Have been trying to do a refi with BNC - a lender from Zillow...
While I thought things are going smooth, lender came and requested my ex's settlement statement...So he has a rental property where we took out the mortgage together years ago when we were still married...He just recently refinanced it to just his name, taking me off the loan.... His refi closed like 10 days ago....
His old lender (Wells Fargo) sent a letter stating the joint mortgage was paid off... Now BNC asked for my ex's settlement statement to prove that my name is NOT on the new loan...
I almost that the ask is so inapporpriate to the point that I felt offended... Should I reject that request?
The lender is no more entitled to any particular paperwork than the borrower is entitled to any particular mortgage.
You are completely free to reject that request, @Diane G.
...
@Thread,
- It's not marital status discrimination. The debt appeared on OP's credit report. So there's two possibilities: she's still obligated, in which case the full PITI is a monthly liability in the DTI calcs (possibly offset by rent from the property in question), or she's not obligated, in which case proof of that deemed acceptable by the underwriter is required (this part has already been beaten to death, not going into it further) to exclude it, since by default lenders assume that any liabilities on the credit report are true.
- If the lender excludes something from DTI that shouldn't be, the lender may run afoul of the Ability to Repay consumer protection rule that our elected representatives, Mr. Dodd and Mr. Frank in particular, created for our protection from predatory lending. ATR (and the obsession with DTI that results from it) is the reason the person with $2m in the bank, liquid, can still have a hard time taking out a $200k mortgage. If that person with $2m in the bank can't show ATR, it would be "predatory" to give him a $200k mortgage loan, according to the rules as they currently stand.
- Proving that an old mortgage in one's name was paid off, does not prove that the new mortgage is not also in one's name. Any time I refinance a mortgage into my own name, I get proof that the old one was paid off in full, so that doesn't prove that I'm not on the refinanced mortgage. Many mortgages also do not appear on credit reports, or do appear but after an X month delay. OP has probably already locked their rate and is on a deadline.
- ATR and the Qualified Mortgage, together, provide an umbrella for lenders, where the presumption of guilt in litigation is shifted in favor of the lender any time the lender's lawyers can say "we were trying to follow QM and ATR just like you told us to!" when it's conceivably possible that this is true.
@ Chris mason - banks don't need this new "proof" that I was not on the new mortgage to remove it from my DTI... In the 5 years since divorce, I have refi this particular property 2-3 times already, with WF, and with US bank... Each time, i just have to give them the divorce decree and they pull a "suppliment" (what ever this is), and they remove it from my DTI.... Even though I dont know what that suppliment is, I know it can be done because it has been done multiple times... Lol
Now, with ex paid off the loan this time, I don't even know there IS a new mortgage taken out...What ex told me was he took a HELOC from his primary and paid off the loan on the rental...
@ Chris mason - banks don't need this new "proof" that I was not on the new mortgage to remove it from my DTI... In the 5 years since divorce, I have refi this particular property 2-3 times already, with WF, and with US bank... Each time, i just have to give them the divorce decree and they pull a "suppliment" (what ever this is), and they remove it from my DTI.... Even though I dont know what that suppliment is, I know it can be done because it has been done multiple times... Lol
Now, with ex paid off the loan this time, I don't even know there IS a new mortgage taken out...What ex told me was he took a HELOC from his primary and paid off the loan on the rental...
You said he refinanced it in OP, now you're saying he paid it off via other means. That's why underwriters ask for documentation, and don't take borrower claims at face value. Don't take this personally, it's actually 100% normal for borrowers to change their story half-way through, especially when there is any sort of divorce, alimony, child support, etc etc, involved. :)
The scenario is now drastically changed; I might pop back in the thread once it changes 2 or 5 more times and the story is settled.
But, in general, if borrowers mis-represent the scenario, then of course lenders cannot be accurate about which supporting documentation is needed. If someone says they work at Whole Foods when they are a self employed S Corporation basket weaver, it's not the lender's fault when they ask for paystubs from Whole Foods that the borrower cannot produce. Or if someone says they have "saved up" the down payment when in reality they intend to use a HELOC, of course the paperwork the lender asks for will not match the actual scenario and may appear nonsensical.
@Account Closed Proof of what? That it is unprofessional to risk a penalty unnecessarily? And you are right, a lender can deny a loan if you fail to give them information they ask for. I never stated otherwise. (Psst, just because they CAN do it, doesn't make it legal or ethical) For your convenience, I am including a link to cases at the Justice Department that demonstrate that lenders take the risk of being penalized if they do not follow fair housing and equal opportunity credit regulations.
https://www.justice.gov/crt/housing-and-civil-enforcement-section-cases-1#lending
@Scott L. Banks are required to maintain documentation to support their underwriting ability and decisions to provide to regulators and auditors when they are examined/audited. Again, there are different documents that probably can be provided however banks are usually trying to close loans as quickly as possible because delays affects their sources/uses funds schedule.
From my experience in banking, lenders usually don't have enough time to dig into people's families' finances so I don't believe that this lender requested this information out of spite or nosiness. They just need to make sure their borrower does not have any additional debt to service outside of what is provided on the credit report and they need to verify debt amounts listed on the credit report because if there are any issues with Diane not being able to service the debt repayment it is the lender's *** and the bank's interest earnings & capital that is on the line.
I also second what @Chris Mason said.
I don't think everyone is getting what I'm saying. Based on the original post by Diana, her lender is asking for documentation on a new loan that her ex-husband obtained after their marriage was dissolved. The reason given was to ensure that this particular loan wasn't a joint obligation of Diana and her ex-husband. They had previously held a joint mortgage on some property that they purchased during their marriage, which he was awarded in her divorce. The bank acknowledges that this joint mortgage was (recently) paid off and the lien released. Diana (properly) has proof of this and presented it. The lender is now speculating that the husband (fraudulently) entered a new joint obligation with Diana in order to pay this previous mortgage off. So they are now, without any evidence of such an occurrence, asking Diana to produce the personal financial documents of her ex-spouse which she technically has no legal right to obtain, and which he has no legal obligation to turn over.
So now lending professionals on Biggerpockets are telling Diana..."Don't feel insulted, they're just asking you to beg your ex-husband for permission to see his private loan documents. So that we know you, a formerly married woman, aren't being illegally leveraged by your ex-spouse (this apparently happens all the time to unsophisticated single women)". So they're speculating (with no evidence) that her ex is committing fraud and identity theft, and want her to prove a negative (that he's not). If he was, do you think he would turn over the docs? Yes if I was in her shoes I WOULD feel insulted. The lender is making an arbitrary demand for something that is quite irrelevant to the underwriting, and if it were relevant would be easily obtained without any action on her part. Of course, it's just because there was lots of mortgage fraud in 2008 and Diane looks a little shifty, we gotta cover our bases don't you know. Just produce your blood sample and move along... :-)
Sure, it's a week before closing and we have you over a barrel, so if we tell you to dance a jig and sign in blue ink, you better. Unless that is you are an excellent credit risk with $500K cash in the bank and an 850 credit score, in which maybe you walk your fingers across the keyboard to another bank that actually wants to make a profitable loan to an excellent credit risk and doesn't accuse your former life partner of being a criminal....
And what happens when the " ex" says no . He has every right to
And what happens when the " ex" says no . He has every right to
Not only does he have the right to, since I believe that Diane said they were still on good terms, he could do her a FAVOR by saying no, to back up her point that it is a stupid (possibly illegal) request.
Sorry for your experience. Kysha is right, it's all federal guidelines and risk layering to qualify you directly. In any of us were to personally lend money for 15, 20, or 30 years. We may ask for blood work, genetic testing, etc. to make sure we wouldn't lose any money on the transaction and the borrower was good for the term of the entire loan. Think about it, banks and lenders lend money for a long period of time and only look at you for 45-60 days. Eat that frog.
Sorry for your experience. Kysha is right, it's all federal guidelines and risk layering to qualify you directly. In any of us were to personally lend money for 15, 20, or 30 years. We may ask for blood work, genetic testing, etc. to make sure we wouldn't lose any money on the transaction and the borrower was good for the term of the entire loan. Think about it, banks and lenders lend money for a long period of time and only look at you for 45-60 days. Eat that frog.
So Federal guidelines require lenders to ask you to provide documents for loans to unrelated third parties that have nothing to do with the collateral? What mechanism that they (lenders) don't have... do they expect you to use to obtain such documents?
I just completed a mortgage application for an investment property. Nobody asked me for a copy of my father's recent auto loan. And he has the same name as me and lives in the the same metro area. Wouldn't prudence suggest they ask me to demand a copy from my father, to make sure he didn't title mom's car in my name. 35 years ago he and mom were my guardians and provided all my support... :-)
I mean goodness they're loaning me $108,000 for 30 years, the least I could do is produce mom's car title... Wait till I show up to the closing with a blue pen next week...!
Loan amount, who took the loan out, and which property were mentioned. Here are those details for former Chairman of the Federal Reserve Ben Bernanke, along with who did the mortgage, if it was fixed or an ARM, government or conventional (which is correlated with FICO score), dates, term (30 v 15 year), etc. I looked it up for the first time years ago when his refinance application was denied. I've left his wife off since she is not a public figure, and left his address off as a courtesy.
Now we finally find out why the Fed has been lowering their rates all these years... Chris, how about Ol' Yeller's place?
Scott L. If she had an original note with her Ex. She has to document that it was paid off probably a capacity (income) concern. It would be on her bureau. Don't know about your mom or dad Nor how then being guardians or same name etc.? IQ up son.
Scott L. If she had an original note with her Ex. She has to document that it was paid off probably a capacity (income) concern. It would be on her bureau. Don't know about your mom or dad Nor how then being guardians or same name etc.? IQ up son.
Reading comprehension issues, pops. She already documented that the joint loan with her ex was paid off. The lien is released on the joint loan and she provided the documentation.
Now the lender wants her to produce the loan documents for an unrelated loan to a third party in case this third party might have fraudulently obligated her on this loan? Because they were once married and he presumably knows her SSN? Well the ChiComm government knows my SSN because they stole it from my security clearance file in 2014. But I don't have to produce documentation from the People's Liberation Army whenever I apply for a credit card. What next a letter from her priest or rabbi?
Fraud in the past has been so extensive that people have produced releases, deeds, etc. The lenders use to sign off on these until a few ruined it for the rest. With the limits the government has put on lender compensation along with added work load to a lender, the lender has the borrower put the work into their own loan especially when risk layering a loan. We can just agree to disagree or she can produce the requested documentation to get what she is looking for to benefit herself. If the information showed up on her bureau, fraud report, or other internal audits. She will need to document it.
Well @Diane G. said she should hear from her lender today... I'm popping my popcorn and stirring the pot as in my last 273 posts... ;-) .
So we'll find out whether her lender will require her to produce loan documentation from her ex-husband proving that he hasn't obligated her on a new loan (for an unspecified purpose that only the bank knows). This is because she once held a joint mortgage with him on property that he received in the divorce and that has been recently paid off. How he paid it off is a mystery, at least in theory, but the bank suspects he may have fraudulently obtained a joint loan in his ex-wife's name. Being the regulatory rule followers and whip smart fraud investigators that they are...the lender has directed Diane to produce these alleged loan documents from her ex to PROVE that she's not on them. Since she has absolutely no method to compel these documents from him, nor legal right to see them, Diane asks whether she should feel insulted. I have said YES. However, numerous posters have suggested that requiring spurious documents with no relation to the loan application or collateral for the new loan, is good banking practice and quite common in this post 2008 Dodd Frank era.
The lender is requesting loan documents for a loan in someone else's name, that may not even exist, because it might have been used, to pay off the joint obligation, that is already proven paid off. They are not requesting this for additional proof that the obligation is paid, but to ensure that Diane hasn't been somehow added to a third party loan without her knowledge...
So what does the lender know about ex's new loan? Maybe he paid off the joint mortgage with a payday loan or Lenny the Loan Shark gave him the money. Maybe he got a tax refund. But nonetheless Diane is requested to provide loan documents from a third party to prove that her name is not (fraudulently) on it...
Well if you're 3 days from closing and the Bank asks for a letter from your Rabbi saying whether you are Reform or Orthodox, they can do that, or you don't get the money. Where does a single woman get the money to take out a loan in her own name? Oh the nerve of her....
@Scott L. I think maybe there is probably some confusion on what is taking place during the underwriting process.
I'm assuming (from my credit analyst experience) that the underwriter pulled Diane's credit report and/or a lien report and the report still reflects the debt/lien obligation of the property that Diane & her ex held jointly. If the credit report/lien report reflects Diane's debt/lien with her ex, but she says the debt was refinanced and she isn't liable, then the lender is within his rights to request support and documentation for what Diane is claiming. The lenders have to provide evidence to their managers, regulators, and auditors for why their analysis deviates from what the credit and lien reports state because those reports are typically the foundation of underwriting and calculating the debt service coverage ratio.