On the 1 yard line for my refi and have hit a snag

[Mike H.]

I'm refinancing a rental property right now under fannie's 5-10 guidelines. I'm over 3 months into this crazy refi and just when they're about to issue the clear to close, I get blindsided by some crazy issue.

Does anybody know what kind of argument I can make to overcome this lender's issue?

I bought the property with my aunt's money and had a private mortgage/note drawn up and recorded. My aunt wired the money to the title company at closing for the purchase. She also rolls in some of the rehab costs into the total loan amount.

So I paid 67k for the house and the loan was made for 88k. I put in about 25k in rehab.

Here's the issue: Because the HUD from the purchase was recorded as me paying cash and not with a lender on the HUD - even though the mortgage and note were dated on the purchase - the lender is now worried that this was a cash out refi with my aunt and they can't do a refi rate and term with me now.

Basically, they're suggesting that the HUD shows me paying cash. My aunt's loan to me was a cashout refi. And now they're gunshy on pulling the trigger to close. The lender is having "a meeting" today to decide.

Everything else is golden. My numbers met all the guidelines. The house even appraised out at 150k so I'm just under 60% LTV which is tremendous given how appraisers are really sticking it to us here in Illinois.

Is there anything I can point to that would help ease the lender's concerns? I've done 6 of these with my aunt's financing and have NEVER had anyone suggest her loan was a cashout.

For the most part, nobody cared what her loan was as long it was a recorded mortgage and they were refinancing her loan rate and term.

The worst part is that I have another house under contract that I won't be able to close on if this refi doesn't go through to free up my aunt's financing.

Suggestions?