Legal or illegal request from underwriter?

Question

Hi BPs!

I need your feedback on this.  So I've applied for a mortgage loan.  The investment property is in Illinois, a 3/2 house.  It appears that I've passed all the requirements from the underwriter except for one thing - they want my roommate's bank statements showing that she pays me half of the rent that we live in here in Los Angeles (This is for DTI calculations) First of all, I have already supplied the underwriter with all my bank deposits, clearly showing her monthly rent checks, copies of the canceled checks from the past 12 months. There are several issues.  My roommate switched banks this past April and so, she would have to go in person to her old bank to request for the old bank statements.  She does not have time to do that this week.  She's working 16-hour days doing tax accounting.  Issue isn't just that she does not have time, she does not feel comfortable supplying her financial statements out.  She's not even on the loan, not a borrower.  But the underwriter won't approve my loan otherwise.  They said that my  DTI would go up.  Is this legal for them to request someone else's financial statements, when they are not applying for a loan?  What are the lending laws in Illinois and underwriting laws?  This is all very new to me.  I've never had to supply underwriters more than my own financial statements.  Please advise.

Wayne Brooks · Answer

Illegal...no. An underwriter can ask for anything they want in order to give loan, you don't have to comply.    But, with canceled checks, it doesn't really make sense they'd need to see the originating account.

Steve Babiak · Answer

For those wondering why the tax accountants are busy now that it is September, keep in mind that many will file a six month extension in April so the tax forms must be completed by mid October.

Steve Babiak · Answer

Your roommate's cooperation leads me to ask: Will she continue to be your roommate after you make this purchase?  If not, that could explain the lack of cooperation.

Peggy Liu · Answer

@Matt Devincenzo  Thanks for sharing your story.  In my case, there are canceled checks and deposit history from my bank that I have shown to the underwriter.  The mortgage loan person I spoke to at my bank yesterday says that should suffice.  But, somehow, it doesn't.  I have gotten an email from my roommate cc'ing the loan processor stating that she does not want to supply her statements to third party.  Anyhow, this seems to be beyond my control at this point.

@Mary B.  Thanks for the suggestion for future loans.  Right now, I need to get the underwriter to accept what I have (her canceled checks and deposit slips copies) .  My roommate as made a statement to the underwriter that she does not want to supply her bank statements to them.

Mary B. · Answer

@Peggy L.

From here out you would do best by giving your roommate receipts for half of the payment.  You can get receipt books from Staples, target etc. The banks / underwriters want to see proof of every bill / payment, no exception and unfortunately your word isn't bond. Prepare for next time.

Explain to the underwriter/ bank that your roommate is a tax accountant with lots of business for the end of the fiscal and request / beg for an extension. Everything happens for a reason... Hopefully it works out for you.

Kudos,

Mary

Matt Devincenzo · Answer

You seem to have gotten the answer to your original question. Now for how to resolve it.

Understand that the underwriter has a checklist and they go down it, in a perfect world everyone fits into the list and then they give their stamp of approval and all is well. In reality that is rarely the case, so they ask for more information. Eventually they can approv it based on additional supporting information, but what if that still doesn't fit into their checklist? Everyone has a boss and different "levels" of boss may be able to make different decisions as to what is acceptable and not.

I have had a somewhat similar situation. I was living with a friend who owned a home, I declared my rent of $500/mo on my loan application. The problem was the landlord verification was "fishy" because my LL was a friend and lived at the same address as I rented...to make it worse we were stationed together (Navy) and rode to work together. So they wanted canceled checks, I didn't have any as I went to the ATM and gave him cash. They wanted to see ATM withdrawals, again problem I never got out $500 exactly because I'd get whatever personal cash I needed at the same time.

All that to say, the solution was a "higher level" review of the file by another person. Since everything else was fine and my file was clean it was just the proving of my payments that was a problem.The higher review approved the loan with me providing a signed affidavit about the living situation.

So talk to the underwriter and see if there is any way you can get your file "bumped up" the food chain. If not you still have the current course of action to follow, but if they can then maybe you can get approved based on your cancelled check ect.

Peggy Liu · Answer

@Bill Gulley   Thanks for your thorough reply.  I understand that the underwriters have to be able to document everything.  I understand that for auditing purposes.  I am frustrated that my roommate isn't working with me here.  I've offered her dinner,  monetary compensation for her time, anything that she deems fair for this favor to me but she just hasn't replied.  Yes, I know tax accountants are busy right now but, I'm running of patience. Beyond that, I can't get over why the canceled checks, my deposit statements and bank statements would not be sufficient?  It states clearly that it is a check coming from her account into mine every month, with the routing number, account numbers, bank institustion, etc..  It just seems like the underwriter is asking for the exact same thing, twice.  Unfortunately, in this case it appears that I cannot provide the documents from the roommate's end :/  This is out of my control.  I can't force her to do what she doesn't want to do.

Bill Gulley · Answer

Ability to pay, what is the borrower's ability to pay? To see that, they need to know what she paid to credit you with the balance. You opened the door to say you only paid part of the rents or that you received rental income.

That additional income can also effect your ratios as you'll be tagged with any lease that remains if you're still liable, can they see if your roommate can afford the full rents? Is there going to be a lease termination? Will you be taking in a new roommate to help with the mortgage? These are just some of the thoughts an underwriter may have, they want to see your ability to pay, ability to manage debt, ability to take on additional debt, they can only see that by seeing what she paid and when.

Underwriters must be able to document their lending decision, they can't just assume or say....well the borrower or the landlord or the Realtor told me so.

Your quest as to them acting legally....absolutely they are, they can ask and require documentation that has to do with your ability to pay and take on additional debt.

Take your time, tell the lender you're trying to get the info, don't buck the process. Tell your roomy that you can lose your lock in on any interest rate, that such is a real financial loss, being a CPA she should realize she needs to act or become responsible.....if you'd take it that far.

I've never met women roomies where it ended well, frankly the younger they are the worse it is, you two may never see each other, you may need to light a fire under her if the nice route doesn't work in a timely manner. Being a CPA she doesn't need trouble or issues. This is no big time consuming matter, just call the bank, order the statements and you pay the fee to the bank for pulling the documents. She doesn't have to go anywhere. Have them mailed to you at her address!

We also don't have enough information, like who is on the lease or what the landlord reported.

Calm down, inform the lender daily of what's going on and stay on top of it.

You asked about the legality, there are federal regulations that employers, sources of income, landlords, mortgage holders and debt holders provide applicants or their lenders with the information to applicants/lenders for insured mortgages. Push comes to shove, she need to comply, the lender won't push it, they'll just drop it.  :)

Deborah Smith · Answer

Depending on her focus, she may actually become available after Monday.  Sept 15th became THE big push for a lot of accountants a few years back as that's when any business taxes must be completed.  Individuals remain at 10/15 - but since she's so busy now sounds like she may free up after Monday.

Another thought - push back REALLY hard on the underwriter.  Explain she's unavailable due to her profession, and that you have provided everything you can.  Ask them to come up with a solution.  I know it's not really their responsibility, so on so forth, but I have had several underwriters either give up on something or after much discussion, decided something else (something I was willing to do) would suffice instead.

Wishing you luck!

Peggy Liu · Answer

@Deborah Smith   I understand that.  I haven't seen her at all.  In fact, I believe I heard her come back around 1am two nights ago but that was the last time I heard or seen her presence.

What kills me is that the underwriter is giving me just two days to get this done.  Closing date of the escrow is coming up this week.  Ugh!  I can't believe this is the ONLY issue with my loan.

Legal or illegal request from underwriter?

Most Popular Reply