Mortgages, Closing, and Denials....oh my

[DrWright81]

Hi everyone! Boy oh boy where to begin. I am seeking some help so I apologize if this is long...

We are due to close in 23 days. Lender is Wells Fargo. We received our commitment letter and appraisal was good. All scores are acceptable between 679-704. Received an approved then file went to underwriting. Everything approved until yesterday. Loan was denied yesterday because we have an open collections from our second mortgage attached to our foreclosure in 2008. Wells said they were uncomfortable approving the loan because the company can put a lien on the second property which lawyers said was untrue. I know they can still sue for the note but probably not likely either since it has been 5 or more years. Wells also said I could settle but FHA says I must wait 3 years after the account is resolved. Here are my questions...

Do I have any options aside from cancelling my contract and loosing my new property? If I settle the account, does FHA really require a 3 year wait? Would going with another lender possibly give me a chance? I am just so outdone here. It's not like we hid the information. The account has been sitting on our credit for 6 years and it was there when they pulled the credit. I specifically told them several times that the account was not paid off and it was in collections. The LO kept saying it doesn't matter. Anyone have any advice?

[klondike]

You are never approved until you get through underwriting. Many of the big banks will tell you are approved and then deny after underwriting. Don't ever assume you are approved until you get through underwriting.

If you can, it is better to work with a smaller local company that has access to the actual underwriter working your case. That way they can help support any issues you might have.

[StartingOver10]

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@DrWright81 wrote:

Hi everyone! Boy oh boy where to begin. I am seeking some help so I apologize if this is long...

We are due to close in 23 days. Lender is Wells Fargo. We received our commitment letter and appraisal was good. All scores are acceptable between 679-704. Received an approved then file went to underwriting. Everything approved until yesterday. Loan was denied yesterday because we have an open collections from our second mortgage attached to our foreclosure in 2008. Wells said they were uncomfortable approving the loan because the company can put a lien on the second property which lawyers said was untrue. I know they can still sue for the note but probably not likely either since it has been 5 or more years. Wells also said I could settle but FHA says I must wait 3 years after the account is resolved. Here are my questions...

Do I have any options aside from cancelling my contract and loosing my new property? If I settle the account, does FHA really require a 3 year wait? Would going with another lender possibly give me a chance? I am just so outdone here. It's not like we hid the information. The account has been sitting on our credit for 6 years and it was there when they pulled the credit. I specifically told them several times that the account was not paid off and it was in collections. The LO kept saying it doesn't matter. Anyone have any advice?

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^^^This is a classic Wells Fargo SNAFU. They are known to do this to borrowers. Do you have a judgment against you for the second mortgage from 2008 or is it just a collections account? What is the SOL for the deficiency in your state?  (every state is different).

I agree with the above post - go to a regional lender in your area. Or use a good correspondent lender/mortgage banker.

[DrWright81]

Klondike, that's the funny part. The LO did check before we started this process. I made sure to ask because I didn't want to invest a lot of time and energy if this open account was going to kill the deal. I know we were not approved but we were conditionally approved. I also know banks can deny a loan at anytime. I am upset not because I thought we were approved but because I feel the LO should have done her research BEFORE we got to this point since I have strings of emails concerning the open account and was told it didn't matter. 

[StartingOver10]

Wells Fargo is known to not have experienced or knowledgeable LO's. They have what I call "application takers" and your file is truly not reviewed until it gets to underwriting.

You are better off going to almost anyone else (except BOA) than going to Wells when applying for your loan. In my area, WF has a 80% fall out rate from application to closing after a pre-approval. Think about that 4 out 5 applications fail to close after the pre-approval.

[DrWright81]

No there was no judgment on the second. They actually never even contacted us. OCWEN was the servicer and they sold it to Nationwide. I was told since OCWEN was showing up as the collector, I should get them to provide a letter saying the account was "transferred" and now showing a "zero balance"...which is was because it was at Nationwide. Nationwide is a collections agency so I am just unsure what the FHA regulations are on either settling the debt. Wells said I had to wait 3 years to reapply if I settled the debt which doesn't seem right to me. I think the SOL is 5 years but was told by several lawyers that it is 5 years from the acceleration on the note not from foreclosure date. 

[DrWright81]

StartingOver10...wish I would have known that before, lol 

I am looking into a lender that my Realtor recommended and also one that my co worker recommended. They had a bankruptcy and still closed on a home. I can't see why this would be THAT much worse. I mean I know we fouled up and lost the house and owe the debt but we have worked hard to rebuild our credit and the scores aren't even what's holding us up. 

[StartingOver10]

The f/c date is the date that FHA uses. Pull up the property record and see what date the deed was transferred back to the bank. Download a copy for your records. In my area that deed is called the "Certificate of Title". It might be called something else in your area, but you can clearly see the date on the transfer.

BTW, the wait time (typically) for a new FHA mortgage after a f/c is 3 years from the loss date to the new application date (and not one day sooner).

There is a new program out as of last year that will do one year after and it is called the Back to Work program, but there are special limiting circumstances for that program. You can search the criteria on this board.

As to Wells, if you do search on this board you will see that they just have a terrible reputation. I'm an agent and in my area most of the agents won't even accept a Wells Fargo pre-approval because it just doesn't mean anything at all.

Don't lose hope. Check out those other lenders. A good regional lender or correspondent lender ought to be able to help you.

[DrWright81]

What Wells is saying is that if I settle the collections account, I have to wait 3 years before I can apply for a loan based on foreclosure rules. Does anyone know if this is true? I am confused because it seems like they are using foreclosure rules for a collections account. Foreclosure was resolved 5 years ago...So confused! 

[StartingOver10]

I don't believe it to be true either. That's why you need to speak to someone that is knowledgeable. Discard the info you received from WF and go to one of your local lenders. PM Shanethemortgageman on here too. He can give you some great insight.