I always hear how people miss the good old days. I am not sure I do. I prefer progress. But lately, the mortgage industry has been regressing. And I would say that we have not been making progress. We have actually been going backwards. It seems the mortgage process has swung from too easy, to too strict, and now to downright ludicrous. There is nothing that Fannie Mae wants undocumented that is related to a mortgage borrower’s finances. And I mean that literally. So I understand when someone says to me the following,
Blog Category: mortgage underwriting
Condominium litigation can be a problem when getting a mortgage. What if a condominium has litigation against it and you want to buy it? To get a loan approved there are certain things a mortgage lender has to document or the loan may be denied.
A mortgage lender has to prove that the litigation has no impact on the safety and structural soundness of the condo.
And the insurance carrier that insures the condominium building is involved. They have to have agreed to provide the defense, and the amount of the litigation must be covered by the HOA’s insurance.
There are other reasons why litigation against a condominium may not be an issue. These may be:
- It is non-monetary litigation including, but not limited to neighbor disputes or rights of quiet enjoyment;
- the HOA is the plaintiff in the litigation and not the defendant;
- the reasonably anticipated or known damages and legal expenses are not expected to exceed 10% of the project’s funded reserves.
Financing a condominium can be tricky for other reasons. Mortgage guidelines have the ability to change at any time. Always talk to a well-reviewed mortgage loan officer. Make sure you understand the current guidelines and how they might apply to you.
There is a new Fannie Mae underwriting rule related to large deposits. There has always been a Fannie Mae rule that made underwriters ask about a large deposit that was clearly not a paycheck deposit. And that is understandable. If someone has a $30,000 deposit on their bank statement, and their paycheck is $4,250 each pay period, then I can see asking where the $30,000 came from. And usually, the answer is that it is a gift, or a transfer from another account. All we have to do is have the client document that with the proper documents. Documenting a large deposit is known in the industry as getting a “source of funds.” But recently, it has gotten more interesting.
A limited review condo approval means that when you get a mortgage to purchase a condominium you don’t have to go through the normal extensive document review to approve the condominium. You must have an approved condo to get a mortgage approved to buy a unit in the building. The approval review is more limited/abbreviated with a limited review condo approval.
I have found out another reason why documenting a mortgage loan application has become a nightmare. This story relates specifically to documenting assets and the bureaucratic, paper-laden gauntlet that it has become. Guess who is responsible? Come on, you only need one guess! The reason that documenting assets has become torture for mortgage applicants is the U.S. federal government. Yes, yet again, we have our nannies and protectors on Capitol Hill to thank for the latest round of insanity.
It is time to report on another crazy underwriting story. The paperwork that people have to provide and the rigid underwriting guidelines that I have to put them through are really absurd at times. The fact that we cannot interject any small amount of logic into the discussion is really getting painful. It is not really the underwriters fault though. They are only interpreters of guidelines imposed on all of us by the rule makers. These would be government agencies like Fannie Mae and Freddie Mac.