Profile picture for littlelotusdesigns

If you get an approval pending conditions and fulfill all conditions listed can you still be denied?

Our loan broker caused some delays in underwriting and on our last day to back out and get our earnest money back, we were notified that we were approved pending a few simple conditions.  They assured us we were good to go if we supplied the requested info.  We provided it immediately and nothing has changed about our financial status etc. Two weeks later we have no loan approval and underwriter is now saying out of the blue that they don't want to approve us anymore...  We've lost our earnest money not to mention the appraisal/inspection fees! is this typical?
  • November 23 2013 - Boulder
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Answers (6)

I'm pretty sure that by now you have gotten all the answers you need for your question above. If you have not yet purchased a home i would suggest getting a FULL APPROVAL the next time around. This means that they submit you file to underwriting with the only condition(s) being a property address and an appraisal coming in at the value needed. I am sorry you had to go through this during your first home purchase and can tell you that is not typical.

Thank You!
  • December 26 2013
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Not sure if you've resolved this.  The thing to do is get a second opinion from a recommended lender in a face to face setting.  This situation is to complex to solve on Zillow.  
  • November 25 2013
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Profile picture for littlelotusdesigns
Thank you for your assistance! Basically my agent called or emailed the loan broker literally every hour of the business day for 2 weeks reminding the loan broker of our deadlines and demanding to get updates etc. He replied each time stating that the bank wouldn't respond to his inquiries but that we would be approved any day now. Then he would call me later that day and say he had another condition from the underwriter, and that once I submitted that we should be good to go for our clear to close. I would send the requested document within the hour each time, and then the next day we would have a repeat of the same scenario.  I sent documents for new conditions each day for two weeks after the initial "approval pending conditions." This is my first home buying experience so I wasn't sure if that was typical. 
  • November 23 2013
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Profile picture for davidhawke
I highly doubt that it is 'out of the blue".  The underwriter typically cites a reason for the decline, in writing.  

However, if this reason should have been evident early on to the originator, then you might be able to prove in court that it was incompetence on the part of the loan officer, then you might be able to win a court judgement against him.  Then, you could file a claim against his errors and omissions insurance.

If it was somehow determined to be fraud on the part of the Originator (which is highly unlikely), then you might be able to win damages from him after a criminal proceeding.  Because originators are now bonded in Colorado, the bond would immediately pay the amount of damages awarded by the court.

The third possibility is a bit "out there"... but I have heard instances when a warehouse banker mis-manages his line of credit... and then intentionally declines a loan because he knows he can't fund it.  This is the only reason I can think of that a lender truly would decline a perfectly sound loan, "out of the blue" for no reason.  If you could prove that this happened, you would absolutely be able to win damages... because it would be a clear cut case of negligence on the part of the lender.

This is probably a question for a real estate attorney.  However the amount in question for the earnest money, is likely under $10k... which would make it a case for small claims court. 

Good luck.
  • November 23 2013
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Profile picture for David Widlund
Not typical, but not unheard of. A conditional approval means that if you can satisfy the conditions set by the underwriter, and satisfy the concerns the underwriter had with the loan, then it will close. It doesn't mean that you're approved, but rather gives you a list of items that will also be considered to clear up any question marks about the overall compliance with requirements. Your agent should have been in contact with the lender/loan officer to ensure that all conditions have been cleared in time for the loan conditions deadline, and either requested an extension on the deadline, or cancelled the contract to protect your earnest money. That is not to say that the loan officer wasn't at fault for taking longer than expected, or not effectively communicating that your loan was not fully approved in time for the deadline. But in my opinion, your agent is responsible for ensuring that your deadlines are met, extended or the contract is cancelled. The exception would be if the loan officer lied to the agent saying that the file was fully approved. You may still have a chance with another lender, who would be willing to underwrite the file prior to making an offer. Then you won't have to worry about your final approval. Good luck
  • November 23 2013
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No. Fortunately our industry is more precise than "out of the blue they don't want to approve us anymore". Your loan officer should tell you exactly what the reason for the denial, and company has to report to Gov't. reason for denial. If in fact you met the approval conditions, the company has an obligation to close your loan. You may have recourse but that could be lengthy, so suggest you contact "loan broker" and pin him/her down with mention of pursuing consumer protection action. It would be worthwhile to discuss your scenario with a CO lender to get second opinion on possible issues, and hopefully one will offer you assistance from this forum.
  • November 23 2013
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