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Zillow Lender Cancels loan after Condo HOA Questionaire shows property doesn't meet Fannie Mae

In March 2013, I decided to refinance my Rental/Investment Condo and used Zillow to find a lender with a good rate.
My current loan is a 5.25% with 50% LTV, FYI.
So the lender and I engage in talks and we agree on a rate with no fees except for the appraisal. We agreed upon the price for the appraisal and proceeded forward with the refinance.
A few weeks go by, the appraisal was done and I was over charged by $300 for the appraisal. Turns out the lender was "mis-informed" and that condos were more expensive than his original appraisal quote.
The lender promised to issue me a check for the difference after the loan closes. 
Last week the lender finds out that we cannot obtain approval because the condo does not meet Fannie Mae guidelines. 
Today, the lender sends me a cancellation of my loan in form of a letter with any explanation about the appraisal overcharge.
Shouldn't lenders send out the questionaire form out first prior to appraisals? 
What are my options? Thoughts? Ideas?
I just want to refinance and bring down my rate/monthly payment.

Thank you
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April 30 2013 - San Diego
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Answers (10)

Hi Persian!

God sent me to this post to give you the best answer.  I'm sorry for posting a month and a half after you started having your issue.  Please let me know if you are still having issues getting this done.

What you need to do is to get a copy of your HOA Questionnaire.  I have closed many of these loans other lenders have not been able to do for condo investment property refinances.  The Condo Questionnaire may have stated that more than 49% of the units are rented, which is why it may not have met Fannie Mae Guidelines.

However, since I am a broker who is A+ Rated with the BBB, I actually have a local lender I use that has a portfolio program that can get this done with extremely competitive rates and prioritized underwriting.  We can also transfer the appraisal report you already had done.

Let me know if you can get a copy of the HOA Condo Questionnaire and Appraisal and we may be able to get this approved and closed for you within the next 2-3 weeks, which would also allow us to lock in at the best pricing available since we could lock and close within 15 days.  Also, since this is your investment property, there is no rescission period after you sign your final documents so closing this in two weeks is very likely to be able to happen.

[content removed by Zillow because of spam.  Please refer to our Good Neighbor Policy for details.] 

- John
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June 15 2013
I feel for Persian here, because nobody wants to pay for an appraisal for a loan that is doomed from the start.

I think it's important to note that there is no such thing as a "Zillow Lender," any more than there is an "American Idol" laundry detergent - the agents and loan reps on "find-a-pro" are simply people who have added themselves to Zillow as professionals, and many of us advertise to get more visibility.

In my professional opinion, most of the Seattle-area real estate agents on Zillow are, in fact, pretty darned good; however, anybody with a license can register as a "pro," and if everybody was great, then we wouldn't need "find-a-pro" at all, would we? 

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June 13 2013
I have seen lenders that will do refi in this situation when I had the same pproblem with a listing I had

Call me ,its worth a try . Ultimatly a buyer came along that was cash buyer, but before that I found several lenders that didnt care about the owner occu ratio
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June 12 2013
 Be sure they know it's for a non-owner occupied property
========================
The part of the 1003 (application)that the borrower checked off as investment is a pretty good indicator the lender knows its an application for an investment property.

 was over charged by $300 for the appraisal.
====================
Being a 10% tolerance item I would assume by this statement that the GFE originally had the appraisal fee as $3,000? (or they really inflated the title and recording fees to cover it in total)

The appraisal fee fiasco aside, the lender no more knew it didn't meet agency guidelines than you did, part of the application process is procuring the data from the condominium, along with the appraisal,  in order to make that determination.
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April 30 2013
B of I Federal Bank, Coast 2 Coast Lending and Flagstar has a portfolio product for non-warrantable condos.  You'll need a broker for a loan at one of these lenders.

I would post your scenario in Zillow Mortgage Marketplace and choose a highly rated Zillow lender with good reviews and a competitive rate.  When you contact the broker or agent, let them know that you need financing for a condo not FNMA approved and suggest the three banks I did to see if they're signed up with them. 
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April 30 2013
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What's the reason the condo didn't meet guidelines. I may have a resource for you.
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April 30 2013
Profile picture for 800lbs In The Room

If only the answer for foreclosures was as simple as a Real Estate Agent's job...
Time to get real...... As much as we would like to point the finger at "any lender", the fact is, most everyone was greedy. Lenders were stumbling over each other to write loans and make as much money as fast as possible. They made many mistakes in the process. This greed was fed by the the greed of people who were refinancing to pay down credit cards that let them live in excess in order to run them back up, pay for vacations, boats, and cars. How many foreclosed homes were a result of a cash out refi? I venture to say a majority. Lets not forget the greedy RE Agents! Any Agent worth their salt knew the bubble would burst, yet they kept on selling and getting their commissions. Might I add, twice to three times as much commission as a lender would make. We could go all the way to the hedge funds that bought the sub prime mortgages or the politicians that made it all possible for kickbacks and by the peoples vote. But, I'll stop here. Now that the damage is done and, we all played a part in it, Cory wants to point her finger at someone.... anyone but herself.

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April 30 2013
Cory:

What is your problem?  Unethical lenders and loan officers are the reason for all the foreclosures?  The ONLY reason for a foreclosure is that someone you or another real estate agent sold a home to decided to stop making mortgage payments.  Banks don't foreclose because a loan officer overcharged a client on their mortgage.  They foreclose when the client decided to stop paying on the home you sold them that was way overpriced. 

You are so misinformed and so out of touch with current lending conditions, but why should you be informed?  You don't have an NMLS license.  You didn't have your fingerprints and background checked by the FBI or your credit checked.  All you did was pass a state exam any light-switch-flipping monkey could pass and has passed, obviously. 

Real lenders and loan officers don't use sticks and rocks any more.  We use real tools like a Good Faith Estimate and the Federal government has made sure we are bound by them.  There is only a 10% tolerance on the appraisal fee so the lender would have been bound to refund the difference.  You would know this if you were a nationally licensed loan agent, but you're not.  Even so, if you worked with any loan agent these days, you might know that.  The only reason I can think of that you're not up to date on current market conditions, compliance issues and Federal regulations is because you're not selling any homes. 

Butt out giving advice until you actually have any clue whatsoever about what you're talking about. 
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April 30 2013
Also, be sure you get all promises IN WRITING from the lender.  Not all lenders and loan officers are ethical, or we wouldn't have had so many foreclosures. Some are very quick to tell you what you want to hear by phone, but will never repeat what they say in an email. Until you find a lender who will do so, keep shopping.

When I work with lenders, I look out for red flags such as this.

As for as the HOA questionnaire, you may run into the some issue with any lender. Be sure they know it's for a non-owner occupied property, and get that in an email. Just email them and write, "Just to be sure I understand what you said on the phone, the appraisal will be $300, right? And, this refi is for a non-owner occupied property." You get the idea. If they call back, don't trust them. If they put it in writing, you have a better chance - not 100% - but a better chance of working with a more credible lender.

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April 30 2013
some brokers will have the appraisal done first and then the condo questionnaire/cert and others will do the condo cert first and the questionnaire after.

the reason that some brokers have you do the appraisal first is that they know that you are committed to completing the refinancing and wont continue to shop around. generally once you spend your own money you are going to complete the transaction with them instead of spending hundreds more ordering another appraisal elsewhere.

you are going to need to find a lender that allows for unwarrantable condos which means a portfolio lender and even those may require the property is owner occupied.
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April 30 2013
 
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