"Thank You, Flagstar!" - Financing 'Plug Pulling' in the Eleventh Hour

By
Real Estate Broker with Keller Williams West Sound Realty

Flagstar Bank pulls the plug in the 11th hour!

These 1st-Time Home Buyers are awesome folks! They're the kind of people you LOVE to do business with. Even though they're relatively young and just starting a family, they've been exceptionally prudent and responsible with their finances. Their credit scores are exemplary. They have no outstanding debts. And both husband and wife have very stable histories of employment/income. They have a substantial chunk of change in the bank, and their parents are giving them a very generous gift to be used for a down payment.

Halfway through the transaction, there were some concerns voiced over the tax ramifications of the parents giving these kids a gift, so the gift was changed to a loan, and a vehicle was used as collaterral.

Yesterday, one day before closing, the kind folks at Flagstar pulled the plug. They stated that the vehicle was not sufficient enough to pose as collaterral for the loan.

They were asked if additional collateral was furnished, would that suffice? They said "No."

They were asked if the loan disappeared and the money was again offered as a gift, would that work? They said "No."

They were asked if there was anything that could be done to fund the loan? They said "No."

So 'Thank You' Flagstar Bank!  Your New Wave of Banking is simply a wave 'Good-Bye!'

~    o    ~    o    ~    o    ~    o    ~    o    ~

Rich Jacobson is a licensed real estate professional providing empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com, SOUNDBITEBLOG, and Crabbing in the Hood.

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Topic:
Mortgage / Finance
Groups:
1st Time Buyers
Mortgages
Puget Sound - WA Real Estate
The Lounge at Active Rain
Windermere Network Group
Tags:
flagstar bank
1st time home buyers
home financing

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Ambassador
2,275,249
Lenn Harley
Real Estate Broker - Virginia & Maryland
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate

Rich.  The financial institutions that accepted TARP money capitalized the money and paid dividends with it or used it to meet their minimum depository needs.  They didn't take it with the intention of making consumer loans. 

March 25, 2009 04:57 AM
Rainmaker
502,855
Russell Lewis
Broker,CLHMS,GRI
Realty Austin, Austin Texas Real Estate

What an incredible disappointment! I am working with a your couple, 1st timers and I had forgotten how much fun it can be and with all of the excitement, hopes and expectations. It's appalling that institutions can be this absurd. Frankly, it's probably going to get a little worse before it gets better! I know you will help them along and hope you are able to find another lender and finally get them in to a home!

March 25, 2009 06:59 AM
Rainmaker
904,400
Bill Gassett
Metrowest Massachusetts Real Estate
RE/MAX Executive Realty

Wow that is real disappointing Rich. You would think finding out something like this would not happen the day before a closing. The bank screwed with a lot of peoples lives.

March 25, 2009 07:15 AM
Ambassador
894,389
Missy Caulk
Realtor - Ann Arbor Real Estate
Missy Caulk TEAM

Rich, this sucks. I feel terrible for your buyers, how heartbreaking. These banks make me SICK. They took our money and then don't help the buyers out. That is why the continual bailouts are a mess.

It is NOT getting to the consumer.

March 25, 2009 07:49 AM
Anonymous #32
Anonymous
John V.

Flagstar did exactly the same thing to me today.  This was my response to their denial:

"To Mr. Charfauros and Flagstar Bank:
 

It seems to me that Flagstar never intended to fund this loan.  It appears that you and Flagstar offer, advertise and take applications for HomePath loans but have no intention of closing them, all to the detriment of FannieMae as a Seller, their contracted Brokers, Escrow and Title Companies and ultimately, Buyers who intend to occupy these homes.  (Not to mention the Cities and Counties that desperately need the tax base.)    I can only suppose this is done to simply to meet some government requirement that HomePath loans be "offered", and that there is no oversight requiring that they are actually funded.    

 
I met every condition that you put forth, had the necessary credit scores, income and reserve funds and never failed to promptly respond to any inquiry and demand.  Up to and including last night I was "approved" and you instructed me that you would be forwarding loan documents to escrow today.  By your own admission my income and reserves and my financial position INCREASED to the better since you took my original application.   I have worked at the same job at a law firm for nearly 17 years, and have maintained a second job as a part time college Instructor for nearly nine years.
 
Yet you continued to put obstacles up including and up to the 11TH hour (11:59, in your case).     
 
Per your own admission, you and Flagstar "dragged your feet" (in quotes, your EXACT statement) in reference to my loan.  Also per your own admission, the loan would have been funded and approved if you had not done so.  You said the credit check would expire on 9/4/2011 (two days AFTER escrow should have closed), yet you re-ran credit today.  Pursuant to that credit check, you informed me that ONE score was 8 points lower (the other credit reporting bureaus had the same score as previous) and for that reason, even though all my other factors were BETTER since the original application, you denied the loan.  FOR THESE REASONS, IT APPEARS THAT FLAGSTAR NEVER INTENDS TO FUND FANNIEMAE HOMEPATH TRANSACTIONS.        
 
You also instructed me that you and Flagstar would "never make any money" if you just did these loans.    
 
I will make sure that both FannieMae and various consumer reporting agencies and blogs know of this decision and your statements.
 
I will inform the required parties that this transaction will not close because of Flagstar's actions, as you apparently do not possess the resolve to do so.  
 
I am beyond disappointed at your lack of action on this transaction, your failure to return phone calls and emails and maintain an appropriate level of communication with me and the other parties to this transaction, and your apparent intentional acts to do everything possible NOT to close this transaction.  This even rose to the point of having your Assistant Nickole having to constantly remind you to contact me and contacting your superiors.  She, on the other hand, seemed to be more than professional, yet completely hampered by you and your failure to perform.             
 
Lastly, your attached denial would be a complete joke save for the detrimental consequences to my credit.  Every area you checked as a reason for denial is nonsense, including "Loan-To-Value" ratio on a property that did not have and did not require an appraisal and a government sponsored loan program that only requires by its terms 3% down."  
 
 
September 01, 2011 06:59 PM
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Providing Knowledgeable Empowerment and Relentless Representation of Real Estate Clients throughtout the Western Puget Sound, including all of Kitsap County WA, and portions of Mason, Pierce, and Jefferson Counties.

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