Do You Have Good Credit And Equity? Are You Sure About The Equity Part?

Have you recently been in the process of refinancing and had a lender cut your appraisal? You are not alone.

Doing a cash-out refinance is trickier than ever due to declining market adjustments as well as lenders just flat-out being crazy sometimes.

Consider this situation I had with one of my clients who has great credit and income and lives in a very-nice home.

Do not read further unless you want an inside peek into the world of what it looks like to be a loan officer in today’s mortgage marketplace.

I hope I don’t end up buying him a beer at the end of this.

<An email exchange with very minor edits for privacy reasons>

Justin:

We spoke over two weeks ago at which time you told me that we had a deal, not a great deal or by no means the deal my wife and I were looking for. You assured me we had this deal done, and would fund by the latest the next week….. Please advise as to where EXACTLY we’re at as of now. If you don’t get this deal done as you said you had. Please forward my appraisal fee back to me immediately. I have a real hard time believing that nobody in the mortgage business would want to deal with a client with good credit and equity. It is my hope that you get back to me with some good news quickly. For the record, I’m not a happy guy right now…

Thanks,
XXXXX

<My Reply>

Mr. XXXXX,

Thanks for the email.

We have mainly spoken with Mrs. XXX (and by the way - I commend her on her thoroughness and articulation - she does an excellent job of absorbing this fairly technical situation and relaying the information) but let me recap what we have done up to this point and what my plan of action is.

What we have done up to this point:

When we took your application on 1/22 we put down that we estimated the value of your home to be 1,000,000 with the following:

5.625%
7/1 Adjustable Rate
620,000 loan amount
198,914 cash back

We selected ING as the lender for your file because they were the only lender that we were aware of who would allow you to go by the value of the home and not the purchase price within the first 6 months.

When the appraiser delivered his final opinion of value of $720,000 on 1/26, we had to restructure your deal:

5.625%
7/1 Adjustable Rate
468,000 loan amount
43,605 cash back

On 2/6 we received a conditional approval from ING indicating that they had your appraisal in (marked as received).

We followed up daily with ING and once we had everything in *except* for your tax returns, we had asked this question:

“Has everything else been approved? Do you need anything else from us?”

To which we got the response:

“Yes, everything looks good. Send us the tax returns and you should be good to go.”

At that point, I was able to communicate with you that everything looked good and that you could expect the deal to happen as outlined.

When we received the final “approval” from ING, they approved your loan, but cut their “opinion” of the appraised value of your home to $490k.

I was as shocked as you.

Not because I don’t see that happen all the time (I do) but because they actually TOLD US that everything was fine on your file and that we just needed tax returns.

I could explain in more detail about the processes that most lenders have in place and how it could have possibly happened — but it really doesn’t matter unless you are curious.

Anyway, that brings us to what has happened.

Here is my plan of action.

Now that we are in this spot, you are not out of options.

What I am doing:

Now that you have owned the property more than 6 months, I have another lender who will use appraised value and not sales price for value.

I am currently in process of re-submitting your file to another lender - one that I couldn’t use until now due to seasoning issues - you hadn’t owned the house 6 months yet when we started.  While this lender has slightly higher interest rates, that isn’t really my biggest concern, the biggest concern is whether or not they will actually cut your appraisal and/or get your deal done.

Which we won’t know until we hear back from them with a conditional approval.

Once I hear more, I will let you know.  The turn-time for this lender is currently 8 days - so I expect to hear back from them not next week, but the week after that.

What you can also do if you want:

Obviously I want to do your loan, and have and will work hard to get it done.

But at this point, I am most interested in getting your loan done, not that I personally do it.

So, last night, I gave Mrs. XXX 2 lenders that she will want to speak with who might also be able to get your loan done.  The first one is Countrywide, the second one is M&I bank.  I spoke with someone I know at Countrywide and he should be calling soon and I don’t know anyone at M&I.

What I would do if I were you:

Now for the real advice.

What would I do if I were you.

Here is what I would do:

1. I would let me keep working on it.

2. I would call two of the best loan officers that I know and talk with them about your situation and see what they say. If they want to start working on your file, just make sure that you don’t pay an application fee - that way if they work on it and don’t get it done - you don’t have to pay anything.

Here are a couple who are local that might be able to help (it is entirely possible that they know of/use lenders that I don’t):

http://www.arizonamortgageteam.com/arizona-loan-officers/

3. Lastly, I would log on to Zillow.com, go to the Mortgage Marketplace and fill out your information to get mortgage quotes from other lenders. Once you find a lender you like/want to work with, you should start the process with them — again, just make sure that you don’t pay any kind of up-front fees.

One last thing. Regarding your $400 appraisal.

If you keep working with me and others to get your loan done, I am still very optimistic that “someone out there” can get your loan done. However/whoever we end up getting your loan done, we should be able to use your current appraisal.

If there is another loan officer that you begin working with who actually gets your loan approved, there is usually a relatively small “transfer fee” (usually $50-$100) that the appraiser charges to transfer the appraisal from one lender to another.

I will be happy to pick up the transfer fee if I can’t talk the appraiser out of charging it if we get to that point.

If it turns out that absolutely no one in America will do your loan after we have exhausted all of our options - I will personally see to it that you get whatever you paid back for the appraisal - meaning that not only will it cost me $400, but I will also have put in 10-20 hours worth of man hours of both my time and my team’s time to try to get your loan done.

And if that happens, while you won’t be a happy guy - I will have lost both time and money in trying everything I personally know how to get your loan done.

Which means hopefully when we compare who is “more unhappy”, I can win the “most unhappy” award - and I will be glad to buy you a beer as we both wonder what the world has come to that a guy like you with good credit and equity can’t get a loan done.

Call or email me anytime with questions.

Best,
Justin

February 20, 2009