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Every Penny In Transaction Must Be “Sourced” Up To Close

Borrowers all too often believe that once their loan is approved and they sign loan documents, they have nothing to worry about. We have addressed this before, reminding everyone that “verbal employment verifications” are often performed right before close of escrow (so yes, borrowers do need to keep their jobs through close of escrow).

Another issue that surfaces surprisingly often is borrowers bringing in their funds to close (their final check) from a bank or investment account that was never disclosed to us or the lender.

We recently had a borrower transfer his final check from a Morgan Stanley account we had never seen, even though we had previously verified more than enough funds to close from several bank accounts. B/c the borrower accessed an undisclosed account, we then had to scramble to get two months of statements for that account at the 11th hour. We are now hoping no unexplained deposits show up.

The borrower, of course, is frustrated with us b/c he way more than qualifies and these last minute conditions seem nonsensical (for such a strong borrower). But, once again, they are Fannie Mae guidelines, not ours.

In addition, the borrower was frustrated that we did not warn him about this issue. We always do, however, warn against this exact issue at the front end of every transaction. There is simply so much information hitting borrowers in today’s lending environment, that it is impossible to register it all.

The take-away from all this is: (1) borrowers need to make sure all funds come from disclosed accounts; (2) everyone needs to realize that lending guidelines can be excessively onerous, so conditions sometimes surface that cannot be foreseen; and (3) loan officers need to be thick-skinned and expect to take the blame for unforeseeable mishaps that arise in our excessively complex lending environment.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646