I have had 2 banks turn down my refi ONLY because my loan is with a hard money lender in my name and we are trying to 80% cash out refi into my wifes name. She is listed as a guarantor. They keep saying there is a fannie mae guideline that will not allow this. They are also saying she has to be on the loan in the beginning.
Anyone heard of this? The end product is the same whether my wife was on the note or not in the beginning that is why I am so frustrated. My HML suggested I sell it to her in hard money for a nominal fee and approach the lender again.
Any thoughts? I thought I had it figured out with the latest lender but now they are going back to the same issue with title.
Landmarx,
I have told you online and over the phone how to solve this problem. Have you added her to the warranty deed yet?
The following is new from Fannie as of 12-5-07 and could be the problem.
Announcement 7-23 (middle of page 2)
In addition, the following clarification is being made for both limited cash-out refinance transactions in Part VII, Section 103.02 Limited Cash-Out Refinance Transactions and cash-out refinance transactions in Section 103.03 Cash-Out Refinance Transactions: • For a refinance transaction (either limited cash-out or cash-out) to be eligible for sale to Fannie Mae, there must be a continuity of obligation if there is currently an outstanding lien that will be satisfied through the refinance transaction, i.e. there must be at least one borrower obligated on the new loan who was also a borrower obligated on the existing loan that is being refinanced. If there is no continuity of obligation, i.e. if no borrower on the outstanding loan that will be satisfied through the new loan is also a borrower on the new loan; the transaction must be treated as a purchase. If there is not currently an outstanding lien on the subject property, a loan to the property owner secured by the property will be considered a cash-out refinance in accordance with Section 103.03.
From what I gather they are saying she has to be on the note not just on the deed. I will double check with the lender. They wanted to see her on there in the beginning not added on. Would that violate the guidelines above? I don’t see why.
According to fannie mae this would be considered a sale not a refinance. Can I just sell it to my wife? Is that legal?
How about retitle it through my HML with a rate/term sale to my wife. They said they would do it for a few hundred dollars. But then there would be almost no seasoning on the refi. Would that be a problem?
At this point I am lining up my options.
So frustrating, we were hours away from closing twice already.
At this point you how long have you owned the house? You may qualify as seasoned at this point. Seriously though Fannie Mae does not have seasoning guidelines. Add her to the title with a warranty deed and use a lender who is familiar with these types of transactions. The deed is what counts as far as ownership of the house. The note has ZERO to do with it.
Update: The second lender would not do the loan without adding me to the loan. The other option was to go ahead like it was with Alt-A financing. Not.
So we are now looking to a 3rd lender. I called the president of a branch of a mortgage bank here in Houston and she told me that all I had to do was add her to the title with a warranty deed and then the chain of title would be fine. They had no problem with that.
Why wouldn’t the previous two lenders suggest that? Are all underwriters aware of these types of transactions or are some just ignorant? Could it be that some lenders just have different guidelines?
Some lenders impose there own guidelines on top of fannie/freddie guidelines.Based on what Ben posted on that new fannie guideline you may be stuck on this loan. You may want to print that out and see. If it is going to be a problem with your new lender. It could save you more wasted time. As for why your two previous lenders did not know how to get this done…investment properties are a complicated niche product that not everyone can do. Especially when it comes to seasoning and continuity of title.
hey landmarx…
as a mtg. broker since ‘99, believe me when i tell you all lenders are not created equal - a lenders’ worth is tied to his experience and ability in the industry - second of all, in this lending environment nearly all of the banks have gotten extremely conservative as most are lending someone else’s money so even though the deal makes common sense that doesn’t necessarily mean it will make sense when it comes time to sell it in the secondary market…
with all that being said, i am not sure which Houston based hard money lender you are using but most of the good ones offer long term financing when you are ready to get out of the HML into a long term loan; but adding your wife to the deed should do the trick…