In other adventures in lending, I had a client who told me she wanted to buy a home because she was getting divorced. Not that she didn’t seem like a really nice woman and not that I wasn’t compassionate for her situation, but there were no divorce papers filed and no lawyers involved.
To an underwriter, that could smell of occupancy fraud: the attempt to purchase a home as though it were a primary residence for one person, when it was actually intended for use as an investment/rental property/vacation home. And that just doesn’t go over big; or go anywhere for that matter…
In my business I am fortunate that I get to build incredible relationships with my clients. But the next step in the “mortgage loan process food chain” is to pass the application to someone with whom my client is not going to have a business relationship. To an underwriter, you are a case and are being appraised and evaluated just like the property you want to purchase.
While I cross and dot everything and make sure a client is in a mortgage program that makes sense for them, the underwriter looks at the checks and balances and one of them is the intended use of the property. To their scheme-sniffing snouts, if something smells bad it is probably rotten. This is why the majority of my time is spent on making sure nothing is being submitted that does not present an honest picture and provide the appropriate support documentation.
Basically, if this loan was granted and turned out to be a case of occupancy fraud, then it is a loan that would not be bought by the secondary market. Instead, the lender could be made to re-purchase the smelly loan. Bottom line, underwriters would rather pass on possible profitability if there is the slightest reek of deception. In this case, my client is going to have to (at the very least) file separation papers to prove her intent to leave her spouse and alleviate any suspicion of co-mingled funds.
At the end of the day, just because you say so doesn’t mean that it is good enough to get your loan passed the hounds.