How deep can home loan vendors go?

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Pablo

Pablo

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My business partner is refinancing his house. Pretty standard stuff. Early last week, he asked for the K-1 copies for 08 and 09. I said he should have his copies with his 1040 stuff, but I provide them after he scratches around a bit. Then he says they have questions and want the 1065's. I'm thinking.....what the heck? But I provide the required page 1-3, after giving him a warning about privacy, etc......then his loan broker has questions yesterday and want pages 4 and 5 and my partner has the gall to chew me out for not providing everything at once. I've never, ever had lenders ask me this level of details about my partnerships. Is there any wall lenders can't breech?
 
The industry is hurting from giving out loans too freely in the past. They are going well beyond the "norm" to make sure your not a high risk loan.
 
Just try refinancing your home or buying a new home. You will be amazed at the required documents and stuff you will have to sign to get a loan. It’s a free country, Banks can deny a loan for any reason. And don’t be surprised to see them asking documentation showing 6-month asset reserves and a written permission to request copies of the applicable federal income tax returns directly from the IRS among other things.
 
When I do a hard money loan I ask for tons on info as well as the credit checks. I want the money , I don't want to deal with real estate aquired from foreclosure.
 
Originally Posted By: Shannow
How far can the banks go asking for details ?

As far as the customer is willing to let them.


That is EXACTLY what I've been telling him!
 
It took me 4 months to refinance my home mortgage last month. Had to provide them with a ton of documents. Twice.
 
Originally Posted By: Billy007
What are the chances that he will get the loan if he follows your advice?


Good actually, but he's not listening to me and they keep leading him by the nose.
 
when I got my 30 yr mortgage back in november 10, they wanted everything. IRS docs, two bank statements, 401ks, ira's. they wanted my wife's mutual fund that her parents's financial advisor takes care of. she gave them page 8 out of 20 pages, which was her page. but then, they demanded the whole 20 pages. I told the mortgage broker, uh, you can't have those pages. those pages are in my in laws names, and they aren't going to give them to me, and let me find out their whole financial fortune. they dropped the issue and gave us the 4.25% loan. mind you, my wife and I both have 800 credit scores with 20% down payment and we are both nurses. this was with bank of america
 
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Pablo, the reason so much documentation is being asked for is due to what led to the financial meltdown and the new legislation/investor requirements that came about as a result of the meltdown to approve a loan. There is overwhelming government regulation (For starters look at RESPA Reform or the Dodd-Frank Act, which is a 2300 page bill) and investor guidelines (Fannie/Freddie/etc.) that require the lender to gather this info. If the customer refuses to provide this paperwork, the lender may possibly end up with a loan on their books that A) does not meet government regulation or B) does not meet investor saleability guidelines. If the loan does not meet government regulations or investor guidelines, there is a negative reputational risk, which lenders do not want at this point in time or EVER for that matter and a possible financial loss, which lenders (or any business) most certainly do not want. They are in business to make money, but most are feeling the sting from the meltdown and don't want the same thing to happen twice and "big brother" is looking at all banks with a very close eye as well to ensure that it doesn't happen twice.
 
What they are asking for won't stop any sort of meltdown into the future...it's just people covering their backsides.

Crisis will be forgotten, and everyone will want more than their slice of perpetual exponential growth, there will be more money invested, the desire for their investments to not be chewed up by inflation...all natural desires.

Until once again, bets have to be made on flies crawling up walls, and then the system needs to be flushed out again, and the pegs reset.

Handing over all of your personal details such that they know how many toothpicks are recorded as assets on Grandma May's bedside table, and how many are apportioned to a mortgage transfer to the Wyong Shire Council really means nothing to security, and maybe a lot to Grandma May
 
The real pressure point is from the banking regulators, the OCC being the toughest. The government tries to tell the consumer they are making things easier for the consumer but the required documentation becomes more and more difficult to understand. Case in point, the new good faith estimate and HUD settlement sheet that went into effect last year is still up in the air. At one point, HUD's FAQ regarding those documents was up to 56 pages. Having worked in banking for 17 years, I can tell the bank/loan officer wants to have every i dotted and t crossed because it's no fun when a bank examiner is hovering over you and there's something not 100% perfect in a loan file.
 
Does your partner have a day job with a regular paycheck? Spouse with one? He should ask the bank what percent (28%) of income they think should go towards the mortgage, if he makes it without the partnership income they should flake off.

My bank wanted all my IRA stuff too, this was in April '09, and supposedly just to make sure I could handle the couple thousand bucks in closing costs.

The tax return copy has been going on for a long time; my parents had to do it applying for financial aid for my college back in the 90s. Easy enough to doctor up a 2nd bogus 1040 to submit as "proof".
 
Another thing lenders are doing is requesting tax returns transscripts from the IRS. If the copy you gave the lender if different than the copy filed with the IRS....big trouble.

Another thing that needs to be kept in mind here is if the bank is selling the loan to Fannie, Freddie, Sun Trust, Wells, BofA, etc. they are at the mercy of the investors requirements. Otherwise the end investor will not buy the loan.
 
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Originally Posted By: eljefino
Does your partner have a day job with a regular paycheck? Spouse with one? He should ask the bank what percent (28%) of income they think should go towards the mortgage, if he makes it without the partnership income they should flake off.

My bank wanted all my IRA stuff too, this was in April '09, and supposedly just to make sure I could handle the couple thousand bucks in closing costs.

The tax return copy has been going on for a long time....


Yes he has a real job and other businesses as well (like me). I told him to just use his real job to qualify but of course they see the K-1 on his 1040. Yes asking for the 1040 is standard, but the 1065 and deeper - into the business records?? That's why I asked the question.

Originally Posted By: Slick17601
Another thing lenders are doing is requesting tax returns transscripts from the IRS. If the copy you gave the lender if different than the copy filed with the IRS....big trouble.



Yep - and I wish they would have just asked him to sign the transcripts permission slip. It would have made my life easier.
 
Originally Posted By: Pablo
Originally Posted By: Billy007
What are the chances that he will get the loan if he follows your advice?


Good actually, but he's not listening to me and they keep leading him by the nose.



pablo, is this the actual lender (wells fargo, citi etc?) or just an originating firm?
I would ask them for formal documents showing what is required for documentation, I think the agent is pulling stuff out of this food-exit-canal.
1040/schedule x should be adequate for past few years.
 
I refi'd my rental property back in Dec 2009. All they wanted was the usual two paystubs and copies of my bank statements.

I suspect that the reason they didn't go very deep is:

1)I'm not over-leveraged. The total amount I pay on my two houses is such that I could afford both even if the rental property sat vacant.

2)My credit score is very good--over 800.

3)I actually have some money saved in the bank--it's obvious from my bank statements that I am not living "paycheck to paycheck".
 
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