BluefoxToday blog : Questions That Must Be Asked ............ Declarations Section VII Of Loan Application #3

Questions That Must Be Asked ............ Declarations Section VII Of Loan Application #3

  

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Yesterday I covered the first 2 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The third question on Declarations Section VII Of Loan Application states:

  • c.   Have you had property foreclosed upon or title or deed in lieu thereof in the last 7 years?

This question may seem easy to answer at first, but it is not as simple as it may appear.  The reason why it is not as easy as it appears is because many people who are foreclosed on consider not owning the house from the point that they were evicted from the house.  This eviction can place many times when the bank holds a Foreclosure Auction, but this not the date of the foreclosure, so technically the owners still own the house.  In fact they are considered the owners of the house up until the bank completes the foreclosure process which could be several months later.  Even the date on the "Foreclosure By Sale Committee Deed" is not the date of the foreclosure.  This date is just the date that the Foreclosure Committee (usually a committee of one) approved the foreclosure, but it is not the final date of the foreclosure. That date could be 3 to 6 months later, and it is at that point that the owners of the house have been foreclosed on and no longer own the house.

So as you can see a question that seems easy to answer is not so easy after all.  Because of the confusion that this process can create, it is important to fully investigate all foreclosures if the Borrower answers YES to this question.

FHA requires three years from the time of the foreclosure before a Borrower can qualify for an FHA Loan again, and Conventional (Fannie Mae & Freddie Mac) requires five years.  If a Borrower honestly believes that three years have past since they were foreclosed on, because that was when they were evicted form their house, and foreclosure documents are not requested in the beginning of the loan process, everyone could be in for a big surprise at the end.

The forth question on the Declarations Section VII Of Loan Application states:

  • d.  Are you a party to a lawsuit?

I always thought that it would have made more sense to have this question as the sixth question after the next two questions which continue to deal with foreclosures and delinquencies on mortgages.  But higher powers then me determined that it should be placed at this point.

This question like all the others, if answered incorrectly can create major problems late in the loan process.  A Borrower can quickly go from being in great financial shape, and their Debt-To-Income Ratios falling in place, to no longer qualifying because their Debt-To-Income Ratios are now to high.  Just like foreclosures, more questions need to asked if the answer to this question is YES.

If the Borrower is the one who has brought a lawsuit against someone else, it needs to be explained, but it most likely will not create their Debt-To-Income Ratios to change.  But if they are the ones that a lawsuit is being brought against, there is a risk of an additional financial obligation that could easily put the Borrower over the qualifying Debt-To-Income Ratios for a Loan Program.  The potential risk will in a lot of cases cause a loan to be rejected, and it is something that is better explained sooner than later.

Just as I stated before about previous questions, if a Borrower answers NO to this question and it is discovered they do have a lawsuit pending against them. not only will the loan be denied, but they could face criminal charges for lying on the Loan Application.  This is because at the bottom of Page #4 Borrowers have to sign attesting to the fact that all of the information that they have provided is the truth to the best of their knowledge.

I am going to end this blog with these two questions because the next question "e.  Have you directly or indirectly been obligated on any loan which resulted in foreclosure transfer of title in lieu of foreclosure or judgment?" of the Declarations Section VII Of Loan Application will require a lengthy explanation of the problems that it can create.

 

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

Comment balloon 10 commentsGeorge Souto • August 29 2009 05:23PM

Comments

George,

Solid information for today's mortgage applicants to know. And for us in the business, too. On foreclosures, there are quite a few variables to deal with and understand, so to answer this question correctly can require legal advice.

Posted by Esko Kiuru almost 9 years ago

Esko, a lot of these questions seem simple, but for many there is more than meets the eye.  It is easy to see how someone would think that they no longer own a house if they have been evicted, but eviction does not mean lost of ownership, strange, and it may not make sense,  but that is how it is.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) almost 9 years ago

George, you have outdone yourself with this series. This is so important, and it is the attention to details that have gotten you the reputation you have. By the way, when I was with Donna we were talking about you. She is eagerly awaiting her first deal with you!

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Berkshire Hathaway HomeServices New England Properties) almost 9 years ago

George, We need more lenders like you that, Andrea stated, pay attention to detail.  This is really great info.  I am passing you blogs on to my lender.  

Posted by Debbie Aldrich, Salt Lake City Realtor - Salt Lake County, Cottonwood Heights (The Watts Group Real Estate ) almost 9 years ago

George -- were these types of questions being asked of the infamous sub-prime borrowers... it would seem that these type of questionnaires, if filled out properly would have gone a long way to prevent the  mortgage crisis.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) almost 9 years ago

George   I can truly say I look forward to your postings,; such good information that I can share with my clients.  Not to be overlooked your sense of humor.

Posted by Jennifer Fivelsdal, Mid Hudson Valley real estate connection ( JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571) almost 9 years ago

George - there are clearaly lots of would-be buyers who ought to read this to understand how their personal situations might put them, and the seller, in joepardy. I imagine many just go down the list and check NO without thinking.

Jeff

Posted by Jeff Dowler, CRS, The Southern California Relocation Dude - Carlsbad (Solutions Real Estate ) almost 9 years ago

Wow George there are a lot more questions that I thought. I guess it has been a while since the last time I filled one of these forms out!

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) almost 9 years ago

Andrea, I would like to do a deal with Donna, but the opportunity just has not presented itself yet, but I am also looking forward to it.

Debbie, these days we have to pay careful attention to everything or watch deals blow up late in the process.

Joan I wish that was the case.  I only did three or four sub-prime loans during that time, and these questions were asked.  But even if they answered them yes, the sub-prime guidelines were so loose that it a Borrower was even just a day out of bankruptcy, they could still be approved for a sub-prime loan.

Jennifer thank you, and as far as a sense of humor goes, with a face like this I have to have one ....... LOL

Jeff, unfortunately it always seems that people are sorry for the poor Buyer who got denied for a loan, and very few seem to be sorry for the Seller who took their house off the market for several weeks, and possibly miss out on good Buyers, because the one purchasing their house lied on a mortgage application.  People forget that a Seller a lot of times is the one that is really the one that they should feel sorry for when a loan goes bad.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) almost 9 years ago

Bill you got in there as I was responding to the other comments.

Well Bill just step into my office and we will take you through the whole process and get you qualified for a loan ........ LOL

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) almost 9 years ago

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