Here are some ridiculous recent examples:
I had military clients borrowing from VA (no money down) who used a lot of their liquid assets for their wedding; they made copies of cards, gift cards, checks, $100 bills, marriage license, huge reception bills, the invitation, and even wedding pictures, and the underwriter questioned where the $4000.00 checking deposit came from even though there was over 30 pages of documentation. Here’s a big thanks to the troops who watch out for us everyday.
A single-mother/teacher loaned her mother $1000 for a short-term “emergency”. Her mother paid her back well within 30 days before closing, and even though this was documented by several statements; this was an issue that delayed closing by a week, even though those funds were not needed to close. Here’s appreciation to our educators!
A couple who had a nice tax return from 2008, the refund was made directly to their checking account, planning on using a significant portion of the return for their downpayment, they applied and received a pre-approval. Upon researching the real estate market, they decided to build a new home, and subsequently put their downpayment funds into their savings account where the funds would receive a half percent interest instead of no deposit interest sitting in their checking. And, yes, it was a problem and a scramble to document the funds for the underwriting process to enable them to close. Are you kidding me? This transfer was within the same bank!
I listed a house in the first-time homebuyers’ price range recently. We received a ton of attention, multiple offers at list price, but the appraisal came back at $10,000 below the list price. With the amount of interest the property received, I know we were priced right for the current market conditions; however, the price the FHA appraiser came back with was $10K below. So what happens? The buyer will have to come up with a larger downpayment for the property, the buyer and seller will re-negotiate or meet in the middle, or the buyer will alk away, fearing they aren’t getting a “good deal” in a “buyer’s market”, and the seller will have to live with an appraisal on FHA record (accurate or inaccurate) for 6 months. What does that cost? The problem with this one was, it was a unique property and hard to find recent comparable sales, which doesn’t always reflect current market conditions, which is what an appraisal is supposed to do. In my opinion, appraisals should also include active listings and current reasonable choices for the market. Appraisers rarely look at current active listings, which is a better indicator of “market value”; however, now appraisers fear “jail-time” appraisers they aren’t likely to “risk it” on a hard to value, one in a ten-thousand kind of property.
Current underwriting guidelines protects lenders and secondary market investors. Everyone benefits from responsible lending, home-ownership, and the lack of increased foreclosures.
However, the current guidelines don’t leave any room for reasonable exceptions, which is counter-productive. These guidelines keep property values from rising with market conditions, keeps good borrowers from getting loans, and stops the housing crisis from recovery, deal by deal.
Is any of this fair?