insane lenders

cas66ragtopNovember 28, 2011

My house sale is still on track, we hit a few bumps, and got past it. We are scheduled to close mid December.

I remember LITHs probems with the lenders, and now I am starting to see just how insane they are. My buyer has a VA loan (if it makes any difference), and today they asked about the road maintenance. Being in a subdivision, it is privately owned and maintained, paid for by the HOA. Well that answer wasn't good enough for them - they want to see receipts that PROVE the HOA has paid for snow removal and other maintenance. The realtors are working with the HOA president and treasurer to get the documentation they need.

Is that crazy or what? I have never heard of such a thing.

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LoveInTheHouse

That's what I'm talking about! People don't believe it because they haven't run into it yet. They're saying, "Oh, it must be your buyer." It's not the buyers. It's the banks being crazy. I'm expecting them to ask my buyer to open his mouth so they can look down his throat next!

Cas, what state are you in again?

    Bookmark   November 28, 2011 at 11:08PM
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ncrealestateguy

You two are right... these lenders must be crazy... wanting to know who is responsible for maintaining the common property associated with the home that they just loaned hundreds of thousands of dollars on!
Sheesh! They should just shut up and lend to anyone with a pulse, and not worry about who is in charge of keeping the properties looking nice.

Cas, good to hear the deal is still progressing. Do not be surprised if the lender asks to see proof of the financial health of the HOA too!

    Bookmark   November 29, 2011 at 7:17AM
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brickeyee

"I remember LITHs probems with the lenders, and now I am starting to see just how insane they are."

Private roads have always been an issue.

Someone has to maintain them, including clearing them.

It sounds more like builders trying to cut corners and not have to put in a road that will be accepted by government that then provides maintenance.

In Virginia the state owns all the roads, and except for cities provides maintenance.
You must have a road built to state standards before the state will accept it.
If you keep the road private you do not have to pass meet the state standards, instead you have a lower quality road that WILL end up costing more in the long run.
Guess who has to pay?

can the HOA afford to re-pave the road?

Can they afford annual maintenance (like snow removal)?

    Bookmark   November 29, 2011 at 10:36AM
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tishtoshnm Zone 6/NM

In my area this is very, very common as there are a lot of private roads. We had to show proof of a road maintenance agreement for our loan 5 years ago. I certainly could not fault the bank for that. A couple of years ago we had a severe weather season and some roads became virtually unusable and people did not have the funds to repair them. If those homes had been foreclosed on, the banks would have had to shell out significant amounts of money to even be able to sell the house. From the other side too, it also brings this to mind for homeowners. Having lived on city roads before, I never would have even considered this but it is a very significant point.

    Bookmark   November 29, 2011 at 11:09AM
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cas66ragtop

LITH - We are in West Va. You may be on to something thinking the lender may ask to look down the buyer's throat. Maybe the lender should require the buyers to get a physical examination to prove that they are healthy enough and will live long enough to pay off the mortgage. While they are at it, they should also request a copy of their driving record to prove that they are not an aggressive driver. Haha! Oh - I saw your house with the link you provided on one of your last posts - wow, that place looks great. Looks like a real bargain to me. I can't believe how much trouble you've had selling that. Hopefully you're finally on your way to getting rid of it and going on with your life.

NC - ok, ok, what's up with your smartbuttishness? Do you want me get in my car, drive 8 to 10 hours, take another 8 hours to track you down and stalk you, waiting for the perfect opportunity to strike, kick your butt (or you may kick mine), get caught, spend a couple days in jail, get out and spend another 8 to 10 hours driving home again? Do you really want that? Haha! Thanks for the good wishes. I'm sure everthing is still on track.

BRICK - Yes I see your point about whether or not the HOA has the funds for road improvements. There are a couple subdivsions out there where the builders went bankrupt and left behind a real mess. Our subdivision is not like that - it is 100% complete, road is still in excellent condition, will not need repaving for a long time. They did not build a cheap road. Even though its private, the county still has their building requirements. If HOA goes bankrupt, that doesnt mean buyer will forfeit on loan and then they will have a hard time re-selling the house.

I understand the lender wants to cover themselves, but that should have already been taken care of with the appraisal and with the buyer's credit rating. Our appraisal was just fine. The buyer's credit should not be a problem either. They already sold their other house (closed 1 week ago), based on his job description he makes very good money, the only debt they have is 1 car loan. It should be a slam dunk. I don't see why the lender is so worried about something like a road maintenance agreement. Seems very silly to me.

    Bookmark   November 29, 2011 at 11:09AM
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cas66ragtop

The funny thing about city/county/state roads versus private roads - I have lived on both, and in my experience, the private roads are in just as good of shape (if not better), and snow removal happens very quickly.

    Bookmark   November 29, 2011 at 11:27AM
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51gerri

VA loans are underwritten on VA standards. I haven't been in the business for a long time now, but back when borrowers couldn't get a VA loan in a subdivision with a mandatory home owners association unless the subdivision and HOA had been approved by VA. While it's possible the lender is over reacting, it's also possible they're trying to satisfy VA requirements.

    Bookmark   November 29, 2011 at 6:44PM
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ncrealestateguy

Bingo Gerri... Most things that seem silly to us is because someone is trying to satisfy some governmental regulation.

    Bookmark   November 30, 2011 at 9:55AM
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brickeyee

"I understand the lender wants to cover themselves, but that should have already been taken care of with the appraisal and with the buyer's credit rating."

No, appraisals and the buyer's credit rating have nothing to do with the solvency of an HOA and it ability to maintain roads.

The money comes from the homeowners, and if the maintenance is not performed it WILL drag the value of the property down.

Private roads may have better snow removal since the home owners are paying the bill directly, and have a lot more leverage (and costs incurred) since they must contract privately for the removal.

Try calling the state and complaining some time, you are on a map based on traffic that determines the order things get cleaned up.

    Bookmark   November 30, 2011 at 10:04AM
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feedingfrenzy

Private roads are currently a nightmare and many deals have fallen apart because of them. In your case, you're fortunate that there is an HOA and a written agreement in place that covers road maintenance. Current Fannie Mae standards require either that or a state law that says the state will take over maintenance of any private road if the owners fail to do so. Currently, only two states, California and Vermont, have such a law.

We had a refinance deal fall apart at the last minute because of lack of a written and recorded road maintenance agreement for our private road. I was able to refinance through another lender by disclosing the issue right up front and providing a letter from the county road commission stating that the county would take over maintenance in an emergency situation, plus much other supporting documentation I was able to research online and in the county courthouse. Being a lawyer does come in handy sometimes.

I think you'll be fine because the HOA should be able to provide these documents fairly easily. I think brickeyee is right that there may be further requests for financials from the HOA, so have patience and it should work out.

Good luck!

    Bookmark   December 1, 2011 at 3:42PM
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linda117117

Its getting worse and worse. I recently closed on a home and the bank didnt think the HOA carried enough liability insurance. They wouldnt close on the loan until the HOA upped their insurance policy. They actually did it.

    Bookmark   December 1, 2011 at 6:28PM
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weedyacres

I heard a story on NPR this morning about tightened lending standards, and the "expert" attributed it to the fact that Fannie and Freddie are invoking their right to make the bank take back responsibility for a foreclosure if the originating lender that sold them the loan made the smallest of errors in the documentation. As a result, they're being anal about every last potential detail and pitfall.

    Bookmark   December 2, 2011 at 6:54AM
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ncrealestateguy

And in the meantime, Fannie and Freddie are the only entities that have zero accountability... still!

    Bookmark   December 2, 2011 at 7:10AM
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brickeyee

"And in the meantime, Fannie and Freddie are the only entities that have zero accountability... still!"

At least on of their 'lend to anyone' cheerleaders will be gone soon.
Barney Frank.

    Bookmark   December 2, 2011 at 9:32AM
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feedingfrenzy

Ironically, brickeyee, Frank was one of the co-sponsers of a House bill introduced in 2005 that would have created an independant regulator for Fannie and Freddie, but it died in the Senate. A similar Senate version never made it to the Senate floor. Anyway, the main reason Fannie and Freddie lowered their lending standards wasn't Barney Frank (although he certainly was too cozy with them), but because they saw their stock prices and profits drop after the private lending industry increased its own business by drastically lowering lending standards. In other words, they were under pressure from their own shareholders to do the same and so they did.

    Bookmark   December 9, 2011 at 3:24PM
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brickeyee

"Ironically, brickeyee, Frank was one of the co-sponsers of a House bill introduced in 2005 that would have created an independant regulator for Fannie and Freddie, but it died in the Senate."

An "independant regulator" [sic] to what standards?

F&F have never been completely unregulated, but both they and the regulators have been the victim of congressional meddling.

The existence of banks capable of packaging mortgages into bonds (the secondary Marketa Fannie established) means both F&F mat no longer be needed.
Of course some banks (led by Indy and Countrywide) and followed by BofA and Deutsche Bank managed to screw up.

    Bookmark   December 11, 2011 at 12:19PM
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feedingfrenzy

Should have said it died in the House, not the Senate.

Don't get the sic. The regulator would be a government entity independant of Congress.

I can't follow your second sentence, but I must say the third is some kind of understatement!

    Bookmark   December 16, 2011 at 7:00PM
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ncrealestateguy

Barney Frank and "others" in their own words. Very enlightening. Seen here scolding the regulators who were warning of FM and FM.

http://www.youtube.com/watch?v=_MGT_cSi7Rs

    Bookmark   December 16, 2011 at 8:10PM
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badgergrrl

the [sic] is because you spelled "independent" wrong.

    Bookmark   December 17, 2011 at 1:00AM
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brickeyee

Thank you badgergrrl.

    Bookmark   December 17, 2011 at 9:37AM
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cas66ragtop

Wow - it is amazing - we finally closed last night! Woohoo!!!!!!!!!!!

But during closing, more insanity popped up that I just had to tell you guys about.

1. We had a pool table that was originally listed as a "non-conveyance" - it was to be purchased seperately. Then during negotiations, the pool table was given to the buyers for free. Do you believe that this almost became an issue to the lender? I truly don't understand their reasoning, but it has something to do with you can't leave behind personal property that has a value and make it part of the house sale. Well in this case, it was FREE - so who gives a crap? I also left behind curtains, curtain rods, blinds shower rods and shower curtains - even the storage shed could have been considered personal property. Wow, I'm lucky the lender was ok with all that.

2. This isn't lender related, but this popped up and I was scared it was going to kill the deal. The buyers were very concerned about this, and rightfully so. In our area, if you own multiple houses, you pay one tax on your residence, and you pay higher taxes on any additional non-residences. Yeah, thats really fair. Thats like if you own 2 cars, but can only drive one at a time, you should be charged a higher tax on the 2nd one. Greedy scumsucking government! Anyway - I filled out my personal property taxes correctly, and claimed one as my residence, and stated the other house I was trying to sell. Well it slipped through the cracks, and I paid the lower tax on both houses. Good for me - I finally got a break. The title attorney noticed this and told the buyers if the county notices this error, the buyers could expect to pay the back taxes. How stupid is that - instead of them coming after me, they will come after whoever currently owns the house. The buyers asked if they do notice, can't they demand I pay them, and the attorney said, no - its YOUR bill if that happens and there is no way out of it. Again, good for me. Anyway, just more silliness that could have resulted in not closing. Well, maybe not "silliness", as this was no laughing matter. It was still a bit absurd, and it was a total shock to all of us. Luckily, even at the higher rate, these taxes are not astronomical. The buyers are getting such a good deal, and they are just as tired of jumping through hoops as we are, they allowed it and we finally closed.

3. Then another thing I found "funny". There we all were at the closing table - the sellers, the buyers, both realtors and the title attorney. The attorney was a soft-spoken man who was quietly shuffling papers back and forth between us and the buyers to sign. Just about the whole time the realtors were busy talking to each other, swapping "realtor war stories", and a few times they got so loud they overpowered the attorney, and you had to ask him to repeat himself. My realtor even got out some paperwork, and then said aloud - "oh I am just going over the paperwork of another closing I had earlier today". ?????? It was rude enough you were running your mouth and distracting us, now you are studying paperwork that has absolutely nothing to do with the closing at hand? Sorry, I found that to be very rude and unprofessional.

Well I am glad it is finally over. You guys should also be happy, because now you may hear less from me! Now I can start concentrating on some home improvements I'd like to do and I can get back to having a somewhat normal life. Thanks to everyone who showed support and offered some good advice along the way. And thanks for just letting me vent my frustrations. Hopefully some of my venting actually helped someone else out there, and they can watch out for some of the pitfalls that I experienced.

Good luck to everyone - hope everyone has a very nice holiday season!

    Bookmark   December 17, 2011 at 3:21PM
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brickeyee

"you pay one tax on your residence, and you pay higher taxes on any additional non-residences. Yeah, thats really fair."[sic]

It's called investment property, and it depends on who is defining "fair."

    Bookmark   December 17, 2011 at 10:48PM
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ncrealestateguy

Cass66... first LITH leaves us and now you! But congrats on the quick sale. Yes, the agent was rude to not give you and the attorney her undivided attention.
Yes, our government has a spending problem, not a tax collection problem.
Take care man.

    Bookmark   December 18, 2011 at 7:29AM
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cas66ragtop

NC - Hey thanks for the good wishes, and thanks again for all your help. I really appreciated it. I will still be around, I have sort of become addicted to this site. You have yourself a good holiday!

Brick - I think you were very aware of my situation. I "got stuck" with the other house, it was never intended to be an "investment property". Thanks for taking the time to read my post, only to copy a sentence, comment on a spelling error, and then make a snide remark about it. And thanks for NOT congratulating me on finally getting my house sold. It goes to show what sort of person you truly are.

    Bookmark   December 18, 2011 at 12:55PM
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jane__ny

Congrats, Cas! Doesn't it feel so good to have it all finished?

At our closing the buyers had an 8-month old baby who screamed the entire hour and half. I thought I'd have a nervous brake-down. This baby screamed so loud, people from other offices were coming in to see if there was an emergency! The closing took over an hour, I needed a stiff cocktail as soon as we walked out!

Again, much good luck,

Jane

    Bookmark   December 18, 2011 at 11:14PM
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cas66ragtop

Thanks Jane - yes it feels great! Wow, I would not have wanted to endure your closing with the screaming baby. That sounds terrible. That could have been worth an extra $10k, or may have even been worth cancelling the deal altogehter! haha!

Thanks Jane - and have a great holiday!

    Bookmark   December 19, 2011 at 7:31AM
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ncrealestateguy

Good to hear you will check in from time to time. Being one of the 50 percenters who succeeded to sell during these rough times, make you a mini expert on the topics at hand.

    Bookmark   December 19, 2011 at 4:32PM
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