My very capable processor proclaimed yesterday that she's glad our office isn't next to a gun shop because she's ready to blow her head off. She said this in jest, of course, but I'd like to describe a particular refinance from hell that's causing our blood to boil.
In May, a well-qualified homeowner came to my office and applied for a refinance. His situation is pretty complex. First, his income is derived from salary and commission. Second, there were two tax liens on his credit report. Third, he owns a rental property.
Here we are in late August and I'm hoping the loan will have closed by the time this column is published. Allow me relate the timeline of events.
- The borrower took three weeks to provide us with basic information, such as tax returns and bank statements. He travels frequently and was unable to provide us with the documents in a timely manner.
- At the time the borrower made his loan application, we told him the tax liens on his credit report would have to be removed. He said he would work on it, but it might take time. We submitted the loan when we received his documents, knowing the underwriter would make the removal of the tax liens a condition of approval.
- The refinance boom, coupled with more stringent guidelines, results in very long underwriter turnaround times. The loan finally was approved seven weeks after the loan application, with two conditions: that the tax liens be removed and that proof of insurance on the borrower's rental property be provided.
- Two weeks later, the borrower provided the credit bureaus with the proper documents to remove the liens, as well as his insurance information. We submitted the new information and waited for sign-off.
- One week later, the credit report was approved, but the underwriter had questions about the insurance on the rental property. We danced around this issue for a while and finally got it resolved. Meanwhile, the bank statements provided are now too old. A week goes by before the borrower provides us with updated statements. When we finally receive and submit them, the borrower's pay stub had expired. He sends us an updated pay stub, and I pray we can get this guy to closing.
- Unfortunately, the updated statement shows a zero balance. The borrower had forgotten to tell us he had closed that account and moved the money to a different account. He sends us yet another bank statement, and another few days go by. The underwriter examines the statement and notices there are four large deposits. Fannie Mae and Freddie Mac guidelines require that all large deposits be explained and documented, regardless of how much money the borrower has or how strong the borrower's financial picture is. It's an unreasonable rule, in my opinion.
I left a message with my borrower this morning asking for more paperwork.
Folks, a complicated financial picture coupled with today's overzealous underwriting standards surely will result in a circus routine. Mix in borrower procrastination in providing requested documents, and we end up with this situation.
Henry Savage is president of PMC Mortgage in Alexandria. Send email to email@example.com.