in purchasing a couple of homes to rent out and to rehab, I was more than happy to help. 

The referral came from a Realtor partner.  I spoke to Mr. Smith (name changed to protect the guilty) about the first property, he wanted to make an offer.  I gathered all of the information, which turned out to be his wifes information.  red flagAccording to Mr. Smith, his wife is a doctor for a well established clinic in an upscale area and just did not have the time to provide me with a phone call.  I explained to Mr. Smith that I would prefer to speak with Mrs. Smith and in order to provide a "pre-approval" I would need supporting documentation.  I do understand that at times one spouse may have more time than the other, but when speaking with one and the loan will be only under the other spouse I am uncomfortable with that. 

I was referred to Mr. and Mrs. Smith's on staff full time accountant for all documentation necessary to provide a pre approval.  I found this to be awkward and as difficult as getting a 2 year old to understand why they cant eat candy all day.  It took almost 2 weeks to get just about everything I needed (2006/ 2007 W2's, 2 months bank statements, and other asset documentation) except the pay stubs.  I spoke with the accountant on several occasions, but the last conversation with him concerned me.  I asked about the copies of recent pay stubs and was asked if a copy of the check she received would be sufficient.  I explained that I would need the stub as this would provide me with all the detailed information as well as year to date income, which would be necessary for underwriting at a later date anyway.  Mr. Accountant informed me that Mrs. Smith is no longer a W2 employee, she is 1099.  red flagNow as a 1099 employee, she is self employed.  Underwriting guidelines require 2 years self employment.  Unless automated approval only requires a YTD profit and loss or 1 year current 1040's, which she would not have.  After explaining this to Mr. Accountant within a day I received a call from the very busy Mrs. Smith.

Mrs. Smith wanted to check status on her pre-approval as well as tell me that they had put in an offer on another property and needed to close next week.  I explained the issues with needing her pay stubs and that as her accountant told me she is now self employed.  She was shocked, she does not know why her account said that, she was very sure she is still a W2 employee.  I accepted that and asked that she provide me with her current pay stubs so that I could move forward with her pre approval process. 

A couple of days later I received fax with 2 most recent pay stubs for Mrs. Smith.  The pay stubs were created from quick books. red flagOne had a pay period date of 10/1/08 - 10/15/08, the other had a pay date of 10/16/08 -  10/18/08.  The check stub was very vague, not your usual looking pay stub.  Missing was some of the usual suspects, Medicare Tax and State Tax.  I explained to Mrs. Smith that it looked like some of the deductions were missing from the pay stub.  She was unsure why it was showing up this way, but she would see what she could do to correct this.

At this point the red flags were getting bigger and bigger.  I did receive new pay stubs, with all the deductions now on the pay stubs but the dates were still unusual.  I received several calls from Mr. Smith wanting to move forward.  I informed my Realtor partner that I did not feel comfortable providing this information to my underwriter or providing a pre-approval for this borrower.  My lively hood is and has been for almost 12 years now working with people to purchase and refinance homes.  I love my work and can not and will not risk my license for something that just doesn't smell right. 

Maybe I am being silly, maybe over reacting?  My woman's intuition is telling me different.  I have not knowingly been a part of mortgage fraudmortgage fraud and even though as a loan officer my name is mud because of the others that have, I will continue to do what is right for me.  So with all those red flags, I turned away a client.

Kim Murphy

1st Advantage Mortgage a Draper and Kramer Company

Providing Loans in Illinois for DuPage, Kane, Lake, Will and Cook Counties

Comments (56)

Tom Burris
NMLS# 335055 - Baton Rouge, LA
Texas/Louisiana Mortgage Pro - 13 YRS Experience

I have denied people for this very crap.

Their response is telling. 

Instead of hanging up on me and calling another lender.... they grill me on why I cannot move forward. Even asking what they can do to get this deal moving. <= weird, huh?

Sorry... real people don't act like that.... they move on. Fraudulant applicants act like this.


Nov 17, 2008 08:57 AM
Bekah Casaday
ERA Oxford Realty - Gardendale, AL

Kim, I wonder what would have happened if you had just given them the preapproval and went through with the loan. These kind of things always come back to bite you. Good thing you trusted your instincts!

Nov 17, 2008 09:26 AM
Paul McFadden
Responsive Pest Control - Seattle, WA
Pest Control, Seattle, WA.

Kim: Hopefuly you didn't spend too much time on this one. These borrowers toally wasted your time. Goof for you that you knew what was needed to even get the loan done. It's also good about what you say. If a borrower doesn't get it, it's o.k. to kick that to the curb! Take care.

Nov 17, 2008 09:40 AM
Michelle Roethle
Windermere Peninsula Properties - Belfair, WA
Your NorthWest "Real Estate Solution"

It sounds like you did the right thing. Anyone can make a believable looking stub these days and unless you can confirm the information it is best to turn them away.

Nov 17, 2008 10:27 AM

I will turn down over priced listings, especially in this market.

Robert Brown, Cornerstone Real Estate, Logan Utah Real Estate

Nov 17, 2008 10:32 AM
Robert Brown
Cornerstone Real Estate Professionals - Logan, UT

I will turn down over priced listings, especially in this market.

Robert Brown, Cornerstone Real Estate, Logan Utah Real Estate

Nov 17, 2008 10:34 AM
Marian Goetzinger
Pine Knoll Shores Realty 252-422-9000 - Pine Knoll Shores, NC
Crystal Coast Real Estate NC

Good for you kim.  Do the right thing and good things will come to you.  Have you read "Blink".  I know you can trust your gut.  Good job.

Nov 17, 2008 10:50 AM
The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

That is awesome !  We need to take a lesson from you.  The times that I have sold no I felt so glad that we did as I knew it would be a waste of time ! Other times I that I thought I have should have said no and did not, I ended up compromising myself or just wasted time.  Am learning to say no more and am learning that it is very important to have this quality.

Nov 17, 2008 10:56 AM
Buffy Creekmore
Keller Williams Prime Team - Lexington, TN
E-Pro Broker in Lexington Tennessee

Kim, That is crazy and you definetly made the right choice. There will always be dishonest people for us to deal with. Thanx for sharing your story.

Nov 17, 2008 11:29 AM
Nelya Calev
John L Scott - Bellevue, WA

You did the right thing. Always go with your got feeling. Its better to cut them loose sooner

Nov 17, 2008 12:44 PM
Carl Stars
Sutton Group About Town Realty - Burlington, ON

I fired a client only once, but it felt good and I was empowered. Take control of your business no take control of your life..... When you fire someone there is often no consequences.( most of their friends know they are nutbars anyways !!   

Nov 17, 2008 12:49 PM
John Novak
Keller Williams Realty The Marketplace - Las Vegas, NV
Henderson, Las Vegas and Summerlin Real Estate

When you see that many inconsistencies, I think it is best to err on the side of caution. Will be interesting to see what happens with these buyers in the future.

Nov 17, 2008 01:27 PM
Kim Murphy
Draper and Kramer - Lombard, IL
Mortgage Loans in DuPage, Kane, Cook, Lake, Will C

WOW!  I never expected this to be flagged (no pun intended) for a feature and to come back to all your wonderful comments.  Thank you everyone for your support!  I know I did the right thing by turning this away.  The prospect of many homes as future business can be something that blurs the lines of ethics sometimes.  But in my opinion its just not worth my livelihood!  I have a family to support and kids that count on me!  Plus ....fraud doesn't look good on me!

Thank you all for your comments!

Nov 17, 2008 02:39 PM
LS Rogers Realty
LS Rogers Realty - Richardson, TX

Sounds like you made the right decision. Nothing like dodging a bullet.

Nov 17, 2008 03:37 PM
Lisa Hill
Florida Property Experts - Daytona Beach, FL
Daytona Beach Real Estate

Good thinking, and good job. Unfortunately, the "Smiths" will go looking for another mortgage rep... one who doesn't have any scruples.

Nov 17, 2008 05:14 PM
Dean Akey
Saint Charles, IL

Hi Kim, that is why you are who you are.  There should never be any gray matter when it comes to ethics and you did the right thing.


Nov 18, 2008 12:35 AM
Barb Szabo, CRS
RE/MAX Above & Beyond - Cleveland, OH
E-pro Realtor, Cleveland Ohio Homes


No doubt in my mind that you did the right thing!

Nov 18, 2008 02:46 AM
Kim Murphy
Draper and Kramer - Lombard, IL
Mortgage Loans in DuPage, Kane, Cook, Lake, Will C

Tunrda... I think so too!

Lisa... That is the part that frustrates me the most I think... they will find another lender that will do this loan and guess who continues to look bad in the end... ALL LO's!  SAD!

Dean... You are so right, no gray in mortgages only black and white... especially now!

Barb... Thanks!

Mike... I will go over there and check it out! Thanks


Nov 19, 2008 02:48 PM
Greg Wilson
1st Cornerstone Realty - Schaumburg, IL

Kim, You are absolutely right.  Sometimes its in your best interest to turn away a client.  I had turn down a few clients and I'm really glad I did.  Saves me so much touble.

Nov 20, 2008 12:34 AM
Vicki Watzlawick
CORE Realty (The Watz Team) - Algonquin, IL
Illinois Foreclosure Expert, The Watz Team

Good job Kim!  You did the right thing.  This career doesn't seem to get any easier...does it?  Keep up the good work!

Feb 01, 2009 01:55 PM