We recently had a very successful commercial banker apply for low down payment financing b/c he wanted to preserve his cash for improvements and other projects.
He, however, had side businesses with losses on his tax returns, he wanted to use a business bank account for his cash to close, and he had many unexplained large deposits among numerous other minor issues.
We, like every other residential lender, had to condition him to death b/c we have to comply with every Fannie, Freddie and FHA guideline there is or we cannot sell our loans on the secondary market.
Our borrower got very upset b/c he did not understand how onerous residential lending guidelines are and he only saw things from a commercial lending perspective.
He insisted that WE were being very unreasonable b/c his loan “made so much sense,” e.g. he was paying way under market for the house; his credit was excellent; his balance sheet was extremely strong; and he had numerous sources for repayment.
And yes, if we were a commercial banker that was keeping the loan in our portfolio, we would have made the loan for sure.
OUR FOCUS IS ON GUIDELINES SO WE CAN SELL LOANS
BUT, as a residential lender, our sole and only focus is on complying with every one of the nitpicky residential lending guidelines there are so we can sell our loans on the secondary market b/c that is how ALL mortgage lenders make their money.
I realize I beat this horse often, but it is worth repeating b/c wealthy borrowers get frustrated with mortgage lenders so often when the lenders ask for seemingly petty conditions. But, we are all just complying with guidelines.
Our borrower above in fact threw his hands up and ended up just getting private money financing b/c private money lenders actually do “make sense” deals, but their rates and fees are far higher.
PITCHER MAKING $4 MILLION GETS “BEAT UP”
I’ve blogged about this numerous times, but one of my favorite examples is the time we had to “beat up” a professional baseball pitcher for conditions when he was making $4 million per year and his debt ratios were under 3% :). You can see that blog here.
Anyway, we’re not being ornery; we’re just following the rules so we can sell our loans.
Jay Voorhees at (925) 855-4491 Real Estate Broker, CA Department of Real Estate, DRE# 01524255, NMLS# 335646
