Bank statements and overdrafts

[simyengi]

I need some advice. Although I haven't had an overdraft in more than four months, my bank statements still include the total amount of overdraft fees for the year. Unfortunately this box has $3,300 in it. My loan officer said go ahead and send them for the underwriter but he (or she) will need need statement around 60 days before closing. The category will be blank on the January statement. Should I be worried about this? Or should I ask my bank if they can print a bank statement without that line item? I don't want to derail this loan. Thanks in advance.

[MrChairman]

The banks will not remove this. Having that much in overdraft fees is a serious red flag. I've seen people get denied for 1/10 of what you have. If you get a final approval through underwriting I'm certain it will be a battle for you. Having that in your file won't look good at all.

[StartingOver10]

Mr. Chairman pretty much said it all.

You will need to show that the OD's are an unusual occurance and you have taken steps to cure whatever error happened to allow the overdraft.

Of course, if you have these OD's spread throughout the year, that would be a larger issue because it is clear you didn't address the OD problem.

The best way to prevent OD's is to keep a check register (electronic or manual) and reconcile your statements regularly. If you don't keep accurate records, you will have a perpetual OD problem. Naturally you can see where the underwriter would have an issue with a potential borrower not being able to track their income and expenses, right?

[simyengi]

Wow, thanks for the info. I haven't had an overdraft since June. That's when I finally paid off some surgical bills for spinal fusion surgery. My last few months have been clean so I was hoping that it wouldn't be an issue. Our new construction will be ready to close in May 2014. Sixty days before closing, another set of bank statements will be needed as well. My loan officer seem to think there would be an issue at this time. He 2014 bank statements won't have this info on them. What do you folks think? I'm starting to think I should pull out now until January.

[MrChairman]

As long as you have ZERO overdrafts between now and closing you should be fine. That will be about a year of no overdrafts. Luckily you have some time to right the ship. Especially with new construction there will most likely be a delay so you might have even more time. The UW will surely ask for an explanation but as long as you have ZERO overdrafts between now and closing I think you will be fine. Your LO is correct that the OD count will reset with the new statements in January. The banks do calendar year (Jan 1 - Dec 31) to calculate OD for the year.

[Sunshine85]

$3,300 in OD fees is significant and the UW will definitely have an issue. Try talking to your LO about doing a VOD (verification of deposit) instead. VODs are done on a standard Fannie Mae form, and there is no section where ODs are questioned. 

If that's not an option, wait until you have Jan and Feb 2014 statements, and turn those in to the UW. Under no circumstances would I suggest submitting any statements that show as much as you've been charged in overdraft fees. 

[simyengi]

That's more promising. What kind of explanation do they typically look for? I'm about to turn all bookkeeping over to my wife.

[simyengi]

I sent in a printout from the bank which showed the last two months of activity. He said I need actual statements...PDF from online banking would be fine. How do I request the VOD without setting off any red flags?

[StartingOver10]

Just talk to your LO. Explain your hesitation and ask him what you can do to get your approval now and provide bank statements closer to the final approval date. He should then volunteer the VOD option.

Remember, the LO wants to have you get an approval too. Does this LO seem good or is he more along the lines of an application taker? If he is the former, then just be honest with him. He has seen it before.