One Frustrating Loan Scenario!

If you have followed our blog recently you probably have noticed us venting more often than we probably should. This blog was started to provide helpful information to our readers. In the past we have added numerous daily posts that offer some great content and insight into the mortgage and real estate market. Lately, we have focused more on the woes of the economy and how this impacts mortgages and real estate. These woes have led to all the frustration and the following is an example that clearly illustrates how goofy this mess is!

In early July I started working on a refinance for a client. This client was trapped in a subprime mortgage that carries a rate of 12.6%! They desperately wanted out of this mortgage and I could save them over $1000 per month! This wasn't an easy loan. They were self-employed and it was a $345,000 home in a rural area. Comparables were tough to come by and the appraisal was not an easy one to get approved. I sent the loan to several lenders. To no surprise many didn't accept the appraisal. One lender paid for a second review appraisal and it came back supporting value. At this point we thought we were home free. This is where the file got interesting. I had asked the client for their 2006 and 2007 taxes, they gave me what they had and said nothing further. The lender executed a 4506T and found that they 07 return was not filed yet! It turns out that they filed an extension on their 2007 taxes and were working towards some extra deductions. She also informed me that they were on a payment plan with the IRS on some of the back taxes they owe. They informed me that the return she gave me for 2007 was not filed yet and it was the most recent draft of the return that their accountant had given them!
She meant no ill intent, she simply didn't know. I should have been more clear, but usually when you ask for a return that isn't done, they tell you this. She just happened to get the latest version of it and thought that would work. I explained the mix-up to the lender and they said the return must be filed before a loan could be done. Due to the stimulus payments, the IRS was backed up 8 weeks! After waiting we started the loan process up again, only to find out that they now weren't interested in doing the loan. This was extremely frustrating since they wouldn't use some common sense and see what took place here. It was an honest mistake by the borrower. Had she told us there was an extension filed, we would have provided the 05 and 06 taxes along with a copy of the 07 extension. The lender would have been fine with this, they just flipped their lid when they got a return that wasn't filed. It wasn't like we trying to get credit for more income either! These clients made plenty of money for the loan, it was just a matter of giving the lender the appropriate documentation so we could move forward and close.
Now we were back to square one. I updated the file and sent to a new lender. This is something that could have been done a long time ago if we wouldn't have been strung along by the last lender! While updating the file we were dealt one last blow and this one was critical! The IRS filed a Federal Tax lien on the back taxes they were currently paying on! This put an end to any hope of a refinance since this must be paid first! Had the lender just been reasonable in the first place and looked outside the box to see what really took place, this client could have gotten out of this horrible loan prior to the Tax Lien being placed! Now they are stuck! Yes it is ultimately their fault, but it is still a tough pill to swallow.

So aside from this whole scenario being frustrating from an underwriting standpoint, let me tie it all together this way. I had to call this customer and tell them that they could not refinance and get out of their crappy subprime loan because they have to pay the IRS the money they owe first! This is of course so the Government can take their tax money and fork it over to these FAT CAT lenders in order to BAIL THEM OUT for giving you this crappy loan in the first place! Make sense? I thought so.

Just because the Bailout was a necessary step in the long road to recovery for our economy, this scenario sure doesn't make it any easier to explain how it is better to the people that are being hurt by the problem!

Brought to you by:
Professional Mortgage Group, Inc.