I mentioned the other day that we had completed two successful appraisals on The Probate House. As of this morning, we were told that there were a few minor conditions left in underwriting and that we should expect a clear to close in the next day or two…
Well, a lot can change in a few hours…
This afternoon, the mortgage broker for the buyer called, and he wasn’t happy. Apparently, the underwriter for the loan had informed him that they would need to get a certified FHA inspector to inspect the property before they could clear the loan. It wasn’t good enough that the buyer had a full inspection (that’s been sitting on the underwriter’s desk for two weeks) and that two certified FHA appraisers gave thumbs-up on the property…they need a formal FHA inspection as well.
The crazy thing is, there are only 3 certified FHA inspectors in our entire county — and there are over two-thirds of a million people in our county! So, it could be several days before an inspector can get to the property, and after he does, who knows what he’ll ask us to fix. The worst part is that the buyer needs to pay for another inspection, and we’ll have to pay for any repairs that are required.
We didn’t do a full remodel on this house (which is why it appraised for $20K above our asking price), so I wouldn’t be surprised if there are a couple issues that a picky FHA inspector finds. Hopefully nothing major, but who knows.
For reference, this is all in response to the fact that we’re trying to take advantage of the new FHA rules that say buyers can get a loan less than 90 days after the seller acquired the property. Apparently, while the underwriter is willing to abide by the new rules, he is putting the house under lots of extra scrutiny because our sale price is 100% above our purchase price.
Who knows if the underwriter is really just doing his job and being cautious, or whether he is looking for a reason to kill this loan…I guess we’ll find out. The house is scheduled to close next Friday, it’s anybody’s guess whether that will happen or not…
JScott, I just went though a similar situation. 3 Appraisals, the last being a FHA field appraiser. She nitpicked the house, a top to bottom rehab. We complied and got the deal closed……finally. I paid around $3K in concessions and about half of that went to appraisers. There is some crazy reactions happening in the industry right now.
I think LBP issues are the next hurdle we rehabbers will face. The certification of remediation is going to catch a lot of people in a bad place. It will also be a new avenue of opportunity for me and others. But, in the end, it will help destabilize the market just a little bit more, and a lot of uninformed home owner will be left in the lead dust; stuck or walking away from homes that are supposedly dangerous. There is a lot of peeling paint out there…..
Jingle
Sounds ridiculous to me. Did you ever ask to see the loan conditions? Was this on there? Once the potential buyer gets conditional approval I always ask to see the conditions.
Steve –
Nope, this wasn’t part of the original conditions…but, the underwriter is in charge, so unfortunately, there’s not much we can do about it…
Right now Fannie/Freddie are making the banks buy back a lot of loans… they are nitpicking loans that they don’t want and finding reasons to make the banks buy them back and hold the paper.
The reaction from the banks and the underwriters has been to follow the rules to the T and over scrutinize deals. The underwriter is probably ok with the deal and is just doing what is unfortunately necessary for the banks to conduct business and not hang themselves out to dry.
I was having lunch with a mortgage broker not too long ago and he mentioned that although the 90 day rule had been lifted he was not able to do any loans on flips because the buyers of mortgages are not buying loans in that don’t meet the 90 day rule. So that could be the case here…and the underwriter might be looking for a way to kill this??
Freeking too much government intervention. Everyone should write their congressman and tell them to quit messing with housing and let it correct itself. Its been very hard to close FHA deals here in TX for the past few months too. Now that US Govt is stopping buying paper the rates are going to jump up quick. China’s not buying our debt and Japan cant take it all. Troubled waters ahead with higher rates and tons of shadow inventory dropping.
Luis –
Both the lender and the underwriter have already indicated that they are happy to do the loan pre-90 days. The issue is that neither of them have done this before, so they’re trying to navigate the new rules just as we are. They don’t want to take any unnecessary risks, so they are being extra cautious, and that’s resulting in a lot of red tape.
I think this loan will get done, it’s just a matter of how many hoops we’ll have to jump through to get it done…