Colorado Lenders asking for COVID Letter from Employers

11 Replies

My wholesale Mortgage Broker just informed me about more lenders are bringing back "Covid Letters" which pertain to having the employer essentially Gurantee that the Cornavirus will not have an affect on the persons employement. This has actually thrown a wrench in my plans to aquire a duplex in Denver, and has forced me to either ask for the owner to carry or another way to finance the property.

Have other states ran into this situation? How have you dealt with this additional hurdle for traditional financing?

Chris, first thing I would do is call around and confirm other lenders are doing the same. 

I know of a hard money companies here in town that do a 30 year long term financing obviously the interest rate is higher but could be a temporary situation to get you into the property if you really want that duplex. Happy to put you in contact with my person over there.

I have a feeling 12-18 months from now the lending restrictions wont be as strict. 

Chris,

Not all lenders are requiring this, or at least not as formal of a process. We are not requiring the employer letter on our portfolio products at FirstBank, but generally need it for 30 year fixed agency loans. Hope this helps and good luck!

Agree that this definitely not being required by all lenders. Just find another lender.

Originally posted by @Sean Gribbons :

Chris, first thing I would do is call around and confirm other lenders are doing the same. 

I know of a hard money companies here in town that do a 30 year long term financing obviously the interest rate is higher but could be a temporary situation to get you into the property if you really want that duplex. Happy to put you in contact with my person over there. 

I have a feeling 12-18 months from now the lending restrictions wont be as strict. 

Thanks for the response Sean! I will definitely be contacting other lenders. It seems like that consensus that not all lendors require this type of letter. But if anything does come up that I do need the hard money lender I hope we can open the lines of communications to get into contact in the future!

Originally posted by @Zach Kinney :

Chris,

Not all lenders are requiring this, or at least not as formal of a process. We are not requiring the employer letter on our portfolio products at FirstBank, but generally need it for 30 year fixed agency loans. Hope this helps and good luck!

Hello Zach! Thank you again for your response. It's a relief that not all lenders are requiring this letter because I am sure there are a lot of employers weary of signing such a possible liability, even with me being at the company for over 10 years. That's also great information that your lenders at FirsBank are not requiring it on protfolio products. Thanks again for your input!

 

Originally posted by @Rod Allen :

@Chris Reyes - One of my lenders in DC has a similar requirement for clients. It's certainly not a blanket step required by the states. I'd consider working with other lenders if it's an impediment to progress.

Hi Rod! Thanks for your insight on similar practices that some lenders are implementing in other states. And after conversations from other investors/lenders it does seem like there are other lenders that do not require this. I am still very interested in this duplex based on the possible cashflow so I will be definitely looking into progressing this deal.

 

perhaps if I explain WHY it will make sense. Lenders are having to PAY six payments in advance to get Fannie/Freddie/FHA to back the conventional loan because many people are closing a mortgage and going into forbearance on the first payment. If you are self employed be prepared to have your CPA who filed your IRS returns to write a letter saying you are in business more than two years and your business is not slowed or harmed by Covid19. If a w-2 earner you provide paycheck stub at closing, a verification of employment from employer saying you are working and last bank statement online running printout. These extra last second layers are the new normal during Covid. Lenders have a variety of types of "direct" and layered rules and overlays with the government entity that they sell to. Each lender is rated and they will have different rules at closing to show you aren't a forbearance at closing risk which is a giant financial loss to the bank or mortgage company. ASking an employer to say you are guaranteed not to be laid off however seems impossible, who is that lender?

I could see the concern of the lender especially when the Governer of NY basically told renters in March that they dont have to pay rent and shouldn't worry about it.

@Chris Reyes also the letter itself is not stating that future employment is Covid proof, it’s asking has your current employment been affected. Such as a reduction of hours or lowered pay.