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Updated over 2 years ago, 09/06/2022
Unethical lending Practice
We’re are in the final day of escrow our lender called us on Monday and said they sent over VOE’s to our jobs and needed us to make sure they were completed so that we could close on Wednesday (today). So we scrambled to get that done and sent back to them. Mind you we are supposed to close today!
They called us yesterday and told us we have to pay off my wife’s car as a stipulation of closing!!!! Literally the day before we are supposed to close! And we removed our contingencies so if we pull out the seller can take our earnest money.
Loan officer is claiming they don’t know what happened and has no explanation. But had informed us via phone that we could close last week because we were good to go.
Can anything be done about this?
That should be a condition prior to signing the Closing Disclosure, which is before the last step of signing the Final Docs with the notary. What is this LO trying to pull?
@Jowan Chism, it sounds like you may have variable income and that they had to balance out your income earned amongst past jobs/ earnings received in the past. Is this case? If so, major oversight on the lender for catching that last minute.
- Raymond J. Rodrigues
- [email protected]
- 619-456-8311
Quote from @Jorel Williams:
That should be a condition prior to signing the Closing Disclosure, which is before the last step of signing the Final Docs with the notary. What is this LO trying to pull?
Quote from @Raymond J. Rodrigues:
@Jowan Chism, it sounds like you may have variable income and that they had to balance out your income earned amongst past jobs/ earnings received in the past. Is this case? If so, major oversight on the lender for catching that last minute.
That is a typical situation with unexperienced loan officer. Heard that story hundreds of times.
What is the reason they want your Car loan paid off? Is it because your DTI ? Have you been at the same job for the past 2 years ( you and whoever else is on the loan ) ? Do you work hourly/salary, commission or commission mixed with a base salary? Give me a little more information on exactly the loan officer said?
Quote from @Galen Ikonomov:
That is a typical situation with unexperienced loan officer. Heard that story hundreds of times.
What is the reason they want your Car loan paid off? Is it because your DTI ? Have you been at the same job for the past 2 years ( you and whoever else is on the loan ) ? Do you work hourly/salary, commission or commission mixed with a base salary? Give me a little more information on exactly the loan officer said?
@Jowan Chism you always have a choice. Never sign a mortgage because you think you have no other choice. Take that from experience, which I won't go into. BUT, life's going to be very difficult/hectic for a short while as you sort this out.
1) Get all over your lender. Tell them that wasn't a condition of the loan and ask how else can it be solved. Get their brightest minds involved. See if any bright minds here will help privately (no need to spill all the beans in public). They risk losing their fees if you walk away. You are not obligated to take their money until you sign for it.
2) Get with the seller right away. They are unlikely to be interested in blowing up the sale if you need an extra day or two to sort this out. "Taking the earnest money" sounds sexy, but remember they also have plans to move, they'd need to resist the house in a buyers' market, carry it an extra month or two, etc etc. The earnest money eases the pain and frustration of that, but it's likely that they'd still rather close with you. Have your agent see what they need. Don't assume they won't budge.
3) Paying off the car might be an OK thing to do. Car loans aren't terribly hard to get, but rates may be higher than what you currently have. When you've lived with this knowledge for 24 hours instead of 24 minutes (you get the point), does paying off the car shock/piss you off, or does it really harm you? Get somewhere where you can rationally think about this, holistically. You didn't intend to pay off the car, so this is a terrible addition to the equation. But is it? If the lender can't get around it, can you.
Good luck!
@Jowan Chism if they are that baffled by it themselves, this could be something as simple as bad data entry. Get all over them. Remember they have a lot of time invested in this already and it's in their interest for you to close. Your seller doesn't have to know you're threatening you lender with backing out of the loan. Remember that parties only know what they're told. Get all over your lender.
@Jorel Williams can the lender change any requirements post-Closing Disclosure? They probably also have recourse to back out of the loan, but aren't there regulations about changing requirements? Just trying to arm Jowan with as much knowledge as he needs to escalate this.
Unless we find out that this is Rocket Mortgage, in which case......
You probably only had a conditional loan approval, not a loan approval. The conditional loan approval, basically a loan pre-approval, is issued on the onset of your loan application is generally usually a pre- approval/approved eligible status issued by Fannie Mae or Freddie Mac automated loan system and is only as good as the input (income) into the system as the credit is merged into the evaluation. As noted above your income may have had a variable component that couldn't be used in actual underwriting of the loan though the loan officer inputted into the automated system. That variable income probably doesn’t have a history of two years plus or the continuity of income wasn’t verified by your employer (thus the last moment Verification of employment) and request to payoff auto loan. Your loan officer erred by allowing you remove the loan contingency.
What can be done? Are there any other debts that could be paid in order to reduce your debt to income? Debts that you'd be willing to pay off that would equal the approximate amount of the auto loan? If not,in my opinion, you have no recourse. I suggest paying off the auto, close the home loan and then reopen/refinance the auto after the close of escrow.
if they had a CD signed the lender wouldn't re-run AUS would they.
That is the only way this kind of scenario could crop up at such time correct?
Assuming no laws were broken, proceed as directed by the lender. It is very unfortunate, but “bad business practices” are just what they are. You can post reviews of your experience with the lender and then never do business with them again.
Sounds like a horrible case of service and communication from the LO, plus lack of knowledge or experience as to what's even going on with his/her files.
What it sounds like is your file still wasn't Cleared to Close on the final day of Escrow, and Docs weren't even out. You just had an initial approval with conditions; one of them WVOE's. When the Underwriter reviewed the WVOE's and finalized income, the DTI was too high, hence the need to pay off the vehicle to lower DTI.
Sorry you are going through that. If you switch Lenders this late in the game, sellers could very well terminate the transaction. If the terms are still good, and you have the cash to pay off the car, I'd probably still move forward and fund the loan. Stay far away from the Lender on the next transaction.
Sounds somewhere between a bad lender / back office / loan officer and perhaps because of the lending environment. When did you lock your rate? Perhaps they didn't check that with the higher rates you no longer qualify...
Is this a conforming loan? All conforming loans have a "buyer's remorse" clause giving you a 3day right of recisision after closing. The costs the close are sunk, but you can back of the deal that way perhaps.
Sorry, and good luck.
Quote from @Jowan Chism:
We’re are in the final day of escrow our lender called us on Monday and said they sent over VOE’s to our jobs and needed us to make sure they were completed so that we could close on Wednesday (today). So we scrambled to get that done and sent back to them. Mind you we are supposed to close today!
They called us yesterday and told us we have to pay off my wife’s car as a stipulation of closing!!!! Literally the day before we are supposed to close! And we removed our contingencies so if we pull out the seller can take our earnest money.
Loan officer is claiming they don’t know what happened and has no explanation. But had informed us via phone that we could close last week because we were good to go.
Can anything be done about this?
Take the hit on the earnest money and change your loan officer. Why did you remove your contingencies? In this market I have been seeing very few buyers...
- Erik Estrada
- [email protected]
- 818-269-7983
@Jowan Chism 1) the VOE came back with lower income ..so ask your lender if the income for either of you changed and get the details to see if you can work to either correct or change the figures 2) the lower income has created a higher DTI - ask lender what the DTI was prior to the VOE and what the VOE is now 3) the car loan payoff is required to get DTI in line so approval can stand ... do you have any other debt that can be paid off instead of the car loan that might have a lower balance ? credit cards ? stud loan ? 4) Most lenders use two automated systems when approving loans ...DU (fannie ) and LP ( freddie ) ...sometimes a loan can be declined with one system and not the other ...ask the lender what system was used and ask them to try the other system to see if an approval can trigger 5) if dti is on the edge - try lowering the homeowners ins premium / mortgage ins premium or even the loan amount to nudge the dti down ...good luck
I'm so sorry to hear this happened! It is hard to know what is going on since the LO isn't giving you more information. Perhaps they did the VOE and the income didn't match how they had underwritten the file? I would try to get more info if you can to see if there are any other options!
Also if you were to pay a loan off for closing, could you get another car loan after you close?
Agree with Bob -- I would consult your attorney. I really hope you're able to find a solution. Good luck!
Quote from @David M.:
Sounds somewhere between a bad lender / back office / loan officer and perhaps because of the lending environment. When did you lock your rate? Perhaps they didn't check that with the higher rates you no longer qualify...
Is this a conforming loan? All conforming loans have a "buyer's remorse" clause giving you a 3day right of recisision after closing. The costs the close are sunk, but you can back of the deal that way perhaps.
Sorry, and good luck.
Rescission doesn't apply to purchases. Once you close it's yours. You get rescission on refinances and HELOCs and that's usually only on primary dwellings as well I believe.
Unless something has changed, the "buyer's remorse" does specifically to purchases. That's the whole point --- basically, people think or were "swindled" into signing when they didn't want to because of last minute changes to mortgage rate or wasn't declared properly. Should be a Federal law / consumer protection I've been told at many closings. Maybe it is a State thing... Its even one of the disclosures that buyers sign during the closing...
Quote from @David M.:
Unless something has changed, the "buyer's remorse" does specifically to purchases. That's the whole point --- basically, people think or were "swindled" into signing when they didn't want to because of last minute changes to mortgage rate or wasn't declared properly. Should be a Federal law / consumer protection I've been told at many closings. Maybe it is a State thing... Its even one of the disclosures that buyers sign during the closing...
I've honestly never heard of it - must not apply in SC. Very interesting though - wires go out the same day a deal is closed here. Do they hold funding in NJ? I don't see how they could really enforce it especially if the seller was using the money to purchase their own new home. Seems like it would be chaos trying to claw back.
Funds aren't held... I agree, I'm not sure how one would "claw back" the funds... Yup, like anywhere else some people sell their house and then purchase their next house the same day or next... Never seen or heard of it done so no idea.
@Jowan Chism. soo.......what happened?
In my opinion, this is unorganized, not unethical.