Lender could not deliver loan as promised

[Andrey Y.]

Hello all, I am hoping you guys (especially lenders) could chime in on this. Long story short, I have agreed to do a cash out-refinance of a free and clear property, 75% LTV at 4.5% interest.

About three weeks or so, into a planned 30 day close, the lender informs me that the property in question (a condo), may not have a required 51% owner occupancy, and I quote, "we may have issues".

So i politely informed him that the property most certainly has lower than 51% occupancy, hence it being a good investment. He quickly found some lender that would do only 60% LTV, 3.875%, 1.5 points.

I asked him what my options were. I asked if I would be responsible for the appraisal if I decide not to proceed with the new terms. He blatantly ignored that question completely. He also informed me that the new terms were not negotiable, ie. it has to be 1.5 points.

Is this ethical on his part? How can it be my responsibility as a customer to know underwriting guidelines of his firm and Fannie Mae/Freddie Mac. As an experienced lender, he only realized the owner occupancy issue towards the end of the closing? The client cannot be held responsible for this error, logically.

I agreed to proceed with the new terms even though his (lack of) professionalism, and the 60%LTV, is not sitting right with me.

[Aleks Gifford]

Legal stuff first: I am a licensed Sr. Loan Originator NMLS# 1157855 and am currently licensed to originate in IN, OH, KY, FL. If you are not in those states what I say may or may not apply to you. Please consult an advisor in your state.

 This being said the Lender does not know this stuff until your appraisal and cert are completed. A good lender will prep you for this and get you working on it earlier in the process before money is spent.

Secondly most lenders do not refund appraisal as it is a due diligence cost on your part just like an inspection. Some may issue you a credit for future items. In regards to the points and LTV: The low LTV indicates lender fears the deal and this is a courtesy attempt that you can take or leave typically it is 75%. The points are a little high in my book on such a low LTV.

The odds are he hoped you would shop him as a no-warrantable condo is a pain in the butt.

As for the ethics your loan officer is not All Knowing and should prep you that everything could topple a deal right up till closing. As an investor you know this and as such he may not have felt the need to remind you. Consider everything up till closing as due diligence process by the lender and as such they can walk away if it is a bad deal in their mind.

If at any point he was unprofessional it would be in assuming you knew what was happening. I ask my borrowers a lot of questions to determine how knowledgeable they are.