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Profile picture for VinoBianco

Letters of explanation?

Hi, my husband and I are in the middle of the application process for an FHA loan through Bank of America. We were asked to write several letters of explanation, including one for my name change (we were married two years ago) and several deposits to our bank account about 6 months ago. Deposit amounts ranged from $33 to $250. Why were we asked to explain what seem like such trivial questions?
  • June 22 2011 - Chicago
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Answers (17)

Profile picture for Blue Nile
W2's for "contract work"?

Don't you mean 1099's?

And if you are running it as a separate "self-employed" business, why not a separate checking account?

It was beginning to sound more like an "IRS" audit, but now that you've clarified that you are paying your taxes on it and that you listed it as income on your application, it appears that it needs to be clarified as that income for income verification purposes.
  • June 23 2011
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To me it's not a matter of what is easiest. If this was my file, I selected the lender. Thereby, it's a reflection on me.  My borrower need not be involved with this condition if I can have it rectified.

Happy funding, Rudi 
  • June 23 2011
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They are asking, i think, because they want to verify steady employment.  Mulitiple and/or regular small deposits may be a sign of self-employment.  Sometimes income verification of self-employed borrowers can be difficult so the underwriter wants something in the file, in writing from you, addressing the deposits.  No big deal though - for example if you put in a check from grandma, say that, if a friend reimbursed you for using your credit card in a pinch, say that.  -Brian Madden, Brock Realty, Arlington, VA 
  • June 23 2011
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Profile picture for VinoBianco
Hi all, thanks for the responses. Just to be clear:
1. Yes, I have a checking, savings and credit card account with Bank of America.
2. I began the application process in April. The deposits requiring letters of explanation were all included in the banking statements that I was required to submit when I applied in April. Most of the deposits were checks from one company that my husband does contract work for. He listed that company as a regular source of income, and even submitted his W-2's from that company for past three years.  Yet we were still asked to explain the deposits.
3. I have already written and submitted the letters of application. I just wanted to know, for my own peace of mind, why it seemed like Bank of America was being so nit-picky.

Thank you.
  • June 23 2011
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So if they get a tax refund for $3K they should put it in the cookie jar? It's the $33 deposit(s) they are being asked about. I didn't see any reference to low credit scores,  I must have missed that part. 
  • June 22 2011
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This is a standard procedure in the loan process, make sure you dont make any large deposit until after the purchase. 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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or it's been in process for 6 months...more likely the issue with BoA than looking back at 6 months bank statements because they can...I don;t think they can.  We couldn't see deposit accounts at wells, I would be suprised if they could.
  • June 22 2011
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in the middle of the application process for an FHA loan through Bank of America.

Maybe the OP can clarify if it is the loan originator or underwriter asking for this information, sounds to me like an UW. One way to see a 6 month old or year old bank statement is if you apply with the bank you have a checking acct with, never thought about it but it may be a reason NOT to apply with your own bank.

VinoBianco,Is B of A where you have your checking acct? 
  • June 22 2011
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Hi,

I used to be a loan officer. Currently a realtor. This is very typical when applying for an FHA loan, especially in todays marketplace. It is a good thing that your LO is asking for these items upfront, so there are no suprises later in the process. Your LO is probably trying to put together the strongest package possible for you to get approved.

Best of Luck,
Jaime
  • June 22 2011
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Great question Clay...why are they looking at 6 month old statements?
  • June 22 2011
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Profile picture for Matt Laricy
Sometimes they ask you for things that dont make sense, but are needed. If your questionable, ask another lender if this is standard. If you need someone to go to for help, I'd be happy to help refer someone.
  • June 22 2011
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LOL, R.

A $250 deposit is not unusual and neither is $33, unless you were making multiple small deposits per week ( as in 10 or more ). During that period 6 months ago how many total deposits were made in 1 month and what was the total $$ amount? Oh, why is the underwriter reviewing a statement from 6 months ago? 
 
  • June 22 2011
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Path of least resistence...not a fight worth fighting.
  • June 22 2011
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The phone call will take longer than the LOE. I have written LOEs for far stupider things. I strongly believe in just giving it to them if they want it so bad. 

I wrote a LOE for the following condition.

"Please explain name discrepancy in C/R."

Names in credit report were:
John R. Smith 
John Robert Smith

I Wrote the following LOE and instructed borrower to sign.

To whom it may concern,
My name is John Robert Smith; R is my middle initial.

Signed: ____________________ Date: _____________


Loan Closed, no issues
Disclaimer: The names where changed to protect the innocent.

Sometimes, it's really not worth the fight. Just give them the LOE.
  • June 22 2011
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This must be a junior or level one underwriter. Your loan originator should be able to make this go away. There cannot be a justifiable reason to have you explain such small amounts. Totally absurd. I would have been on the phone in a heartbeat.

Happy funding, Rudi
  • June 22 2011
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Profile picture for shapiroamg
I agree with its easier to just write the damn things but explain $33 and $250?? that is a bit nick picky. Just my $ .02, carry on...
  • June 22 2011
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The best way to proceed is to just write the LOEs and not ask why. You do have to source all large deposits and it's up to the underwriter's discretion what is large. Sometimes they just want unusual activity explained. Your LOEs should take you about 3 minutes to write. Simply write:

To whom it may concern,

My name legally changed from XXXXX to XXXXXX  when I was married on XX/XX/XX.


Signed_________________ Date _____________

Your LOE for the deposits needs to state:

To whom it may concern,

The deposit to my XXX account ending in XXXX  for $XX.XX was for ___________________

Signed: ____________________ Date: _________________


You will spend more time waiting for other answers than it will take you to just write the LOEs. In fact, your loan officer should just write the format for you as I have and you fill in the blanks and sign.
  • June 22 2011
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