Cash out Refinance - Lender Being a Pest

2 Replies

I couldn't think of a better topic name but the title sums up our situation. Here it goes - 

I'm representing my uncle to purchase a property in the Los Angeles area. I'm not an active realtor but am licensed and trying to assist him with this one. 

He is based in Georgia. He wants to borrow $700K against his home, using a cash out refinance from the bank (It's a major/well-known bank. Not sure if I can mention who but if anybody is wondering, I'll say it).

His home is completely paid off, and the bank (In his hometown) had his home appraised at $1.7 million. 

His bank account has $1.1 million.

He earns around $30K/month (prior to taxes).

The bank loan officer even stated he is well qualified and his home is excellent (Obviously!)

All of a sudden though, they are asking for information about the property such as property taxes, rent roll, insurance from the current owner, etc.  That's fine with a conventional loan if he were to put in a down payment towards the property. I've seen/heard of instances where they kind of analyze the deal and base the loan amount on that. 

It seems they are not going to appraise the property that is being purchased - but I don't know why they care about its rent income, taxes, etc. 

Our concern is:

1. This is not the strongest cash flow deal. Probably around 4 - 4.5%. It's a low/slow steady return, but should go up a great deal in the future with appreciation. He doesn't care about the return though, and is sold on the location. I do agree, it should be priced higher. But if they are going to base their loan amount on what it generates, we would have never bothered with them in the first place.

We have about 25 days left to close and just passed the due diligence/inspection period, when they started asking for these documents. 

Is it worth having him take this up with somebody higher up than the loan officer at the bank? He has told me the loan officer wants him to purchase a property in the Atlanta area, near his home, and has been asking him every time he calls to come and see it. (He has no interest in it). Perhaps the loan officer is trying to get him to back down from this deal. 

Wondering if this is normal for a cash out refinance under such terms. 

Thank you!

Originally posted by @Kathleen Hernandez :

I couldn't think of a better topic name but the title sums up our situation. Here it goes - 

I'm representing my uncle to purchase a property in the Los Angeles area. I'm not an active realtor but am licensed and trying to assist him with this one. 

He is based in Georgia. He wants to borrow $700K against his home, using a cash out refinance from the bank (It's a major/well-known bank. Not sure if I can mention who but if anybody is wondering, I'll say it).

His home is completely paid off, and the bank (In his hometown) had his home appraised at $1.7 million. 

His bank account has $1.1 million.

He earns around $30K/month (prior to taxes).

The bank loan officer even stated he is well qualified and his home is excellent (Obviously!)

All of a sudden though, they are asking for information about the property such as property taxes, rent roll, insurance from the current owner, etc.  That's fine with a conventional loan if he were to put in a down payment towards the property. I've seen/heard of instances where they kind of analyze the deal and base the loan amount on that. 

It seems they are not going to appraise the property that is being purchased - but I don't know why they care about its rent income, taxes, etc. 

Our concern is:

1. This is not the strongest cash flow deal. Probably around 4 - 4.5%. It's a low/slow steady return, but should go up a great deal in the future with appreciation. He doesn't care about the return though, and is sold on the location. I do agree, it should be priced higher. But if they are going to base their loan amount on what it generates, we would have never bothered with them in the first place.

We have about 25 days left to close and just passed the due diligence/inspection period, when they started asking for these documents. 

Is it worth having him take this up with somebody higher up than the loan officer at the bank? He has told me the loan officer wants him to purchase a property in the Atlanta area, near his home, and has been asking him every time he calls to come and see it. (He has no interest in it). Perhaps the loan officer is trying to get him to back down from this deal. 

Wondering if this is normal for a cash out refinance under such terms. 

Thank you!

 If it was disclosed to underwriting that he's in escrow to purchase another property, yes I would expect that they would need to include the taxes+insurance on that property in his debt to income ratio math. 

But, now that it was disclosed to underwriting that he's in escrow for another property, yup that bullet has left the gun and you can't take it back once it has left. I'd assume that the underwriter would ask for the property tax bill, evidence of insurance, to see the purchase contract, etc etc etc. You can take it to management, but methinks the underwriter is going to win this battle since it apparently was in fact disclosed to the underwriter that he is in escrow for another property. 

@Chris Mason

Thank you for the reply!

Yes he is in escrow for another property at the moment. I completely forgot to mention that other property (At least in a clear manner) in my original post, but you are correct.

There are 3 properties in the picture:

1. One that he's in escrow for in Georgia (Cash payment, once title defects are cured)

2. One that he's 's in escrow for in California (The one he is trying to get a loan for)

3. And the third - a different property, also in Georgia, that the loan officer is pushing him to purchase but that he is not interested in. (Loan officer may have a connection to either the builder, seller or both according to what my uncle is telling me)

Both the Georgia and California properties are the same price. I think the one in Georgia is maybe $10-15K more expensive.

They want the details on the California property. But I now understand, and will continue to work on getting the required documents (I've tried but the seller/listing agent are very slow), while telling him it's not worth complaining at the bank.

Two other concerns I have on this transaction then are:

1.) I don't think the seller has kept formal leases. Tenants are all month to month and will be staying. I wonder if a spreadsheet with rent info would be acceptable.

2.) I also question whether the seller has insurance. I was told by the listing agent that he does and pays X amount (Forgot the figure but have it in my e-mail) per year. I wonder if a lack of insurance (If it's the case) would be an impediment. We did have a complete inspection done and could forward it's results for insurance quotes as an alternative.