Is there any recouse when a bank

ownerbuilder-2008May 29, 2010

When we recently went under contract to sell our home I told the buyer of a local bank I used and suggest he apply for his mortgage there.

I told him how it was a home town bank that seemed to care about the customers they serve. Boy was I wrong!

The buyer did take my suggestion and applied for his mortgage loan. About two weeks later they called and told the buyer and I that they hand carried the loan application to the mortgage Manager and went over loan application. They said there was no problem with the loan, it was "Golden" and approved, all we needed was to have the paperwork processed and the appraisal done.

Based on that information we ordered the land survey at a $1.400 dollar cost and the closing agent did the title search.

Then we started packing and moving our belongings out of state. (I know it not a done deal till ya get a check in hand.)

We hurried back to be here when the appraiser arrived.

Then two weeks later the buyer found out that the survey was not ordered and he asked if the survey could be ordered so to expedite this very slow process.

When that message was sent to the mortgage dept. He was told that the loan was not going to be approved.

Then the local banker personally drove to the main office to try and find out why the previously approved loan was now not approved. Through a series of meetings he and his boss found that basically there was a miscommunication and they were able to set the loan back on track. In fact his boss said she would personally hand carry the loan application through as she could see no reason for it to be disapproved at that point.

Now we are a month into this loan application and when I called today to find out what was happening and if the appraiser was ordered yet he said he just found out that the loan was not approved. He was very professional and apologetic and said he told the buyer, basically the bank mortgage manager for some unknown reason changed his mind and decided not to make the loan.

To be lead down a month long path to just have the door slammed at the end is to say the least devastating to both our family's. I know banking is tough nowadays but is this normal business today?

As I said this banking process has been ongoing for over a month and during that time I found that my mother was diagnosed with terminal cancer.

So finding that I have been putting off visiting her waiting on this loan and appraisal is very frustrating and really just cruel.

I have e mailed the mortgage manger and the buyer has called asking for a meeting. But no response as of today.

After all that venting is there any recourse that anyone can suggest? Is there a banking authority of some kind?

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I would at least press them on the reasons for the denial, so that you can intelligently go somewhere else and apply without going through the whole mess again!

    Bookmark   May 29, 2010 at 9:45AM
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It will cost more to recover the small costs than the money you are trying to recover.

This bank is really screwed up.

They should not have been discussing the loan status with you as the seller at all.

They are doing business with the buyer and you (as a seller) have nothing to do with the loan.

It is strictly the buyers issue.
This may be why you have received 'conflicting' answers.

I would be livid if a bank discussed my loan status with ANYONE except my attorney or me.

    Bookmark   May 29, 2010 at 11:41AM
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Brickeyee is correct in saying that it was highly inappropriate behavior for the bank to be talking to you, as the seller.

Sadly, you should just take this as a lesson to not think that a 'local' bank is any better or more efficient than a 'big bank'. Just let it go, and press onwards. Your mother is much more important than time and even money. Good luck to you going forward!

    Bookmark   May 29, 2010 at 1:07PM
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My son in law is a mortgage broker...he has worked with clients and everything has gone perfect, all the ducks in a row and then it goes to underwriting at the very end for the signature and the underwriter doesn't approve the loan. This is happening with increasing frequency at his place of business. Standards are tight and one small thing will send up a red flag. It's frustrating for buyers, sellers and the mortgage guy who has put all his time and effort into it and is often paid straight commission....don't know if there is any recourse but I do understand your frustration.

    Bookmark   May 29, 2010 at 5:36PM
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Well I found out why the loan was denied. Unlike the past it is now considered a bad thing to have other property's.
The buyer had a building lot and a rental house.
Apparently the bank said the Fed's would look at them cross-eyed for making a loan to someone with two other mortgages no matter the amount of income the borrower makes.
What a upside down world.

    Bookmark   June 3, 2010 at 10:59AM
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"Apparently the bank said the Fed's would look at them cross-eyed for making a loan to someone with two other mortgages no matter the amount of income the borrower makes."

Huh? This makes no sense at all.

I just bought a second home with no issues, My household income to debt ratios are all in order. The only stipulation the lender had was that I had to provide documentation that I have enough cash reserves to pay the mortgages on both places for six months.

If a lender wants the business, there is a way to do it.

And again, the bank in question here should never allow you or any other party to know why a particular application was denied.

I'd run like hell from this bank. If they are so cavalier with someone else's personal information, why should they be trusted with yours?

    Bookmark   June 3, 2010 at 12:01PM
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Sorry, but that is blatantly untrue. As long as borrowers qualify for all the payments, they can have multiple mortgages. Some cap it at 4 or 5 mortgaged properties, FNMA will allow more than that.

    Bookmark   June 3, 2010 at 12:41PM
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I've heard of this happening recently. My friend and her husband recently divorced, but are continuing to co-own the home. Their divorce agreement stipulates that they each pay half the mortgage and associated costs. The ex-husband has more than enough income to pay yet another mortgage (in fact, costs for both homes, child support, car payment, living expenses, etc will be approximately 40% of his take-home pay after retirement contributions). He could not get another mortgage unless his parents co-signed the loan with him because his name is on the original mortgage. His loan officer (who has been his loan officer for 15 years and through 4 home purchases) said it doesn't make any sense, but that is how it is working now (at least at this particular bank in this particular region).

    Bookmark   June 3, 2010 at 1:52PM
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While you can basically have unlimited mortgages, they certainly have tightened up the standards for dealing with income producing properties. The days of financing investment properties to the hilt based on potential income are over. You are going to need cash in hand and verifiable/real income to qualify for the loan. Lenders got burnt badly by people using borrowed money to finance large numbers of "investment" properties. The cash flow wasn't there and when prices dropped, they were sitting on multiple bad loans.

    Bookmark   June 3, 2010 at 1:55PM
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Just F.Y.I. the buyer asked the local banker to share the status of the loan request with me but not any specific numbers. The branch manager did approve the loan based on the fact that the buyer had " a large sum of cash reserve's" and 40% cash down.
It was the mortgage manager at the corporate office said no based on the multiple mortgages even though the buyer had excellent credit and has been a long term executive with a large and stable company. He is applying w/another bank now. We will see what they have to say hopefully good news soon.

    Bookmark   June 3, 2010 at 3:42PM
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Generally good points; and small comfort though it is, we've been waiting for nine weeks for approval of a small loan (10% of market value)from a "dynamic european bank" (with which we are shareholders).

Frankly, we suspect the banking industry is behaving like over-indulged infants who've had their toys removed through government interference and are trying to prove how "obstructive" they can be by withholding capital; thus delaying economic recovery...... so it'll be back to the good old days of lend, lend, lend...... oh, and lots of bonusses!

Some might call this anal-retentive behaviour, but not us, oh no sirree!

We always look to America for a lead, and hoped you guys were more imaginative and go-getter than us hidebound Europeans - this time; seems like we're all in the same boat.

Good luck, keep calm, stay focussed, and try (although it's difficult at times)to remember that "it's only money - some things really are more important.

J & S

    Bookmark   May 24, 2011 at 10:35AM
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John SNELL said, "Frankly, we suspect the banking industry is behaving like over-indulged infants who've had their toys removed through government interference and are trying to prove how "obstructive" they can be by withholding capital; thus delaying economic recovery...... so it'll be back to the good old days of lend, lend, lend...... oh, and lots of bonusses!"

I agree with that! Did you see my post about why houses are selling slow? Because of banks! Not because of people waiting for an even lower bottom. It's the banks who refuse to part with the money even though we bailed them out. Buyers can't get mortgages! Even when people are qualified, they are turning down loans for crazy reasons. They'll find something. I keep saying next it'll be because they don't like the color of my roses.

I have no idea why some people on here are zeroing in on the fact that you know what's going on with the loan. They were getting on my case about that too. Oh my god, the bank is not supposed to give you that information! In my case, my buyer shared everything with me. What are we supposed to be in the dark until we get to the closing table and no one shows up? There is nothing wrong with asking why a loan was declined. And now you have all these costs, all that aggravation and stress because they led you on. THAT is a crime!

And I understand why you started packing and moving--because you had to. What are you going to wait to do all that till the last minute? You were moving out of state. I totally understand because I am moving out of state also. The same thing happened to me when I sold my house the first time. The bank led us on till TWO DAYS before closing. The person who was hurt the most was the lady whose house I was buying. She was in financial straits. It really caused some suffering for her and I felt terrible.

There must be some agency that oversees the banks. Have you tried Googling something like the Dept. of Banking and Insurance?

Lastly, I'm so sorry to hear about your mom. You're going through a lot.

    Bookmark   May 24, 2011 at 11:03PM
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"It's the banks who refuse to part with the money even though we bailed them out."

So you want the banks to resume making loans that may not have adequate collateral?

The banks (and Freddie & Fannie0 are rightly nervous that if prices continue to decline the collateral behind the notes will further decline in value.

It is a chicken and egg problem, since not making loans influences further declines in the market value of collateral.

"Unlike the past it is now considered a bad thing to have other property's. "

No, it is a bad thing to have "other property" that is mortgaged.
The underwriting guidelines (for a long time) have required you show the ability to cover ALL your mortgages from YOUR FUNDS (without rental income) or have sufficient reserves to cover ALL the mortgages for enough time to find a new tenant.

This is the same way investors have been forced to operate for a long time ((along with higher down payment to even GET a loan, PMI is NOT an option for investment properties.

In the go-go housing market all sorts of folks thought that easy money was theirs, without the financial basis to actually pay on their mortgages.

I personally know of folks that contracted for new houses, fully expecting to sell them at completion (or even shortly before).
They received confirming mortgages by claiming they would occupy the houses as their principal residence (despite owning other houses they presently lived in and had no intention of moving out of or selling).

When the bubble finally burst they lost many tens of thousands of dollars in down payment cash and settlements with the builders over failing to close.

We old cautious investors are wary of stretching to thin since we have a decent amount of OUR money money tied up.

There is no guaranteed return on RE, especially short term.
It is a long term investment, not a quick flip (as many folks have now discovered).

The 'quick flip' folks seem to have disappeared into the woodwork leaving someone else to pick up the pieces (often the lenders eager to make a fast buck also and transfer the risk to someone else like Freddie or Fannie).

At least FHA has not taken as much of a beating, though they are also in trouble.

I should still thank them though, I picked up two properties last fall at bargain prices that needed a minimum of work as REO after the previous owners defaulted and the bank foreclosed.

The bank ate the loss (or whomever actually owned the note probably F or F), I ended up with bargains, and the previous owners have a badly damaged credit rating abd are klikely to be renting for a while now (and NOT from me).

Banks saw any easy way to make money on lending and then transfer the risk to F or F (all the while being paid by F & F to collect payments by servicing the loans).

The decline in underwriting standards at F & F only added to the problem (pushed in many cases by pols and 'community organizer's suing banks to make riskier loans or have their charter's revoked).

Plenty of folks jumped on the 'easy money' bandwagon thinking it was a quick buck.

They all made money while F & F went broke as the defaults mounted and the bonds from the banks tanked in value (at least F & F had Uncle Sugar to step in for them).

    Bookmark   May 25, 2011 at 9:32AM
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No, I want the banks to resume making loans to buyers who have adequate collateral. Good buyers. Yeah, I know they're nervous. But they're rejecting good buyers as well as the bad buyers because they're so nervous. I'm not going to argue over what a good buyer is.

    Bookmark   May 25, 2011 at 11:35AM
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"o, I want the banks to resume making loans to buyers who have adequate collateral."

And who makes that decision in a volatile market?

If you put enough down money is easy to get.

if you have a low percentage down the banks are nervous that you could walk away (who'd have thought it) and leave them with a balance above the value they can get.

It has less to do with the buyer than with the risk of default.

    Bookmark   May 25, 2011 at 4:44PM
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