I got a call from a young unmarried couple this week that went to school with my two sons, and whom a Realtor that I partner with referred to me. This young couple had been Pre-Qualified by one of the major Internet Lenders that advertises a lot in my area. This Realtor has been around long enough, and burned enough times by this type of Lender, that he does not trust their Pre-Qualification Letters.
The Pre-Qualification Letter from the Internet Lender was just on the female member of this relationship, because his credit scores were in the low 500’s. Her middle credit score (which is what we use) was 701, and the Pre-Qualification was for a “Stated Loan”. I don’t know about other Loan Officers, but I do not have any Stated Loan Programs for credit scores in the low 700’s.
When I got the call I did what I always do, I asked a lot of questions. I particularly ask if they know what their credit is before I run it, and what their income is. From the initial response that I got it was clear that I could not qualify them on just her income for the amount they wanted to be qualified for. So I suggested that we first look at both their credit, because sometimes we can fix someone’s credit very quickly. When I looked at the Credit Report, it was obvious that it would take a few months to correct his scores, and they wanted to purchase a Condo right away.
It was clear to me why the other Loan Officer was trying to do a Stated Loan on her only. She is a Waitress, and even though she receives a base hourly rate, a large part of her income is from tips, and she does not claim all the money that she receives in tips (a way of not paying taxes, but not good for mortgages). I asked her if she had any documents from the other Loan Officer, she said she did and would e-mail them to me.
I quickly looked at the documents as soon as I received them, and I did not like what I was seeing. Right off the bat the interest rate was one point higher than my rate, and the Closing Costs were $1,000 higher. The other Loan Officer also grossly understated the taxes and condo fees for that area. It became even clearer what was happening when I looked at the income that he was stating. He was stating both her income and his, even though she was the only one on the loan.
I called her back and went over with her what I was seeing, and then told her to read the disclosures that she had received VERY carefully. The disclosures stated that she was giving them permission to verify the income, by giving them permission to request her tax returns. It went on to say that tax returns might be pulled at time of application or by Quality Control after the loan closes. It also warned her in several place about providing false information.
This Loan Officer was encouraging them to sign documents that obviously contained false information. That is not only FRAUD on the part of the person signing the documents, but also FRAUD on the part of the Loan Officer encouraging them to sign documents that he knew contained false information.
I showed the Realtor the documents that they had received from the other Loan Officer, but he was already aware of them, because she had also forward them to him. He told me that he was not going to have anything to do with this, should this young couple decide to go forward with this Internet Lender.
He and I have advised them of the consequences if they go forward with this, as well as the games that will probably be played with them along the way. Should they do this, they will be doing it with full knowledge that this is Mortgage Fraud. I am also going to encourage them to report this Lender to the Banking Commission, should they decide not to go further with them.
So be careful out there, even though things have slowed down a little bit, and Lending Guidelines have tightened, the unscrupulous are still around, and spinning their web of corruption.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
Hi George,
I'm glad to hear there are lenders like YOU around, someone who would not have any part of this.
George: Right when everything was going haywire an agent in my office got a contract for a listing and it was 100k over the list price. The cover letter from the agent said something along the lines of "the LO told me to write the contract this way.....he has an appraiser....and the seller can gift the money back to the buyer".....now what kind of crap was that? It all backfired ....
There are unscrupulous people out there.....regardless which side ...
It is up to you....me....and the rest who love to do things the right way (so we can sleep at night) to keep this industry going forward with good agents/lo's and the like.
WooHoooooo!
America is waking up from its drunken real estate binge with a huge headache. This type of lending as you well know has been going on for...has always been going on. Since the late 80's however the number and pace of these type of loans increased until we have what we have now.
Stated income, "no doc" loans and other creative financing alternatives were the invitation to do all sorts of things with the collateral and terms to make the deal happen. The mantra was this deal (whatever it was) would be just a part of the larger portfolio that would become a collateralized debt obligation. With full knowledge of the due diligence sampling used for portfolio validation more and more of these files crept into the blocks.
Passed around and around bought and sold here and abroad everyone had a chance to take a ride on the merry-go-round. The pendulum is now swinging back to more conservative underwriting guidelines and those holding now will be the losers. The survivors will have stuck to those more conservative guidlines even through these past two decades.
There is no hang-over pill for this. The cure will be a hard pill to swallow and will result in more consolidation in the marketplace. These deals will still be around for a while -- I still see them in offers I get on my listings but, just like the alcoholic there must be present sacrifice to clear up the wreckage of the past.
This is why the entire nation's housing market is in such a mess! Prices should have NEVER gone up to where they were.
Lynda, thank you. No loan is worth going to jail over.
Leisha, we can try to help them stay out of trouble but in the end it is their decision.
Sally, that was Mortgage Fraud big time the Loan Office, Appraiser, and Realtor need to be put out of business. Sally I am glad that you stayed out of that one.
David, I like that statement "There is no hang-over pill for this". At the Mortgage Company that I work for we write loans by the book, so we are in a strong position right now. But there are many that are still waking up with a "hang-over"
Mortgage George...
At this point in the fraud game we can hope that honest folks like you come along more often.
You probably know about the short sale fiasco's we have happening in our market.
These short sales are leaving a fraudulent paper trail.
Yah. The original loans were fraudulent. Applying for a short sale when you've committed loan fraud is not such a great idea.
What a flippin' mess :)
TLW...ROAR!
George,
I'm conducting a short sale right now for a client who purchased their home before they met me...overpaid so much that they were the perfect example of the problems we face here. Yours sounds like a very dangerous situation both for the LO and the clients. There will always be a few stragglers who slip through the cracks.
Sandra, I thought this type of stuff had died down, but it does not seem to ever go away.
TLW I have not run into many Short Sales around here, so I have not seen what you guys are going through, and I hope that we don't experience it.
Jennifer I guess we can never let our guard down.
Neal, like I commented to TLW, I have not run across many Short Sales around here, and the ones that I have run across seemed to be above board, but you never know the slimy ones might start to pop up.
Cheryl, good thing I let you know about the disable comment. What you said is very true, these types of Lenders are full of surprises especially at the Closing Table.
George,
It's really sad that some mortgage originators still operate as if everything is as usual despite all the turmoil we see in the lending industry. Hopefully the banking commission will take appropriate action.
George,
You probably don't see it there because you never put your clients in that position in the future. You just make them pt 50% down so they can't owe that much:)
Cheryl, that would not be fun.
Esko, the Banking Commission needs to do more on their own to clamp down on these practices.
Neal you bet .......... a minimum of 50% :) :)
Randy, the unfortunate part is that Buyers fall in love with a house, all they hear is that someone is telling them they can do the loan, and do not pay attention to how it is being done or what they are being asked to sign.
Ines, I knew what you meant :)
You and Rick, just like the Realtor that I was dealing with here are smart enough to ask the questions when something smells bad, but are are to many that only care about the sale and the deal closing, and turn a blind eye to what is happening. You guys do business the right way, and that is why you will be around for a long time.
George,
Bravo for you standing up and I'm glad your writing about it. I'm an unemployed underwriter and let me tell you..... "WE TOLD THEM SO!" I can't begin to tell you how many loans I DENIED, that came back to life. They didn't want us to underwrite to the guidelines, they wanted us to CLEAR THEM TO CLOSE!
Now I have friends who are not as fortunate as me to have a side business and a wonderful husband. They may lose their homes, their credit is now shot and some have not worked since JUNE of last year! I hope the industry takes a stand and understands that not only are the homeowners and banks affected by fraud, but the employees at those companies are too!
I recently wrote a blog called "Stated Income...The Right Way!" I can think of at least 5-6 brokers that I would love to send it to!
D. Bass, I try very hard to make my loans work within the rules, but there are many out there who do not care how it gets done as long as it gets done. As a result of this kind of mentality many companies ended up in trouble. I will go over to your blog and take a look at what you wrote.
Dianne yes there are still some out there trying to take advantage of others, but what is also unfortunate is that there are some Borrowers out there that are all to willing to be taken advantage of.
George
Stated loans are still available for clients with a 700 FICO but they have to make sense. They are available for the self employed borrower but require verified assets. Obviously a borrower without assets and substantial reserves will not work. The loan scenario has to make sense. No underwriter today will sign off on a loan that doesn't have substance (assets). I currently represent 157 and am able to do stated loans even in a declining/distressed market of California, lower LTV, higher reserves. Lenders just want verification of assets.
I am a Certified Mortgage Specialist (CMPS) as well as licensed by the DRE. I wouldn't dream of stepping over the line.
There is always a high road and a low road in any market, good or bad, George. This LO is probably 6 months or less in the business just like half of the sales force in the mortgage industry. They are getting bad advice in a turn and burn shop and the unfortunate reality is. This loan officer does not have a future in our business. Without long term lasting relationships and a base of customers that view them as a trusted financial advisor, they are dead in the water. It is a long walk to get to the happy days of everyone picking up the phone and wanting a mortgage again. The thinning will continue and for now AS ALWAYS, it is buyer beware.
My advice to consumers would be to ask friends and family and other financial advisors who they would recommend to help with their mortgage. If that does not work interview several people and look for more than just rate and cosing costs. The reality with rates and closiing costs is that if you shop long enough you will find the person willing to lie the biggest to get your business. A good advisor charges the fair market rate and is not shy about disclosing this. AND they are worth every penny of it. Ask all those people going into forclosure!
Great post George, Keep on caring and the world will always be a better place :)
Patti, glad to hear that you are able to still write State Loans out there, but around here they are all but gone for the time being. Sounds like the State Loans that you have are being done the right way, those that I have run across lately (like this one) are not done like you described and are very shady.
Tom, good suggestions, and you are right Loan Officers like this guy will not be around very long, but in the mean time they can do a lot of damage.
Karen, there is nothing wrong with being creative, as long as it is done honestly and within the guidelines. Unfortunately some use their creativity to mislead others, as you mentioned in you comment. We can only hope that peoples desire to purchase a home will not cause them to turn a blind eye to what they are being asked to do.
Dena, thank you for the compliment, but there is nothing super about me. I just try to be honest in everything I do, and not take advantage of people.
George,
I am so glad you are on my side. I know you wuld be there for any of my clients. I hope more read this blog and you get more and more customers because you are straight forward and will help them see the true light not a flashlight.
Trevor, even those are even though for me to now.
Susan, I like the end of your statement "see the true light not a flashlight". That is good :)
Jeepers! Do you have a commission to report this to? Stick to doing the right thing, it has made you who you are today! Respect & honesty are very good qualities. Internet banker, apparently, is missing these:)
It's a Good Life!
Fran
As a Notary Signing Agent, I have seen alot and nothing surprises me any more. I just wish folks wanting to commit fraud knew how their actions hurt others. I've been in situations where I could not comment or offer an opinion because I am a notary and not a broker or an attorney. I've seen unscrupulous brokers (thankfully, most of them are out of business now) who simply wanted to close the deal lie to their client about what a document contains when their client inquires about terms and conditions. In these instances, the best I could offer their client was to point out the actual terms under which they are signing by showing them the language, and by showing in detail the right-to-cancel document if it exists (re-fi's and non-owner occupancy deals). Beyond that, I discontinue working for these people on future deals because I see them as slimy. An ethical and honest NSA who is knowledgable about docs is important for all borrowers to know.
"A QUICK NOTE"
www.aquicknote.net
Frances, they can be reported to the Banking Commission, and Lenders have been fined for similar actions, but it is usually the Borrower who does the reporting.
Shannon, yes the Closing Table produces many surprises with these Lenders, and sometimes those in positions such as you can do very little about it. Thank you for sharing that.
George,
Committing fraud is, obviously, an extremely unfortunate part of the mortgage business. The willingness on the part of so many to do so is driven, I am sure we can all agree, by greed. We have the great fortune (but also misfortune) of being in an extremely lucrative industry, and many less-than-ethical people have taken and continue to take advantage of this. I do believe, however, that if nothing else, the events of the past 12-months have cleansed the industry of many of those persons. This was not, of course, the intent of the "credit crunch." It has been merely the natural business outcome for those who viewed the industry as one in which they could "smash-and-grab" as many loans and as much money as was possible. I believe further that the vast majority of those of us who remain - regardless of our present condition - are still around because of strong core business values and will ultimately benefit from recent trials. The number of ethical business people like yourself and those who responded to your post will grow in proportion to those unethical persons who have had their house of cards mortgage companies collapse as a result of the events of the past year. If that is the case, then occurrences like the one in your piece will, hopefully, become less commonplace.
Hi George!
Your Fort Worth Friend, Linda
Hi George, I did and I emailed you back. Julie Neerings wrote a beautiful post about what's going on in my life. I'm sending you the link. Thank you for reaching out...it means more than you know!
http://activerain.com/blogsview/373740/You-Just-Never-Know
Yes mortgage fraud is still here... ya think it will EVER go away....
Nope.... We can HOPE, wish and PRAY... but it won't; all we can do is
be ETHICAL about how WE do business...
AND report those we find stomping on those people we hear about...or that come to us..
George, A very good article indeed! This is a classic situation, that has existed since the dawn of the no doc. I believe that the industry as a whole (Loan officer, Realtors, Attorneys, etc) are finally seeing the light, that making a sale at any cost simply is not worth doing. And why do these programs even exist! Too tempting for some desperado's to say no to.
I welcome the new mortgage market where we are all on a level playing field and our knowledge, professionalism and customer service will prevail!!
Alex, even though this type of thing has died down a little, it might not completely ever go away as you said, but at least we can try to keep it in check.
Frank thank you for your comment. I like that word "desperado's" I wish I had thought of it .......... LOL
OMG, everyone is now 'honest abe'? Come on, give me a break! 2 years ago today every lender in America was dishing out Stated, NO-Doc, NINA loans out the wazoo!
The market was up....realitors were making nice 3% commisions....brokers were making their 3 points and the home owner was paying for it all by simply 'wrapping it up in the mortgage payment!' now the bubble has burst and people are defulting on loans...it's the loan officers?
ITS THE BANKS FAULT FOR OFFERING LOANS LIKE THESE!
Then you have people like myself who bought their house before the major part of the boom was over and payed CA$H for my house. Every year i would take out a HELOC. Now the crash comes in and I got decent credit (upper 6's low 700's) and believe it or now I still got $150 in equity in the house that I cant get to! I've had the apraiser here.
What should I do? I'm trying to start a little business and need to get at that money? Now I gotta try and sell my house cause I can't get the loans even thouggh I'm lower that 70%LTV.
The crevis of the mortgage industry has dried up...and said were gonna get tuff on the people looking for a mortgage no matter what!
Sav.....help me, legitimate loans/refinance are being done every day, especially if they have credit scores like yours and LTV's of 70 or below. What is not available is the loans that people lied about their income, which they should not have been doing anyway.
Yes there were Loan Officers out there charging 3 points and getting away with it, but that was not the majority of Loan Officers, and certainly not me. Borrowers, especially self employed ones have to make a choice. They have to either stop hiding income, pay taxes, and be able to get a mortgage/refinance, or hide their income, pay lower taxes, but not be able to get a mortgage/refinance. It is their choice but they can't have it both ways any more, at least not legally.
In the case of this young couple in this blog it was simply fraud all the way around, and that was never allowed, even in the good old days.
Thank you for taking the time to comment on this, I always appreciate comments from non member whether they agree with me or not, and you are always welcome to comment on here.
George,
I've read some of the responses to your blog post and it is sad how some would like to oversimplify. Certainly there is enough blame to go around. Blame the broker, blame the realtor, blame the lender and blame the borrower. I think everyone who is quick to point a finger needs to say: The truth is, the SYSTEM is broken. Each of us has had our hand in creating the problem, we must now all share the pain of fixing the problem (and believe me, I don't mean a government bail-out). That pain will be born by a slow and sluggish rebounding of the mortgage business and only those who are patient, willing to change their way of doing business and who show an honest effort to make things better will (and should) survive. It is much like survival in the animal kingdom. Strength is good but brains will keep you alive most of the time. When the rebound begins, be sure to choose a Notary Signing Agent who will guide your clients through their loan documents in an ethical manner!
"A Quick Note"
Jay as soon as we think that these people have started to crawl into the hole that they come out of, they pop back up again.
And yes it has been a little crazy, but it has been good crazy. I am trying to find some time to post another blog, but I have to take care of my Borrowers and Realtors first.
Jay, who is that handsome guy in the sidebar? Why , I do believe it's our own George Souto!
And Jay, I thought WE were his realtors!
George - Unfortunate as it is, fraud will always be around. Two reasons why is, it's not reported and when it is, the punishment is a slap on the hand (for the most part). As I have seen, the consumer only wants to hear that their dream of owning a home can become reality, or the money they so desperately need, they can refinance their property. So when the honest lender, broker and/or Realtor comes along, hands them the cup of coffee (or 2), to wake them up from their dream, they then go to the first person who is going to promise them the world.
I'm still trying to hold on to that positive attitude that in the end only the good shall survive. I'm not so sure anymore in this industry, that's correct. I've watched our amount of business slowly go down. Especially now that it's slow, more then ever, people are wanting kickbacks. I'll close my doors before I go down that path.
Rich, yes I am also sure that some will try, but hopefully they will get caught.
Dawn, I am with you, I would rather be out of business than do that kind of business.
Russ, if more were sent to jail, maybe there would be less fraud going on.
Not only am I glad you didn't take this further, I'm glad the realtor didn't as well.
Casey, yes they did and I hope to be able to do something for them soon once we clean up his credit.
Bruce we need to use common sense in this business.
Darleen, you are sooooooooo right.
Chadd, thank you.
Jacob, you have a GREAT day also.
James it has never made any sense to me either, but if someone wants to truly do a stated income loan, what they really need to do is to do a No Ratio Loan.
Darleen greed over rides common sense.
Paddy you are right on the money with your comment.
George,
Its been a long time! I'm glad to be back here and blogging. Thanks for stopping by my blog the other day.
I have come across this situation a few times and it can be disturbing. I've lost a couple clients because I'm ethical and won't jeopardize my license for anyone. It is quite interesting what some people will do.
George, I hope those buyers did the right thing. I had a client a couple of years ago, that applied for a loan with a lender that I regularly use. She submitted W-2s that she had altered. The lender noticed the different fonts that were used on the W-2. She had also lied about her length of employment at her brother's company. (She also forgot to tell me that she worked for her brother.) It was amazing that she got mad at me and the loan officer. She was going to write a letter to the president of the mortgage company because she was being denied a loan. The loan officer was trying to be tactful but definitely not giving her a loan. When she started ranting and raving, I told her that none of us would look that great in head to toe orange jumpsuits. I wasn't going to jeopardize my career and life to get a closing.
I had another buyer a few years back, basically asking me to commit mortgage fraud. He didn't call it fraud. When I told him it was illegal and couldn't be done, he went on his way. About a year later, I found out he had gotten his real estate license. I don't know where he is now. I'm waiting to see him on the news, busted.
my understanding is that fraud is NOT JUST STILL HERE, but in some places it has even ticked up with the smaller mortgage box, people are stretching the truth more.
chris the implementer