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from Local Attorney, Michael H. Wasserman

Thursday, January 10, 2008

The Bizzare Rituals of Mortgage Lending

My brother, a corporate lawyer, used to carry a bag of lapel buttons with him in his attache. When one of his deals took an odd turn, he would whip one out and offer it to his opposing counsel. They bore the legend "thank you, for turning a routine transaction into a bizarre ritual" I've coveted those buttons for years.

Just imagine how many I'd have to print, if I could only find a way to meet the mortgage underwriters my clients are subjected to. If there were ever an industry that specialized in the bizarre, could anyone do better than the mortgage underwriters?

In the past four days, I have seen
  • A lender demand a sales contract be modified to exclude the seller's bar stools from the transaction
  • A lender assert that Fannie Mae guidelines require a 6 unit condo association hire a lawyer to give a written opinion that the association meets all FHA guidelines and is properly organized
  • Another lender refuse to consider the rental income generated by a four flat under contract for the purposes of considering the buyer's ability to repay his purchase money mortgage
  • A lender is DEMANDING that a seller remove burglar bars from the bedroom windows or fit them with quick release handles before it will approve the loan. (a safety hazard? perhaps, but somebody help me understand how they could possibly effect the home's value or the loan itself?)
and, saving the best for last, now this:
  • A lender has just red flagged a client's file because the borrower is putting 25% of the purchase price down from his own savings! Imagine that, the buyer has TOO much money to qualify for a loan!

It is truly a world gone mad.