Underwriter asked for a letter and more comps. Nervous

bothFebruary 18, 2009

My husband and I are trying to purchase a short sale property. The property is a two flat that is three blocks from our kids school. I am sick of driving all day so we tried. The whole thing started in Early September. On January 12 we were told by Countrywide that our offer was accepted. They then sent us the final final letter on Janurary 26th saying that we had to close by February 26. Before we had the final letter we told our mortgage broker that we wanted to go ahead and lock in and we paid $475 for the appraisal. We got the package signed back to the mortgage broker by the 26th of January. We waited for awhile for the appraisor and he appraised the house for 5 thousand above what we agreed to pay. This property is a two flat. I believe the mortgage broker gave the package to the underwriter on Friday Feb 6th. On Friday the 13th the underwritter told the mortgage broker we needed to write a more convincing letter that we were moving into the two flat (We are renting our home) and more comps from the appraisor. We were sceduled to close this Thursday the 19th but that is not happening. The appraisor has not gotten the comps. As of today the MB told our attorney that they will be in by end of the day today. Oh our letter was finished and emailed to the MB and he forwarded it Monday (a band holiday). I know this is a long story but was wondering how long it will take the underwritter. I guess she knows we are under a time contraint. Should I be mad that the appraisor has taken his time from the beginning? We did complain about the appraisor and were told we could get our own. Any thoughts would be great.

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My advice;

Countrywide wants your money... they'll extend their deadline for closing if that is required.

I don't know what the "explanation letter" is all about, unless you are "mving down" in size, neighborhood or quality, while keeping the old, better place. Is that the case?

All will likely workout fine if you can just relax a little & breathe. Nothing you can really do otherwise.

Dave Donhoff
Leverage Planner

    Bookmark   February 18, 2009 at 9:45PM
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My guess is the explanation letter is needed in order to convince the lender that you are really going to live in the 2 flat and not buy as investment. My guess is the loan is not an investment loan (higher interest rate) and they want to be sure you will be living there since they are giving you the residential loan (lower interest rate).

They are probably having a hard time understanding this because they see you still own the SFH and think you will stay there and just rent the 2 flat out as an investor/landlord. My bet is some investors have lied in the past and received residential loans (lower rate) even when they never intended to live in the place.

But as long as you explain what you did here, that the entire reason you are buying is because of the proximity to the kid's school, it all makes sense.

    Bookmark   February 19, 2009 at 9:06AM
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I understand the letter and we did a good job writting it and even said we would be willing to sign a occupancy form or anything that they could take the house away or increase the interest rate if we do not live in the whole thing. The letter we wrote included pics of the huge pile of boxes we have packed and lots more stuff.
But why does she need more comps? It appraised for 5,000.00 more that what we are paying. (The appraisor was not from Chicago and I think he under appraised it.)
And why is the appraisor dragging his feet and the Mortgage Broker does not care that we are upset!! My husband and I have credit scores above 800 and a great paying job. If they were ever going to try and get paid for a home sale you could not get better looking clients in this day when getting a loan is so hard. Thanks for listening. Amy

    Bookmark   February 19, 2009 at 10:46AM
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The letter of explanation is needed because you are moving from a Single Family dwelling to a 2-unit dwelling, and keeping the Single Family dwelling. Unfortunately for you, this was a scam used by many borrowers to acquire investment properties at owner-occupied financing terms. Since Lenders have been burned by these types of transactions, they are now heavily scrutinized. And everyone signs occupancy affidavits, and they are worth less than the paper they are written on. In bad times, those 2-unit "owner-occupied" really investment properties are the first to default. Since they really weren't owner-occupied.

As for the appraisal, the fact that the appraiser appraised it for $5,000 more than you bought it for really means nothing if he used comparable properties that really don't support that value. Lenders are having all kinds of problems with appriasals, and the comparable used to support property values, especially in declining markets.

Is this area a declining market?

The appraiser is probably taking so long because he used the best comparables he could find, and now can not find others to suipport the value he stated. This is also happening all the time.

I used to underwrite loans, years before all this mess happened. These days, I would probably counter-offer and offer you investment property terms, to protect my banks interest. (Sorry, this is not about you in particular, this is to protect my employer.) The bank really doesn't want this house back, nor to change terms in the future.

And if your mortgage broker doesn't seem concerned, then I would say they are not very customer-service oriented.

    Bookmark   February 19, 2009 at 12:52PM
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