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I was divorced in August 2013. We filed for bankruptcy in 2012 and the house was foreclosed on in October 2013. I have been renting a house as a single mom since March 2013. I have a friend that is a realtor and after talking to her, she suggested I talk to one of her lenders to see when I would be able to buy a house.
From my first conversation with the mortgage company, I was very upfront about my credit issues. Told them of the BK and the foreclosure. Said I was working on rebuilding my credit.
To my surprise, he emailed me and said "Great News!!! Your property that you though foreclosed was included in your BK!!! That means you can go shopping whenever you are ready. I have a few questions to help me with your pre-approval". I told him that I didn't think that was correct but he went ahead with the pre-approval and got me hooked up with a down payment assistance plan and an FHA Loan. I started looking at houses and found one. Got several emails and phone calls saying everything was moving along and the close date would still be on 5/27/16. Yesterday (5/18) NINE DAYS BEFORE CLOSING, I got a call from the mortgage company and he said underwriting denied my loan. Said he felt horrible and takes "full responsibility" for this. I was denied because the foreclosure was not rolled up with the bankruptcy. He said he should have pulled the deeds himself to verify the information before he pre-approved me.
He was able to refund me the appraisal fee, I'm waiting to see if I will get my $2k earnest money back. I'm also out $497 in other fees. My problem is they never should have pre-approved me. If they would have looked up the foreclosure, they would have known that it was less than 3 years since the foreclosure.
I didn't hide the information from them about my credit problems. I feel the mortgage company made a huge mistake and now I am the one paying. Seems like this is "mortgage 01" kind of stuff.
I did send an email asking for the $497 back in out of pocket expenses and said that if I do not receive the earnest money back, I will hold them responsible. Any chance I have a case against them They admitted their error (I have the email). If I had not been pre-approved, I would not have even started looking at houses! Thanks!
Carefully check the wording of the documents he issued. The wording of the UW approval (not the LOs) should be very specific regarding the approval. It should say something along the lines of "evidence xyz address included in BK that was discharged on such and such date." Anything up until the underwriter seeing your file was an opinion, or a prequalification.
BK is what forgives debt, but it does not give the lender the right to seize the collateral in a defaulted loan. This is how people are able to remain in the home, many times for years, payment free. In your BK papers there is a Statement of Intention. If your papers show "retain," you forced the lender to file foreclosure action to get their collateral.
Now, it is possible to mark "retain" and still get a loan, without reaffirming. You can file BK and check retain, and continue to make payments. If you've declared BK and continue to make payments, without reaffirming the debt, the bank still can not take your property. It's when you stop making payments and force the lender into foreclosure proceedings (and expense) you are penalized with the actional time.
As for that LO, I have no doubt his intent was not malicious, just inexperienced. Why did the approval get all the way to 9 days before closing before an underwriter looked at your file? In the days of TRID and the way we must close, something isn't right there. When was your contract written? But more importantly, if you knew he was wrong, why did you proceed?
What appears to be basic to you is not mortgage 101 to those of us in the industry. Every day, changes come at us at a crazy, impossible pace. Technically, he was correct, if the house was in the BK, you would be eligible in 2016, had the property been surrendered. But for whatever reason, you chose not to surrender the property, forcing the bank to go thru the expense of foreclosure to get you out of the home so they could take the pledged collateral. Should he have researched further? Absolutely! But your friend, the Realtor, should have insisted on a pre-approval prior to stepping into the first home. ANYTHING issued prior to an underwriter seeing a loan is nothing more than a prequalification. Only an underwriter can issue any kind of approval, including "pre." (Which means credit only, property to be selected).
Your refund of your deposit will depend upon the wording in your contract. Hopefully, your Realtor friend didn't have you remove your financing contingency. As for the appraisal fee, it will depend upon the letter issued. You can file a complaint with the CFPB, but unless that letter says Notice of Approval or Loan Commitment, your chances are slim.
Experience isn't the absolute guarantee of success, because experience certainly knows not to provide any emphatic promises of success.
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