topic Re: Didn't disclose an installment agreement - is this a problem? in Mortgage Loans

Didn't disclose an installment agreement - is this a problem?

revanthony5 — Sun, 23 Dec 2012 05:45:15 GMT

I'm currently in Escrow with Wells Fargo. My application was instantly approved and now has to go to underwriting where they verify my income and etc. I'm nervous because I didn't disclose my installment agreement with IRS from 2005 and my Bill Me Later account. The loan officer didn't ask nor did the application. My credit report doesn't show these items and was informed that items not shown on the credit report doesn't have to be counted. I'm aware that they request transcripts from IRS for the past 3 years, so don't know if my 2005 installment agreement that I'm still currently paying will come up. I'm this close to closing and hope that this doesn't hurt me. Please advise

[revanthony5, I split your message off to form a new thread here. Lel, FICO Forums moderator]

Re: Didn't disclose an installment agreement - is this a problem?

webhopper — Sun, 23 Dec 2012 05:46:53 GMT

revanthony5 wrote:
I'm currently in Escrow with Wells Fargo. My application was instantly approved and now has to go to underwriting where they verify my income and etc. I'm nervous because I didn't disclose my installment agreement with IRS from 2005 and my Bill Me Later account. The loan officer didn't ask nor did the application. My credit report doesn't show these items and was informed that items not shown on the credit report doesn't have to be counted. I'm aware that they request transcripts from IRS for the past 3 years, so don't know if my 2005 installment agreement that I'm still currently paying will come up. I'm this close to closing and hope that this doesn't hurt me. Please advise

[revanthony5, I split your message off to form a new thread here. Lel, FICO Forums moderator]

You should disclose the installment agreement because it will likely come up when they do the records searching. How much is the payment?

Re: Didn't disclose an installment agreement - is this a problem?

revanthony5 — Sun, 23 Dec 2012 05:49:39 GMT

My installment agreement is $100 a month. They only ask for the past 3 years, so I don't feel the need, but worried because I'm sooo close to closing.

Re: Didn't disclose an installment agreement - is this a problem?

Lel — Sun, 23 Dec 2012 05:58:40 GMT

revanthony5 wrote:
My installment agreement is $100 a month. They only ask for the past 3 years, so I don't feel the need, but worried because I'm sooo close to closing.

I would think that this would need to be disclosed in Section VI of the Uniform Residential Loan Application as a liability. Like webhopper said, this will almost definitely turn up during the title search process.

Re: Didn't disclose an installment agreement - is this a problem?

Mike_B03 — Sun, 23 Dec 2012 07:26:39 GMT

revanthony5 wrote:
My installment agreement is $100 a month. They only ask for the past 3 years, so I don't feel the need, but worried because I'm sooo close to closing.

I don't understand what you mean by "They only ask for the past 3 years"...3 years of what? Installments that started only the in the past 3 years? That is not true...so if you financed a car for 60 months and you're on month 38, you wouldn't count that as a monthly debt? Unless I'm not understanding what you are saying.

Why did you not disclose it? Are you tight on the DTI? Do you have a judgment/lien against you for the taxes or is there just a payment plan in place? If there is no lien/judgment they may not find out about it, not sure.

Re: Didn't disclose an installment agreement - is this a problem?

StartingOver10 — Sun, 23 Dec 2012 13:37:56 GMT

Yes, not disclosing debt on a loan application is a problem. Contact your LO right away. Let them know all about all of your outstanding debt and associated payments. The loan application requires you to disclose all of your debt., it is not limited to a time period of debt incurred within three years. If you are making payments, the payment and the balance need to be disclosed in writing on the loan application.

If you review the form again (1003) there is a spot for each debt to be listed individually. Believe me, if you have more payments than what can fit on the form, there are additional pages that can be added. It is fraud to not disclose debt in order to induce the lender to make the loan for you. Make sure you contact your LO right away to straighten out this misunderstanding.

Re: Didn't disclose an installment agreement - is this a problem?

revanthony5 — Sun, 23 Dec 2012 21:18:32 GMT

I didn't disclose this information because it wasn't asked or requested. It's an installment agreement for taxes owed in 2005. It doesn't show on my credit report and I didn't want this included in my debt to ratio. Wells fargo only requested 2009, 2010, 2011 tax transcripts, do don't know if they will find out about my 2005 taxes. I have gone through preapproval and received an approval through their automated underwriting system in which the loan officer does with you right there. I don't know what to do.

Re: Didn't disclose an installment agreement - is this a problem?

revanthony5 — Sun, 23 Dec 2012 21:19:55 GMT

I was also told that you only have to report debt that appears on your credit report and that they can't count debt that doesn't appear.

Re: Didn't disclose an installment agreement - is this a problem?

webhopper — Sun, 23 Dec 2012 21:25:19 GMT

The debt should be disclosed, if look at the uniform residential loan application form there is a section where you list all monthly obligations. Even things like child support payments and alimony payments should be disclosed even though they may not show up on a credit report, they are still an obligation. Being in a tax payment plan may also put you on the federal debt caivrs list which would make it impossible to get a loan.

Re: Didn't disclose an installment agreement - is this a problem?

webhopper — Sun, 23 Dec 2012 21:31:53 GMT

The section appears on page 2 of the application and is listed as liabilities and pledged assets. As StartingOver10 indicated, continuation sheets are available if you run out of room. (I had a continuation sheet when I did my application in sept 2011)

The only type of payment you don't have to count is a loan that is pledged or collateralized by the borrowers own liquid assets, such as a loan secured by a CD or a 401k

Re: Didn't disclose an installment agreement - is this a problem?

revanthony5 — Sun, 23 Dec 2012 21:33:21 GMT

My loans aren't delenquent. I just have a payment arrangement that can be paid off if brought up.

Re: Didn't disclose an installment agreement - is this a problem?

webhopper — Sun, 23 Dec 2012 22:46:19 GMT

I think you misunderstood my statement. All I'm saying is that your 100 per month payment should be counted as an obligation on your DTI and the fact that you owe this money may put you on a federal debtors list.

Re: Didn't disclose an installment agreement - is this a problem?

StartingOver10 — Sun, 23 Dec 2012 22:50:08 GMT

revanthony5 wrote:
My loans aren't delenquent. I just have a payment arrangement that can be paid off if brought up.
This is very serious. There is no exception for payments not on the credit report. If the LO told you payments don't have to be disclosed if they aren't listed on the credit report, than the LO is misinformed.

Take a look at the loan application and read what it says. You can find one by searching for "mortgage loan application form 1003" (that is the standard form used by Wells Fargo and nearly every institutional lender).

The fact is, the payments are part of your back end ratios and if you fail to include the payment, then you are understating the amount of debt you have in order to induce the lender to make the loan to you. Don't mess around with this undisclosed debt payment.

Re: Didn't disclose an installment agreement - is this a problem?

Mike_B03 — Sun, 23 Dec 2012 22:54:48 GMT

I don't understand when you keep saying it wasn't asked for or requested.

The loan application has a section where it asks you to list all monthly debts you are paying. How much more clearly do they need to ask?

Just know that if they find out, they will most likely deny your loan. It sounds like it would be denied anyway if you don't disclose it, sounds like you're at the limit with the DTI so I guess do what you feel but the stress would kill me.

Re: Didn't disclose an installment agreement - is this a problem?

Sunshine85 — Mon, 24 Dec 2012 01:26:12 GMT

Mike_B03 wrote:
I don't understand when you keep saying it wasn't asked for or requested.

The loan application has a section where it asks you to list all monthly debts you are paying. How much more clearly do they need to ask?

Just know that if they find out, they will most likely deny your loan. It sounds like it would be denied anyway if you don't disclose it, sounds like you're at the limit with the DTI so I guess do what you feel but the stress would kill me.

How are you paying this debt? Is it via automatic draft from your bank account, or some type of payroll deduction? If so, UW will most likely catch this through review of your bank statements or pay stubs.

Disclose this now, and let them work with you if there are DTI issues. If they find out about the IRS debt, and I would bet that they probably will, saying it's not on your CBR, or they didn't specifically ask you about it won't fly. It will be viewed as a deliberate omission of information, that will almost surely result in your file being declined. The last thing you want is to spend money on inspections, an appraisal, etc, only to be declined because you weren't 100% up front with your lender.

Re: Didn't disclose an installment agreement - is this a problem?

Mike_B03 — Mon, 24 Dec 2012 02:10:17 GMT

Not just that, but if its an FHA loan, I understand that they tag your account with comments on why a loan was denied, it stays in the system so if you try to apply for an FHA loan later, they will know why you were denied this time.

As was asked, how do you currently make the payments? If its thru an automatic payment or a check from your account, they may see it on your statements and ask about it.

You could probably always say "Oops I didn't know" but again it might get denied due to DTI or if they feel you weren't honest with them. My biggest thing would be the stress, couldn't handle it.

Re: Didn't disclose an installment agreement - is this a problem?

beb86 — Tue, 25 Dec 2012 14:07:21 GMT

if its only $100 that shouldnt be too much of a problem for your dti unless you are borderline..the last thing you want is on the friday before closing you get that phone call from your LO telling you there is a problem.

Re: Didn't disclose an installment agreement - is this a problem?

revanthony5 — Tue, 25 Dec 2012 20:10:12 GMT

If brought up, I will just say it was going to paid by closing and didn't think anything of it. Period I really should have just paid it off along time ago. Thanks beb86

I pay different amounts each month and it doesn't appear anywhere, so again if it comes up. This is from 2005. They will be ordering and reviewing the past 3 years taxes. Also, if you see one of the post from a girl in the same exact situation said hers was never mentioned, so maybe I will get the same luck. If not, just pay it off.

Re: Didn't disclose an installment agreement - is this a problem?

revanthony5 — Fri, 28 Dec 2012 04:58:51 GMT

Thank you everyone for your comments and suggestions. I informed the lender of my additional debt and they said I was still ok with my debt to ratios and my application still is in good shape. Thank GOD!

Re: Didn't disclose an installment agreement - is this a problem?

Mike_B03 — Fri, 28 Dec 2012 05:43:40 GMT

Good to hear! It'll be a little easier to sleep at night knowing you don't have that in the back,of your head a all times. Good luck with the loan, let us know how it goes.