Loan Rep Lied...Angry

[Keith P.]

Hello,

I'm trying to do a cash out loan on my rental property.  I met this loan rep and he told me he has a stated income loan program available to investors.  In didn't believe him but he assured me that these type of loans are coming back.  He said I can cash out 80% of my property's value.  He assured me by saying he closed many of these type of loans already.  So I believed him and went through with the loan application.

I filled out the 1003, submitted all my bank statements and every possible personal docs required.  The bank he uses was big bank.  We did the appraisal and the value came out a little lower than we thought.  So they revised the 1003 loan amount and dropped it by about 70% which is still fine.  Well, just a few days ago, he called me told me that the loan amount will now be based on the rental income collected and not the stated income he initially told me about.  This changed the entire term of the loan.  Because of that, the loan amount will now be reduced to 50% of the property value.  I told him if that's the case, then I won't do the loan.  He said he would talk to the lender and it's been several days and haven't heard from him yet.

To be frank, I am furious.  I fear this loan is dead.  He wasted about two months of my time.  I was really depending on the fund.  I feel like I can't trust him anymore.  I am under the impression that he lied to me from the beginning.  He had to have known that the loan was based on some form of documented income such as the rent rather than stated income.  I can't help but to feel like I've been scammed or lied to.

Did the loan rep break any laws by lying to me?  Is there anything I can do about this?

Thanks!

Keith

[Chris Mason]

Originally posted by @Keith P.:

Hello,

I'm trying to do a cash out loan on my rental property.  I met this loan rep and he told me he has a stated income loan program available to investors.  In didn't believe him but he assured me that these type of loans are coming back.  He said I can cash out 80% of my property's value.  He assured me by saying he closed many of these type of loans already.  So I believed him and went through with the loan application.

I filled out the 1003, submitted all my bank statements and every possible personal docs required.  The bank he uses was big bank.  We did the appraisal and the value came out a little lower than we thought.  So they revised the 1003 loan amount and dropped it by about 70% which is still fine.  Well, just a few days ago, he called me told me that the loan amount will now be based on the rental income collected and not the stated income he initially told me about.  This changed the entire term of the loan.  Because of that, the loan amount will now be reduced to 50% of the property value.  I told him if that's the case, then I won't do the loan.  He said he would talk to the lender and it's been several days and haven't heard from him yet.

To be frank, I am furious.  I fear this loan is dead.  He wasted about two months of my time.  I was really depending on the fund.  I feel like I can't trust him anymore.  I am under the impression that he lied to me from the beginning.  He had to have known that the loan was based on some form of documented income such as the rent rather than stated income.  I can't help but to feel like I've been scammed or lied to.

Did the loan rep break any laws by lying to me?  Is there anything I can do about this?

Thanks!

Keith

 Hi Keith,

A true 2006-style "stated income" loan would violate the CFPB's "Ability to Repay" rule and be non-QM. Non-QM by itself is out there, but violating ATR rule is a big no-no.

Non-QM loan programs that follow ATR rule, that I'm familiar with.

- Bank statements to document income. Rates/terms better than hard money, but (obviously) not as good as government subsidized Fannie rates/terms.

- Cashflow of property as income. Alleged cashflow must be supported by appraised market rents to comply with ATR rule, and it's got to be a positive number relative to PITI. The good news is that this doesn't necessarily have to follow Fannie math, so the rent * 75% thing isn't applicable here.

- Call it a non-residential "commercial purpose" loan to get around the rule. This is what HML do, you know what those rates/terms look like. Both of the previous options are better than HML.

I'm certain there are mortgage products/programs/thing that I don't know, but the above is what I do know. I shop these "HML Alternative" (what I call them in my head) programs pretty hard and most fit into one of those first two bullet points broadly speaking, but if you've found something (that actually funded & closed) I don't know about please let me know.