Mortgage App. refused due to Capital Loss on '09 return (loan, credit score)

[Whereto?]

Brief summary. My wife applied for a loan to buy a single family res in her name only. She has the credit score (800) plus we put down 20% (75k).

We file taxes jointly and because of a capital tax loss incurred by ME in the market crash recently, they say that her debt to income ratio has fallen below Fannie guidelines.

We are at a loss as to understand this thinking. Yes we lost capital but it hasnt affected the ability to put down 20% nor has it affected her income,nor credit score

Options anybody?? These are guidelines imposed by Fannie on our lender. Are there any lenders out there who do not sell mortgage onto Fannie/Freddie therefore are not subject to this rule? Any other options we have??

All help/advice greatly received

[Pragmaticus]

Is her income a capital gain too that you then offset with capital loss you incurred? If yes, I can see where the under writer is coming from.

[Whereto?]

Nope her income is earned income, regular job. Thanks for your input though

[Pruzhany]

Was the capital loss a paper loss or a actual dollar loss? Did it effect your income in dollars? If it was a paper loss only, then you should be able to document it to fit within the guidlines.