Profile picture for FinallyBuying

After receiving a pre-qual letter, getting the clear to find a home bidding on a home and winning...

the lender just came back and said that the underwriter denied us! Reason being was that my husband has a BK and has had lates and charges off since (none of which are kless than about 1 yr and a half old maybe even more) the other reason was that we have too many NFS fees on both of our bank accounts (this is absurd! We have absolutely none on our Chase account and only ONE on our 3 month old Wachovia account we opened to transfer banks as we have no Chase branches near us here in the Carolinas! The NSF fee was a complete mistake on our part and I know for a fact we have not had any NSF fees in our Chase account for the past 6 months!!!! What can we do? We have the house of our dreams and the lender lead us on saying all was fine and took our money then just dropped this unexpecting bomb!! What can we do if anything????? Can we get our application fee back? HELP please!!!! We have had nothing but problems with the lender to begin with...were we asking for this? Credit scores are 587 622 627 and I have 4 accounts in good standing, never late and paid down (one current car loan, one car loan paid off, two credi cards) :-( Thank you

  • June 22 2011 - Raleigh
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Answers (23)

Profile picture for Sharon Lewis
So what eventually happened here?
  • July 18 2011
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Each lender has diffrent requirement,make some calls and talk to their clients that had success with the lender before you use them. Get free copy of your Tri-merge credit report and check around for downpayment assistance programs! Credit monitoring may also keep you informed of any credit changes, you can legally challenge you credit to improve your credit score with the Fair Credit Reporting Act of 1971 !! 
  • June 22 2011
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Good luck
  • June 22 2011
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Profile picture for FinallyBuying
Thank you all once again! My broker has referred a lender at New American Mortgage and says he can work miracles. Here's to hoping for the best!
  • June 22 2011
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Profile picture for SheriMoritz
In general, it's not always true that the larger banks have more flexibility.  Some do and some don't, some do but won't use it often. I know that New American Mortgage has an in house underwriter so they can pretty much give you an answer if they can do it or not within a couple of days if not sooner since your whole file is already together.  Best advise for anyone in your situation would be to talk to several lenders, explain your situation and have them speak to someone in underwriting to see if they think they can fund it.  That should give you a good idea within the next week if getting a loan is possible at this time. Good luck and keep your head up. 
  • June 22 2011
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Your frustration should be geared at the loan officer.  Reality is you had a bankruptcy less than 5 years ago and have had additional financial difficulties since the bankruptcy.  Your ability and willingness to repay your debts is a major factor.  Foks run into financial issues from time to time, lenders want to see those circumstances as isolated, not recurring.
  • June 22 2011
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Profile picture for FinallyBuying
Thank you Sheri! He has suggested someone else and we are waiting to hear back. In the mean time the current lender is having us write another letter for a level 2 review...After reading what their underwriter said regarding our file we do not see much hope with this company or at all as this is a fairly large lender who should have more flexibility..correct?
  • June 22 2011
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Profile picture for SheriMoritz
Your buyers agent should be able to guide you in the direction of other lenders to take your file to see if they are willing to work with your situation.  That is their job and they should be networked with several that you could consult with about your situation.  Best of luck! 
  • June 22 2011
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Profile picture for FinallyBuying
Thank you Shane! I will look into them!
  • June 22 2011
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You'd need an FHA lender that is used to seeing not-so-great credit.  The two that come to mind are American Financial Resources and Shore Financial Services (United Wholesale Mortgage is their broker side).
  • June 22 2011
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Profile picture for FinallyBuying
I have heard that paying those old accounts would negatively effect me since they are older which is why I have refrained from paying them,...that and the lender said they'd be no issue! I do not know the first thing about finding another lender...how do we go about doing so? We need a lender who can do an FHA loan on a HUD home with repair escrow in the Raleigh area....thank you all for your response. I'm trying to look on the brightside! We have had so many issues with this lender that it may be a good thing his underwritter denied me.
  • June 22 2011
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@ Andrew - HVCC cert - most companies use AMC's that will provide one.  But you are right, it's not required, but it should be a lot easier (and we'll accept them with the HVCC cert).

@ FinallyBuying - Wells Fargo, and specifically this underwriter, doesn't want to do the loan, spending any more time with them will be futile.
  • June 22 2011
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At this point, all you can really do is request your entire file from Wells, and ask your REALTOR if there is a lender that they recommend that will work with problem credit.  Take your file to that lender and see if they can work with you regarding those items.  Be completely up front about why Wells turned you down so that you can find out quicker if those same things are going to be an issue with whatever new bank you try.  Good luck!
  • June 22 2011
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Your credit is your credit.  Paying those charge offs will negatively impact your score so I would not do that prior to closing if you can get it that far.  I doubt you will be able to move forward with Wells, they have made the decision and getting over turned will be difficult.

Shane,

Since FHA appraisals are not ordered by the FHA how could a lender certify that an appraisal ordered by another company meets HVCC?  I agree the appraisal could be used for up to 4 months however that is up to the lender, not required.
  • June 22 2011
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Profile picture for FinallyBuying
Sharon, Yes we are using a local lender (Wells located in Cary).
The underwriter provided more specific details and what she is going off of is a YTD amount of NSF on our 30day bank statement. I suppose this is their preference even though we have no NSF charges listed anywhere on out detailed bank statements provided. These charges ocurred back in January. The last collection popped up 9/2009 and there are some duplicates thet the underwriting is considering bad debt. We've tried to have these removed to no avail...will paying those collections from 9/2009 give me more of an advantage? The lender is offering no advice to make my credit more appealing...no help at all!
  • June 22 2011
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Andrew, on a purchase here in the Los Angeles area about 3 years ago there was a previous buyer with FHA financing who backed out due to not being able to qualify, appraisal was already done.  Our buyer immediately went in and made an offer with FHA financing, and it was accepted.  When we pulled the FHA case # one already showed up in the system, it had the previous lenders name and I can't remember if it had our borrowers name or the other borrowers name.  Regardless, we contacted the previous lender and had the FHA case # switched over, and when asked HUD about the new appraisal and how there would be two with the same FHA case #, they said the first one would take precedent until it has expired (which was 6 months at the time I believe) so we utilized the existing appraisal/had the contract details changed but effective date remained the same.  Taylor Bean & Whitaker funded that one.

Now that was for one borrower to another, from one lender to another, very unique situation.

But for the situation where the borrower goes from one lender to another, the same borrower, not a new borrower, this Mortgagee Letter explains FHA's appraisal portability requirements: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-29ml.doc

This link explains the FHA appraisal validity periods: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-29ml.doc

I wish I could find the validity period mortgagee letter prior to that one, but all of my searching only finds 09-29 & 10-08.
  • June 22 2011
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Shane,

I have never known an FHA appraisal to be tied to a property.  We will not accept an FHA appraisal that was ordered by another lender.  VA the appraisla is married to teh property but that is not my experience with FHA.  The loan decision and the reason for the lenders decision is part of the case number, but not the appraisal.
  • June 22 2011
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A Pre-qual/pre-approval means nothing.  An underwriter needs to sign off on your loan regardless of what you are being told by the loan officer.  A pre-approval is only as good as the individual that is issueing it.

You will likely need to try another lender, my guess and that's all it is...a guess...is you will have a hard time obtaining finanicing.

What state are you in?
  • June 22 2011
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Typically when there are delinquencies after BK, most lenders will require the BK seasoning requirements begin again after the last delinquency (unless in the situation of a medical collection, those are usually given leniency).  So if the BK requirements are 2 years, and there is a charge-off 2 years later, then another 2 years from the charge-off.  It's not "standard" it's not "required" it's just "typical" of what a lot of underwriters will want to see.

So with your situation having a charge-off ~1.5 years ago, and then also a recent NSF (which aren't actual delinquencies, but are still look at unfavorably by underwriting), and a BK discharge 4.5 years ago, it looks like there is a pattern.

You didn't "ask" for this, but you probably could have seem some writing on the wall from the beginning when there are issues.  Nevertheless you are well past that point, and so if the lender can't approve you, and you had to pay an application fee, then unless they said that fee was non-refundable then I think they should be giving you that fee back since they can't offer you the loan.

You'd then have the choice to choose a new lender to try and get approved with, or re-assess the situation and try again later.

Fortunately with an FHA loan (which I suspect you are trying to qualify for) the appraisal can be transferred between the former and new lender pretty easily, as the FHA appraisal is "married" to the property for a period of 4 months, no matter who buys the home.

When a new lender is overturning a previous lender's FHA denial based on something about the borrower, called a "credit reject", they need to have a reason to do so - it could be new information about a file or it could be that they are just willing to make the loan when the previous lender wasn't (like it didn't meet a score requirement, etc. from the previous lender).  So you would need to make sure your new lender is able to overturn a possible "credit reject" (sometimes the old lender won't mark anything in FHA case #, which helps going to a new lender) or else you could be wasting your time.

Personally, our bank probably wouldn't do your loan, with the BK, and the charge-offs afterwards with the most recent being 1.5 years ago, and seeing an NSF on a bank statement, I know our underwriters wouldn't have a good chance.  So in my opinion either your loan officer was myopic/short-sighted or just was trying to see if your type of loan could be approved by his/her underwriters - which that second one is fine to do as long as it's before you make an offer on a home, not afterwards.
  • June 22 2011
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Profile picture for Sharon Lewis
Are you using a local lender?
  • June 22 2011
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Profile picture for FinallyBuying
I have been very honest and he even pulled my credit before sending anything to the underwriter so we are really beside ourselves! Our prequal even states that he found me credit worthy! We really feel helpless now...moved from one state to another and now living in a month to month rental...this has severely put a hault on things for us.
  • June 22 2011
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The fact that you had a BK 4-5 years ago and have had derogatory credit since then can in fact prevent you from obtaining a mortgage.  It is up to the underwriter to determine that you have re-established credit.  I see it on the threads all the time,  folks saying as long as your credit score is X you won't have a problem.  The truth is that an underwriter has to sign off on your file and if they do not feel you have re-stablished credit there is not much you can do, other than try another lender that may be more lenient.  I would be honest with any lender you speak with about your situation. 
  • June 22 2011
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Profile picture for FinallyBuying
I think I misphrased the charge offs...none have occured in the past 1.5-2 years. They are all oder. BK is about 4-5 years old. We are not usung my wifes credit or income, only mine if that helps as well....
  • June 22 2011
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