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HandsFrustration Is The Mother Of All Ideas

At least that’s where I get many of my topics…  Today’s blog post  is about a bank which we’ll call AofB for short (the names have been changed), an entity that I’m currently battling on behalf of a buyer client who unfortunately, chose them as his loan source.  Let me start at the beginning of this ordeal and walk you through the scenario.

It all began one summer day when a prior client (I say prior in that I helped him purchase and subsequently sell a condo in Seattle many years ago before he relocated out of state) called and asked for my assistance in another home purchase, as he’s relocating back to WA.  The search lasted all of one afternoon by which time he had selected his future home (after viewing 6 other properties). He felt bad that it took him so long to make a decision (this same client looked at 2 homes last time before making his decision).  I love clients like him!

Once my client (we’ll call him John for the purposes of this story) selected the place which he hopes to call home in the near future, we set out to finalize his financing details.  We presented his offer and after a few short rounds of negotiation, we got mutual acceptance.  The listing agent called us the next day to share his concerns about using AofB, stating that he had several problems on past deals when they were involved.  I sent an email to John’s lender representative at AofB, effectively putting him on notice that we had concerns they would make this a smooth transaction.  We received a polite response stating that if we provided them (AofB) with timely documentation, everything would be fine.

Lost in Transmission?

John is a very practical, organized person.  That’s one of the things I like about him.  Whenever I need him to provide me with information or to sign a document, he is Johnny on the Spot (pun intended).  So when AofB tells me that they haven’t received everything they requested, it made me suspicious.  Apparently, John had sent AofB everything they requested several times! When I spoke with the HOA (Home Owners’ Association) for his new condo, I got the same response from them as well.  They had sent documents to AofB several times, and each time the bank would request the same things over and over again…

The Real Fun Begins…

It’s mid-September, and we are told by the bank that everything is moving along according to plan.  All we are waiting for is the final project approval from the Condo Approval Department, but that it looks good.  Then the other shoe drops.  The bank decides they don’t like how the master insurance policy is worded, so they disapprove the loan one week prior to closing.  We inquire as to what the problem is, but AofB can’t really explain in detail why.  We were told however, that if John had originally put 10% or more as a down payment, then his loan wouldn’t have needed full project approval, only a cursory review.  However, if he was to increase his down payment now, we might be able to get the loan approved.

But Wait, There’s More…

So now John, in a hurry to keep things moving forward, decides to increase his down payment.  He tells his loan officer that yes, he will put 10% down on his purchase, thereby making the condo approval problem go away.  The next day, his loan officer calls John back and says that we can’t un-ring that bell.  Now that the condo approval department has officially denied the condo project, they won’t approve it even if he increased his down payment.  So I probe further:

Me: So what you’re saying is that AofB will no longer finance any condo purchase in this complex again?

Lender: No, that’s not correct.  If another buyer were to purchase a unit in the complex, and that buyer had 10% or more as a down payment, they wouldn’t need full condo review and they would be approved.

Me: Wait a minute! You just told me that my client’s loan wouldn’t be approved by the bank, why would they approved someone else? Isn’t there some central database that this information goes into for future condo approvals?

Lender: We don’t have a centralized database.  All condo approvals are reviewed on a case by case basis.  If another purchase came in for the same complex, they might get assigned to someone else in the condo approval department, and a different person might look at the loan differently and approve it.

Me: That explains why the HOA told me that two sales were approved by AofB last month.

Lender: That’s right, if a different person in the condo approval department reviews the file, they might approve it.

Me: Can’t we switch to someone else int the department?

Lender: No, we (lender representatives) have specific people in each department with whom we work (essentially partnered with). You would need to re-submit the loan with another representative.

Me: So you’re telling me that if we resubmitted our file with a different lender representative at AofB and put 10% or more down, then the condo review department would just approve the file?

Lender: Yes, but that process would take another 30 days or so.  But if you were to switch to FHA financing, we could approve the loan in two weeks.

Me: So, if we went FHA, AofB would approve it.

Lender: Yes, the condo project is FHA approved.

Our conversation went on further, but the bottom line is John chose the path of least resistance (and least time) and switched to an FHA loan… I find it very interesting that a condo project can be FHA approved, yet a bank might still not be willing to lend on a condo purchase within that complex.

The Take Away…

I learn something new everyday.
If you are trying to buy a condo, check to see if it is FHA approved.
This is one of the reasons why our housing market is in turmoil.
I’m going to avoid dealing with AofB on loans as much as possible…

What are your thoughts? Have you dealt with a bank lately and had an experience that you’d like to share? Leave a comment and let us know…

When REALiTY BiTES, bite back!

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