"Thank You, Flagstar!" - Financing 'Plug Pulling' in the Eleventh Hour

Real Estate Agent with Fathom Realty West Sound WA State 52404

Flagstar Bank pulls the plug in the 11th hour!

These 1st-Time Home Buyers are awesome folks! They're the kind of people you LOVE to do business with. Even though they're relatively young and just starting a family, they've been exceptionally prudent and responsible with their finances. Their credit scores are exemplary. They have no outstanding debts. And both husband and wife have very stable histories of employment/income. They have a substantial chunk of change in the bank, and their parents are giving them a very generous gift to be used for a down payment.

Halfway through the transaction, there were some concerns voiced over the tax ramifications of the parents giving these kids a gift, so the gift was changed to a loan, and a vehicle was used as collaterral.

Yesterday, one day before closing, the kind folks at Flagstar pulled the plug. They stated that the vehicle was not sufficient enough to pose as collaterral for the loan.

They were asked if additional collateral was furnished, would that suffice? They said "No."

They were asked if the loan disappeared and the money was again offered as a gift, would that work? They said "No."

They were asked if there was anything that could be done to fund the loan? They said "No."

So 'Thank You' Flagstar Bank!  Your New Wave of Banking is simply a wave 'Good-Bye!'

~    o    ~    o    ~    o    ~    o    ~    o    ~

Rich Jacobson is a licensed real estate professional providing empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com, SOUNDBITEBLOG, and Crabbing in the Hood.

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Rich Jacobson is a District Director for Fathom Realty and a licensed REALTOR®; an avid Crab Hunter, Clam Digger, and Oyster Shucker, He is the Social Media Evangelist for Life on the Kitsap Peninsula & The Western Puget Sound in scenic WA State.


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Lisa Udy
Platinum Real Estate Group - Logan, UT
Logan Utah Realtor

Hey Rich, 

I had a similar situation happen to me, I had a buyer who had 800+ credit scores. They had a new house built, had plenty of money in there bank. There parents wanted to give them a gift for there down payment, and the bank put them through the ringer! It took a month to finally get the loan worked out. Thank goodness we got it funded, the house was already built!! It would have been a disaster to not have funded the loan. We ended up having to switch banks to get it done...It was ridiculous!


Mar 24, 2009 05:54 AM #13
Colleen Fischesser Northwest Property Shop
RE/MAX Advantage | Managing Broker - Chelan, WA
A Tradition of Trust in the Pacific NW since 1990!

I was just talking with someone yesterday and said that now more than ever nothing is EVER a done deal until it's really, truly, everyone-actually-has-the-money-in-their-accounts done! Best of luck for your buyers, hopefully they just hit a snag and not a dead-end.

Mar 24, 2009 06:08 AM #14
Steven L. Smith
King of the House Home Inspection, Inc. - Bellingham, WA
Bellingham WA Home Inspector


That is a really interesting scenario. It is frustrating when they pull the rug out that close to closing.

Mar 24, 2009 07:06 AM #15
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Rich, WOW that does not make sense.  First the Loan Officer should have been able to get a answer from his Underwriter before they even did this to see if she/he would accept it.  Second, it does not make any sense that they would not be willing to re-structure the loan using gift money or anything else that would make it work, or even switch to a loan program that could use those funds. Sounds like the Loan Officer was a sleep at the switch to me, or doesn't know what the heck he/she is doing. 

Tell them to buy in Connecticut and I will get them the loan .......... LOL

Mar 24, 2009 07:07 AM #16
Linda Bourgault
lulugraphix-creative photography & fine art - Flower Mound, TX

Hi Rich—Just my opinion, but as a loss mitigator I do not believe the lenders need any more HELP! They need to help themselves by taking the short sale market and stream-lining their internal process.

It does not make any sense to renig on deals such as this one which is essentially a slam-dunk. Lenders don't realize for some unfathomable reason that it is in their best interest to do good, solid loans. All this does is make potential buyers even more hesitant which in turns delays economic recovery. I am NOT going to get on my soap box, but I am sorely tempted - LOL!

Thank you for adding me as an associate. Have a great week!

Mar 24, 2009 08:20 AM #17
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Don't speculate on what folks think happened.  Focus on what did happen.  The bank rejected the loan.

They don't have any money.

"Flagstar has operations in Michigan, Indiana and Georgia. It posted a loss of $62.1 million for the third quarter, reflecting $86.9 million in loan loss provisions and a $17 million loss linked to the collapse of Lehman Brothers."

Flagstar took about $288 Million in TARP money.

Mar 24, 2009 10:55 AM #18
Barb Szabo, CRS
RE/MAX Trinity Brecksville Ohio - Cleveland, OH
E-pro Realtor, Cleveland Ohio Homes

Rich, How heartbreaking for the young couple who I'm sure think they did everything right.

Mar 24, 2009 11:31 AM #19
Tom Plant
WINEormous.com - Murrieta, CA

Rich - Drives you nuts, doesn't it. I had a lender go out of business the day my buyers' loan was supposed to fund... aaarrrrgggghhhh!!!

Mar 24, 2009 11:55 AM #20
Marilyn Katz
Berkshire Hathaway HomeServices New England Properties - Westport, CT
ABR, e-PRO - WestportCTProperties.com

Rich- I hope you were/are able to find new financing for this couple.  Some of the worst stories, I've heard, this year, are of deals falling apart AT the closing table, because the bank changed their requirements.

Mar 24, 2009 12:13 PM #21
Rich Jacobson
Fathom Realty West Sound - Poulsbo, WA
Your Kitsap County WA Real Estate Broker

Lenn:   My clients only needed about $200K of that TARP money!...

Mar 24, 2009 12:17 PM #22
William Johnson
RE/MAX Associates - La Jolla, CA
San Diego Real Estate Voice, GRI CRS e-Pro CDPE

Hi Rich, I was speaking to Sally today and I missed the news. Congratulations and All the Very Best!


This is a story line that warrants being featured Rich not because you need the points or the notoriety but because agents need to be aware of the " just about anything" is all it takes to make the financing disappear. Now of course, the will need to start over if they are not too discouraged to actually do that.

I would bet that Brian could step in and help everyone get this all straitened out and get that loan funded. Your LO is not the one that messed up he simply submitted the change. That is another reason why other agents needs to know that between them and the LO, we are only going to have one chance and we must make sure in advance now that no changes will be made. In earlier times ( only yesterday it seems- it was just yesterday, LOL) the LO could adjust the package when need be. It sounds like that is no longer the case.

An excellent post and a sad one too that the Buyers have to start over fresh with their financing. I would bet my bottom dollar that within a short period of time, they will be in their new home.

Mar 24, 2009 03:34 PM #23
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Rich - Back in November, Flagstar did something similar (not quite the 11th hour) to me and my clients who sound exactly like your clients.  I did some quick scrambling and had them with another lender and were only a week late on the COE.  It was really stressful until they funded and I totally blame Flagstar for it all.  I haven't submitted a file to them since. 

Mar 24, 2009 03:44 PM #24
Melody Botting
Broker Associate PenFed Realty - San Antonio, TX
You Deserve The Best

This is just nuts!  They irritated me a few years ago and I never gave them another chance. 

Mar 24, 2009 04:07 PM #25
Zilkia Olmeda-Martins
RE/MAX North - San Antonio - San Antonio, TX
GRI, Realtor, San Antonio Texas Luxury Homes

Rich, Wow this is a raw deal.  We don't have Flagstar Bank here in my market.  I hope that you have an alternate lender that can help your clients get to the closing table successfully.

Mar 24, 2009 04:09 PM #26
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

I haven't had to play the exact game...  But, when I was a first time home buyer a long time ago, I had a similar experience from the ugly side...  Didn't like it. 

Mar 24, 2009 04:18 PM #27
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Rich.  The financial institutions that accepted TARP money capitalized the money and paid dividends with it or used it to meet their minimum depository needs.  They didn't take it with the intention of making consumer loans. 

Mar 24, 2009 09:57 PM #28
Russell Lewis
Realty Austin, Austin Texas Real Estate - Austin, TX

What an incredible disappointment! I am working with a your couple, 1st timers and I had forgotten how much fun it can be and with all of the excitement, hopes and expectations. It's appalling that institutions can be this absurd. Frankly, it's probably going to get a little worse before it gets better! I know you will help them along and hope you are able to find another lender and finally get them in to a home!

Mar 24, 2009 11:59 PM #29
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Wow that is real disappointing Rich. You would think finding out something like this would not happen the day before a closing. The bank screwed with a lot of peoples lives.

Mar 25, 2009 12:15 AM #30
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

Rich, this sucks. I feel terrible for your buyers, how heartbreaking. These banks make me SICK. They took our money and then don't help the buyers out. That is why the continual bailouts are a mess.

It is NOT getting to the consumer.

Mar 25, 2009 12:49 AM #31
John V.

Flagstar did exactly the same thing to me today.  This was my response to their denial:

"To Mr. Charfauros and Flagstar Bank:

It seems to me that Flagstar never intended to fund this loan.  It appears that you and Flagstar offer, advertise and take applications for HomePath loans but have no intention of closing them, all to the detriment of FannieMae as a Seller, their contracted Brokers, Escrow and Title Companies and ultimately, Buyers who intend to occupy these homes.  (Not to mention the Cities and Counties that desperately need the tax base.)    I can only suppose this is done to simply to meet some government requirement that HomePath loans be "offered", and that there is no oversight requiring that they are actually funded.    

I met every condition that you put forth, had the necessary credit scores, income and reserve funds and never failed to promptly respond to any inquiry and demand.  Up to and including last night I was "approved" and you instructed me that you would be forwarding loan documents to escrow today.  By your own admission my income and reserves and my financial position INCREASED to the better since you took my original application.   I have worked at the same job at a law firm for nearly 17 years, and have maintained a second job as a part time college Instructor for nearly nine years.
Yet you continued to put obstacles up including and up to the 11TH hour (11:59, in your case).     
Per your own admission, you and Flagstar "dragged your feet" (in quotes, your EXACT statement) in reference to my loan.  Also per your own admission, the loan would have been funded and approved if you had not done so.  You said the credit check would expire on 9/4/2011 (two days AFTER escrow should have closed), yet you re-ran credit today.  Pursuant to that credit check, you informed me that ONE score was 8 points lower (the other credit reporting bureaus had the same score as previous) and for that reason, even though all my other factors were BETTER since the original application, you denied the loan.  FOR THESE REASONS, IT APPEARS THAT FLAGSTAR NEVER INTENDS TO FUND FANNIEMAE HOMEPATH TRANSACTIONS.        
You also instructed me that you and Flagstar would "never make any money" if you just did these loans.    
I will make sure that both FannieMae and various consumer reporting agencies and blogs know of this decision and your statements.
I will inform the required parties that this transaction will not close because of Flagstar's actions, as you apparently do not possess the resolve to do so.  
I am beyond disappointed at your lack of action on this transaction, your failure to return phone calls and emails and maintain an appropriate level of communication with me and the other parties to this transaction, and your apparent intentional acts to do everything possible NOT to close this transaction.  This even rose to the point of having your Assistant Nickole having to constantly remind you to contact me and contacting your superiors.  She, on the other hand, seemed to be more than professional, yet completely hampered by you and your failure to perform.             
Lastly, your attached denial would be a complete joke save for the detrimental consequences to my credit.  Every area you checked as a reason for denial is nonsense, including "Loan-To-Value" ratio on a property that did not have and did not require an appraisal and a government sponsored loan program that only requires by its terms 3% down."  
Sep 01, 2011 11:59 AM #32
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