Vail Daily column: Things you don’t want to do when applying for a loan
Getting a mortgage requires opening many aspects of your life to scrutiny from people and computers. Chances are good that by the time your loan is complete, your lender may know more about you than your fiancee did when you got married.
Mortgage brokers and lenders have a serious responsibility to protect and keep your information confidential (unlike your fiancee, should they find a non-disclosure). We also practice common sense and discretion. During the past 23 years, I’ve stumbled upon references to bank accounts or credit cards that I’m fairly sure were unknown to a spouse and not said a word. I’m not the IRS, your mother or your priest.
But there are moments when a lender might inadvertently learn something that they wish they had not — we’re not your lawyer, either. There are many instances where a statutory law might not exist, but a regulatory rule may exist. Laws apply to everyone, regardless of profession. Regulatory rules, on the other hand, apply to those in a particular profession or undertaking a particular endeavor.
In my world, there are hundreds of regulatory rules from the federal government, federal agencies and the state, and many that require my clients’ compliance In addition, every lender we deal with has his or her own quirky expectations. I have to keep a state license and a federal registration to conduct my profession as well as keep the relationships open to a variety of lenders to serve my clients and make a living. I also feel a responsibility to educate my clients to keep them aware of rules that lenders and government agencies expect them to abide by.
One of the things few people realize is that if a real estate transaction involving a mortgage loan involves fraud, particularly if it’s a FHA or VA loan, there exists in mortgage land the equivalent of a no-fly (which means no-more-loans) list.
It is not particulary easy to get on this list, but once you are on it, your options for getting a federally insured mortgage shift to about zero, and there is a good chance you will be given a financial colonoscopy with no anesthesia should you apply for a conventional loan. No criminal conviction or trial is necessary to be put on this list. Rather, having a government agency determine that you broke a serious rule is what can put you on the list.
Further, the list is not restricted to the borrower. If there is any level of fraud involved that clearly was committed with the assistance or passive knowledge of the mortgage broker, lender, Realtor or title agency or its employees, then everyone involved in perpetrating the fraud can end up ineligible to touch any future deals.
The range of issues that can land you on this list includes anything that is designed to deceive a lender, seller or title company. Most common might be kickbacks from the Realtor to the buyer to induce the buyer to purchase a particular property or pay a higher price. Using a straw buyer to get a loan because the real buyer doesn’t have the credit or assets to get approved is a big one as well.
Another big one is any contract fraud such as post-dating a contract or distorting the actual terms between buyer and seller. If buyer and seller agree verbally that the buyer will pay a higher price and the seller will forget to take the Lexus in the garage with him when he moves, there is a definite problem.
From a lender’s perspective, if we become aware of issues such as planned contract fraud, then we have a obligation to at least try to stop it by explaining the consequences to all parties.
If the contract involving a fraudulent act is already signed and we learn of it before the application is signed, then we are faced with the dilemma of declining to take the application (in which case the borrower may reapply across the street and not mention the issue at hand) or turning evidence of the fraud over to the proper authorities, which generally would be the Department of Housing and Urban Development. If we learn of it during the loan processing period, then we are clearly obligated to start making some unpleasant phone calls.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers. His blog and a collection of his columns may be found at http://www.mtnmortgageguy.com.
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