More than 35 years ago I was working on a refinance cash-out mortgage loan for a friend. The loan was only for $50,000 and the credit was excellent (no credit score in those days), The debt ratio was 28/32 (we had a front and back ratio requirement) and the loan to value was under 50%. It was an easy perfect loan. I gave talks to civic and service clubs for business and I always used this loan as an example of lending. I would explain the loan and the ratio to the audience and ask “By a show of hands, how many people would approve this loan”. Every timeI gave the talk, Every hand would go up. That loan was turned down because the underwriter simply said “I don’t like this loan, something is fishy.” Call this ‘Borrower X’ and ‘Lender A’ . I took Borrower X to Lender B and the loan was approved in one day.
Two weeks later my mother-in-law wanted a mortgage loan. OMG. She was Indonesian and everybody referred to her as the Lion of Celebes (now named Sulawesi) I was a little panic stricken so I took her loan to lender B who just bailed me out of a turn down. Lender B turned my mother-in-laws loan down ! Again, no reason was offered. I took the loan to Lender A and Lender A approved the loan.
I am remembering these because recently I have gone through a series of loans that are Fannie Mae turndowns and have been approved in a heartbeat with the ‘non QM’ product. (Non Qualified Mortgage). My first Fannie Mae turn down ( I have had several recently and all got approved non-QM) was a customer who has over $2,000,000 liquid reserves; basically $2,000,000 cash. His credit is excellent and he wanted to get a loan for $500,000 on a home appraised for $1,650,000. He does not work and per Fannie Mae guidelines say he did not have enough qualifying income under the Asset Depletion program. We took the loan to a non QM lender and the loan was approved in 2 days and the borrower was happy.
comment: all of the recent turndowns were discussed in detail before they were submitted into the lenders system. That way the lender is also happy because we worked on the transaction before submitting. That was not the case for the first 2 examples because those turn downs really had no reason for a turn down. Fannie turn down to Fannie approval with no changes.
There are loans that cannot be done. In that case I find out what can be done in the future and give the borrowers a road map of steps to take to help them reach their financial goals.
