self employed LLC w/ Lvl III UW problems 1 day b4 closing help!

[Anonymous]

Not even sure where to begin... in brief... purchased 2 homes in the past 15 yrs., and inherited 1/2 interest in a 3rd.  Found my dream home and after LONG negotiations, went under contract with a closing date of 6/30/2009.  Purchase price to be $335k (pre-approved with Wells Fargo for $270k FHA loan, self pay the remainder).  Due to my own error, did not expect my realtor to cash the earnest money check which went into an overdraft on my account... during the loan approval process (had the money at home... my fault, I know.)  This sent me off "fast track" and into Level III underwriting which is where the problems began.  Am self employed... provided all necessary requested docs.... kept asking for more and more... said our 2007 income was "half" of 2006 per our returns... am in an LLC where we used a 33/33/33 percentage for tax purposes (though we are really productivity based)... Wells Fargo wanted to see an amended '07 return that corrected our income to where we said it was... this left us owing an additional $17k in taxes... Friday before closing, Wells Fargo wanted us to go file the amended '07 return and provide proof.  Fine... not thrilled, but fine... then we get an email from our LO this afternoon, the day before closing, sayingin order to close, we now need to provide a revised partnership agreement (to show we are productivity based and not 33/333/33), amended company tax filing for '07 (not just our personal taxes), proof of our 2008 taxes being filed (though we've got an extension to November), proof that we have both the $17k and the 2008 $$$ tax money "in the bank"... and on and on... HOW DID WE GO FROM FAST TRACK AND PRE-APPROVED TO THIS NIGHTMARE ONE DAY BEFORE CLOSING?  What recourse do we have?  Find a new LO?  Go to another bank (other than Wells Fargo?)  Go conventional instead of FHA?  Ironically, we don't have those funds (yet) for the '08 taxes...

[Anonymous]

well...

Not to overdo the point, but overdrafting your account with your earnest money check due to your own mistake could have been a deal killer in and of itself.  As far as the tax stuff, it looks like they are making you ammend tax returns so more of your income is useable.  This was probably not necessary prior to it going into higher level underwriting because they were giving you the benefit of the doubt.  The overdraft changed things and now they will be stricter on the whole file.  You are just stuck doing what they say.

[Anonymous]

I knew it was trouble of course... do house closings for a living and never had an agent "cash" the earnest money check... always hand them over at closing... stupid assumption on my part... money was in the middle of a manual transfer.  Question... can switching LO's and starting with another bank make a difference, ie., possibly go through the fast track with someone else?  Can I call the bank and try to have that overdraft removed?  Do they do that?  It was covered on overdraft protection... am sick about all this.

[ShanetheMortgageMan]

All of that documentation is required anyway, didn't have anything to do with the check bouncing as isolated incidents like that are really no big deal... now if you have a trend of them, or also lots of other late payments at the same time, that is different.  In my opinion they were just using that as an excuse when finally asking for the other paperwork.  With FHA the first step is to try to obtain an automated underwriting approval for the client, it either says "Accept" or "Approve" or "Refer", there are no levels of approval.  If you get an "Accept" or "Approve" then the documentation process is a bit more streamlined, however corporation tax returns are always needed if you are least 25% owner of the corporation, doesn't matter what type of response is rec'd from automated underwriting.  As you can see once your corporate returns were reviewed (why they weren't asked for up front I'm not sure, but as soon as they found out you were self-employed they should have been automatically asked for) the issues started popping up - they aren't asking for this stuff because of your overdraft.  Further, unless it's reported to credit an overdraft has no affect on the decision that automated underwriting makes, as automated underwriting only takes into consideration what is on credit, and the figures that the loan officer inputs (income, assets, loan amount, sales price, etc.)... there is no section on the application to insert an overdraft and have automated underwriting take that into consideration.  Starting over with a new loan officer is possible but realize that the corporation tax issues may still remain there too.