After 24 years in the mortgage business I have seen every mortgage scam, and been approached about every way to cut a corner, get a better deal, or pull one over on an underwriter.
But guess what? Underwriter’s know how to use Google now! It took a while, but they figured it out. Why does this matter? Well it only matters to the cheaters and corner cutters. If you are always honest in your loan application, don’t read any further (unless you want to be entertained).
One of the most common schemes by a mortgage borrower who is refinancing is to say they live in a property when they do not. They do this because they want to get the “owner occupied” interest rate, instead of the “investor” interest rate. But it is pretty easy for an underwriter to Google someone and see where their ‘real’ primary residence is. Or some underwriter’s have tools, like access to some IRS records which will show a true primary residence address, or some other private database that they have paid access to. It is really hard to pull one over on an underwriter, but people still try, even in the Internet Age.
Another of my favorites is when someone is selling a house and they want to buy a new one without selling theirs first. They figure it will sell quickly, they are not worried, and if they are in a competitive real estate marketplace making an offer contingent on the sale of your current home makes your offer unattractive. So they try and tell me the house they are currently living in is about to become a rental property, and they even have signed lease. I see their large house with a $3,800/month mortgage suddenly get rented for $4500. Imagine that, just enough to cover the mortgage, and show a little profit! But then the underwriter gets on Craigslist, sees that homes in this area are renting for $2900 at the most, they suddenly wonders if they are looking at a fake lease!
I recently had a business owner who did not want to submit 2 years of tax returns for their business, and also did not want to show their personal tax returns. They said they get a salary from the corporation, so they only want to submit W2’s and a pay stub. And I say that if you own over 25% of a corporation the Fannie Mae & Freddie Mac rules ask the borrower to submit the most recent tax returns (for personal and business returns) going back 2 years, as well as a Profit & Loss statement for the current year. Too much paperwork says “busy borrower”. I ask them to get online, Google themselves, and tell me what they see. I did this recently, and the first entry they saw was a link to the “Team Members” section of their company’s website, which showed them as the founder and current owner. I asked how long they thought it would take for the underwriter to find that. They sent the tax returns.
It goes on and on…
I had someone say that they live in MD and want to buy a property to occupy in MD full time, but they really work and live in Pittsburgh. They were really buying a rental property, and did not want to pay the higher investor rate. Google to the underwriter’s rescue!
I had a client who was selling his home, but wanted me to do an equity line so that he could get the cash to buy his next home without selling it first. The underwriter quickly accessed the local MLS (yes, underwriter’s usually have MLS access), saw the home listed for sale in MLS, and denied the equity line. You cannot get an equity line on a house that is on the market to be sold. “Hooray for the internet” says the underwriter.
I have buyers who swear the condition of a home is livable, good, or even great. Then the underwriter finds out it is a shell, either by doing a Google search, checking MLS, or other sources. This is a problem, because you cannot get a regular, market loan on a property in rough condition. That is what renovation/construction loans are for, or that is what paying cash is for. But people want the lower rates on a good mortgage.
I could go on and on, I have stories to last for dozens of blogs.
It is virtually impossible to pull one over the underwriter. Let’s just all figure that out, agree that underwriter’s know how to use Google now, and stop trying to pull a fast one.