I have an unusual situation that I need some input on. I acquired an investment property this past April. I used a large mortgage origination firm to obtain financing. At the time I was purchasing this property I had just recently closed on several other deals. The broker representative pulled my credit report and it didn’t show the other properties I had recently acquired. I informed him that I had more properties and asked if he needed further information about them. He advised me that it wouldn’t be necessary. He prepared the application based on the information on the credit report. We closed on the transaction but the firm was unable to sell the loan because the new servicing company they were going to place it with already had some of my other properties. The origination firm has kept my loan and is servicing it but the owner is now telling me that I failed to disclose information to them about my other properties. Because of this, they’re asking me to sell the house or they will call the loan. They say they can’t sell the loan and it’s costing them a lot of money to keep it. I’ve kept the loan current and have never been late.
My problem is I did tell their representative that I had other properties and I offered to provide him with information to document them. I have emails that we exchanged to prove that. The representative simply chose not to use that information and never asked me to document the other properties. I definitely made him aware of the fact I had recently acquired several new investment properties. He also failed to inform anybody else in the firm’s offices.
Does the loan origination firm have any grounds to force me to sell the house? Do they have grounds to call the loan even if their representative was advised of the fact I had other properties? The way I see it, this is an internal matter between the company representative and the firm’s owner.
I’ve gone ahead and signed a listing agreement with a realtor but I also have tenants that moved into the property. I told the firm that I would agree to list it but only if I’m allowed to sell it at a price that allows me to recover my down payment/closing costs. Also, I want to make sure that my tenants are not displaced. They said they would be flexible with me and try to work out a win/win for everybody. I really don’t want to sell the property but it doesn’t appear that I have much of a choice.
Sorry for the long message. Your input is greatky appreciated.
Let me summarize—you had multiple closings that yet to hit your credit report and despite informing the LO, they ignored them because they didn’t show up on your credit report?
If that is the case, the LO willingly desired to commit fraud on its his/her own company for the sake of getting a mortgage, only to be caught with his/her pants down and play Vinny Barbarino from Welcome Back Kotter (What, Where, Huh, he never told me that, etc.).
What do your mortgage documents state—any contigenices for consumer fraud? Any buyback clauses in the event the loan can’t be sold into the secondary market?
My guess this isn’t the only problem—your mortgage company originated a loan at a LTV that is no longer being sold in the wholesale market (because the wholesale market keeps tabs on what is and what isn’t desirable in the secondary market) and now they holding a pool of loans that are based guidelines that no longer apply.
Are they going to give you back closing costs and YSP (because they table funded, they don’t have to disclose YSP—you’ll need to look at the original rate lock form to find out what it was)…
Where they might have you is if you didn’t list these new RE transactions on the REO schedule of the 1003—if you didn’t, you’ve committed mortgage fraud yourself (willingly or steered to).
Without the knowing the whole story, I don’t know and can’t advise you further beyond this—don’t ever deal with this company or any of its employees again…
Thanks for the replies. The 1003 was completed by the LO after he took my information over the phone and from my credit report. That’s when I reminded him that I had other properties. He told me we didn’t need to list them because he was putting me into a stated asset program. I signed the form based on his recommendations. I have it documented where I told him about the other properties.
I’m still checking to see what my loan docs state.
After checking through the loan docs, there’s nothing that specifically addresses the issue of whether the lender can sell the loan or not. With regard to fraud, it states they can call the loan if there’s a material misrepresentation. My contention with all this is that I gave them the information and they chose to ignore it. The LO I worked with was a representative of the mortgage brokerage firm. I would think that once I informed him of the fact that I had other mortgages, I was providing this firm with notice. The other thing is this loan is current and performing. The only “damages” suffered by the brokerage firm is that they can’t sell it.
Everything else I documented for them. My income, employment, bank accounts, etc. I had the information on my other properties and told them about it. The LO told me flat out I didn’t need to document those properties.
I told them about my properties both verbally and in email exchanges. They were not documented on the 1003. The LO was fully aware and on notice of the fact I had other properties that were not showing on the credit report. This is documented in an email exchange I had with him. I would think that if a loan officer is aware that you own other properties but chooses to ignore it, that’s not my issue. He’s in the position of superior knowledge and I assume he knows better. I’m not a mortgage professional. My obligation is to inform them of the facts surrounding my loan qualifications, which I did.
Right now, the company is not taking a real aggressive stance on it. They’re politely asking me if I could put it on the market because they can’t sell the loan. They say there could be a problem with the lack of disclosure but they would rather we resolve amicably. They haven’t sent me any letters demanding anything. It’s been all verbal to this point. They’ve offered to let me market it for as long as it takes to get a buyer and they said they would work with me to make this a “win/win” for everybody.
I haven’t sought out a lawyer just yet. I figure if they’re willing to work with me, I should probably go ahead and market the home to avoid creating a nasty situation. The problem is I have a 5% down payment I would need to recover along with my closing costs. I also have tenants that have just moved into the property that I don’t want to get displaced. My best hope is to find another investor that wants the property and the company will pay for some or all of the closing costs.
What if you can’t sell it for the price you acquired it for? What about your previous sunk investment in the way of downpayment and closing costs? What about the cost of lost opportunity (you could have used these proceeds to cashflow elsewhere)?
If you want to avoid the battle, at least ensure that you are getting a ROI (and not taking it on the chin for somebody’s greed and/or incompetence).
Your lender may be assuming the risk of lender liability should you be forced to sell the property at a loss simply to payoff their loan. Your attorney will likely raise this subject during your discussions to find an amicable solution.
But didn’t you sign the 1003 showing your assets/liabilities WITHOUT these properties listed?..Seems like that would hold you somewhat accountable…If these other properties were refi’d it would affect your ratio (I can’t remember now while writing this reply if you did a full doc or not)…The lender has to make their final determination on your loan from the documentation you submitted to them, albeit passed through the LO, not from the emails or discussions that took place in his office…
This was a full doc loan and the LO was made fully aware of the fact that I had other properties that needed to be detailed on the 1003. The LO was an agent/employee of the brokerage firm. I told him I had the information and he flat out told me not to bother with it. My attorney tells me there’s no fraud on my part because the facts show no intent to withhold information. The brokerage company is guilty of having a greedy LO who won’t follow his company’s policies and procedures. That’s not my problem. Had this been a lender who was not involved in the application process, then that would be a different story. The lender in this case can’t have it both ways. On one hand they tell me not to bother giving information on my other properties. But when they can’t sell the loan they can’t come right back and say I should’ve provided them that information after all. The bottomline is they were only thinking about selling the loan and never once cared about my other properties. It was one more loan to produce and sell. Once it was sold, it would no longer be their problem. Since they got caught, they want to throw me under the bus because they can’t make money on the loan. I’ve been on time with every payment. They’ve suffered no harm or damages because of me.