Q: I have had my home for four years. I lost a job, which put me behind. This year, I was offered a Fannie Mae loan that brought me current — I signed the documents and everything — and I have been paying my loan on time for nine months.
Then my mortgage company called to tell me that my loan is "no good" and I will need to fill out and be approved for a different loan. I have been calling them back for two months now, and no one will call me back or give me any answers. Every time I call, they say it is being reviewed by upper management.
I do not know what to do from here. I have loan documents saying I have a loan, but both my credit report and my loan statements show that I am still in foreclosure. What happened here? What should I do going forward?
A: My friend, you are in a pickle. There might be no person on the planet who truly knows what exactly went wrong with your situation. I will hazard a guess, though, that some underwriter or funder or auditor noticed something about your file that did not, in fact, meet Fannie Mae’s guidelines for that program. And it sounds like they noticed it extremely late in the game, perhaps even so late that they have no legal route to undo your loan, unless you simply acquiesce.
Here’s how the process works: You apply for the program, or your lender’s loss mitigation department pulls out all the files that might qualify. Your debt, income, assets and credit are reviewed, and your outstanding mortgage balance is compared to the current market value of your home.
This is the underwriting process, and it goes through several phases, but virtually every major loan program guideline must be met before loan documents are drawn up.
The "docs" are drawn, you sign them, and then another underwriter called the funder reviews the entire file again to be sure that the loan meets Fannie Mae’s guidelines, most often because the lender’s intention is to sell the loan to another company who buys Fannie Mae-insured loans and recoup monies to make more loans.
Either the underwriter or the funder can stop the loan process dead in its tracks before it closes. But once it’s closed — it is a done deal. You and your lender have a binding contract with one another, and neither of you can go back on your word without incurring major consequences. …CONTINUED
However, after your loan is funded and closed, often another underwriter-type staffer called an auditor reviews your file to ensure that it is saleable before being packaged with other loans and resold. If the guidelines aren’t met, often the loan cannot be sold — this is a major glitch in the lender’s business plan.
And sometimes loans that don’t meet the guidelines are sold and returned when their flaws are detected by the buyer. And they get a refund. This is also a major glitch in the lender’s business model.
My guess is that someone — an auditor or maybe even another company who purchased your loan — detected that your loan did not fit the guidelines for the Fannie Mae-insured loan program you’d been approved for. It could be that your debt-to-income ratio was a tad too high or that your credit score was a tad too low.
More often, these things occur when a much more arcane guideline is violated, like when a legally separated borrower’s spouse’s debt is not included in the calculation of the qualifying debt-to-income ratio, even though they live in a community property state.
You don’t have to follow that 100 percent, but do be aware that there are literally dozens of reasons your loan might have been kicked back from being resold, making your lender regret making the loan in the first place.
So, that’s my best guess as to what happened that caused them to deem your loan "no good." Looking forward, though, the key fact to get crystal clear on here is whether or not the loan had closed. My guess is that it had — you’re not telling me that you signed loan documents and got a call a couple of days later that it had been kicked out of the hopper before closing.
Nine months of statements (I assume) and on-time payments later after signing loan documents (of which you have copies), the only reasonable conclusion is that the loan did actually close, and your lender is simply relying on you to take their word for it that they have the right to a do-over.
And, assuming the loan did actually close and there was no fraud or misrepresentation on your part, they may very well not have any such right. But protecting your interests versus your mortgage company — with all the intimidation and imbalance of resources that involves — is not a do-it-yourself deal.
I can’t urge you enough to ask your circle of friends for a reference to a good real estate attorney with mortgage and foreclosure defense experience. The house you save might be your own.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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