The Underwriters rejected my loan due to the location of the home. Is this illegal?

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One week after our closing date, the Underwriters rejected my loan due to “The value of the home is too much for the area, and there aren’t any comparable homes in the area.”. My Real-estate agent, Mortgage Broker, and the Appraiser all said “that is discrimination based on geographical location” and we have a law suit. This would have been my first home (as of 9/28/07) but they ‘pushed’ the date back to 10/02/07, and at 5:15 PM they told my mortgage broker that the loan was rejected, and they knew since 11:30 am that morning. My apartment lease was over on 9/30/07, so now, my wife and 2 daughters, are homeless; staying at a friends apartment until this gets resolved. The Underwriters pulled our (applicants) credit 3 more times, drastically reducing our credit, which in turn is making us come $ 5k out of pocket through a different Underwriter. Please, someone tell me i have a case.. We have already invested $ 2k into inspections, appraisal, etc, and would hate for it to be for nothing.
The house appraised @ $ 194,600.00 with the purchase price set at $ 166,600.00. There were 2 appraisals done; One i paid for, which lists 6 comparable homes, and the other that the Underwriters had done, listing 4 comparable homes. All homes in the area are from $ 130k to $ 200k. Which is why i am so frustrated as why they would say that. It makes NO sense.
Just in case anyone was thinking that they might have reasonable doubt that i would default on my loan…

I have a 30 yr fixed @ 6%, so the problem with the thousands of people that defaulted on their variable rate loan shouldn’t effect me what so ever. Those thousands of people are all moron’s for letting it happen to them. They should have either;
1- Refinanced into a fixed rate
2- Sold the house BEFORE they defaulted. It is very easy to find out what your payment is going to be 1, 2, 5 years down the road, even with a variable rate loan. Their fault for not planning ahead.

I make enough to pay 2x the mortgage payment, and have been @ the same job for 4 years now (only 21 yrs old). That’s not including my wife’s income, who makes almost twice more than me.

8 Comments
  1. Reply
    Chris
    April 29, 2011 at 11:15 pm

    No,

    They look at it as if they have to foreclose they will never get their money back out of the house. It happens all the time. This is for the US.

    Start looking at a new mortgage broker.

  2. Reply
    Barry C
    April 29, 2011 at 11:34 pm

    How can any of us help you any more then your own broker or other aides?

    If they say you have a lawsuit, then who do you think is going to be better able to assist you, a lawyer that they will be able to recommend, or someone random like me on yahoo?

    If time is of the essence, then ask all three for a reference to a lawyer, and call that lawyer RIGHT AWAY.

    It may be that a letter for a lawyer explaining the situation may be able to restore the loan when they see the error of their ways, and to reimburse you whatever costs you incurred as a result of their error.

    If they push back, you are going to have to consider other living options, because it will take a wil to get to court and get resolved.

  3. Reply
    MLaw
    April 30, 2011 at 12:31 am

    This is an increasingly common problem, due to the rapid meltdown in RE prices & tightening of lending standards. No one here can tell you you “have a case,” because no one here knows all the facts or has read the loan commitment — if there was one.

  4. Reply
    wizjp
    April 30, 2011 at 1:26 am

    Nothing to do with location; everything to do with the loan amount being too much for the amount of purchase. If there were a more substantial DP, it would be less of a problem.

    Illegal. No

  5. Reply
    MadLibs
    April 30, 2011 at 1:51 am

    I wonder if the underwriter has been waiting on additional comparables to be provided by the appraiser and either did not receive any or the ones received were not acceptable. An underwriter can decline a loan if the appraiser is showing an inflated value without showing homes to support the value. If there are not any houses selling for near the same price, sounds like the seller is are asking too much? If everyone in your party disagrees with that, they need to provide comprable sales to the underwriter that are acceptable. The comp needs to be similar to the house you are trying to buy. It can’t be a larger home on the other side of the railroad tracks for example. Why then won’t the seller’s come down on their asking price if there clearly aren’t any homes in that area selling for near that price? A credit report is good for either 60 or 90 days, so credit will have to be repulled if your loan goes past that date. I am wondering more if and or why not additional home comparables were not submitted to the underwriter and if there aren’t any available, why the seller’s aren’t lowering their price. Keep in mind that this is why an appraisal is good to get so you know whether you’ll be paying too much for the house. Is there anyway you can extend your apartment lease? So sorry to hear about your situation.

  6. Reply
    Susie D
    April 30, 2011 at 2:11 am

    No – you don’t have a case.

    The underwriter is looking at the viability of the loan in the situation that the property has to sold. If you have million dollar home in a $ 100K location that home is not going to be worth a million dollars because million dollar people want million dollar locations – not $ 100K locations.

    The mortgage market is extremely lend-tight right no because of the tens of thousands of people in default because they over extended themselves with variable interest rate loans.

  7. Reply
    Bryan M
    April 30, 2011 at 2:11 am

    An underwriter has the authority to reject a loan for any reason, with the usual exceptions (race, religion, etc.). If there are no other comps to use in your area it sounds like they are having a hard time justifying the value of the house, which in turn leads to them turning down your offer. If they have to foreclose on your house (I’m not saying that will happen) they have to be able to justify being able to re-sell your house and get their money back. Some lenders view things differently, however, and you may have to shop your loan somewhere else. As far as your closing date, if you had a closing on the house set up then your loan should have already been approved and been through underwriting. So if the loan was never approved you should have never had a closing date set up for the house.

  8. Reply
    John
    June 6, 2012 at 7:15 pm

    Wow, you make a whole 2x the mortgage payment? I make 5 times the mortgage payment I was approved for. You are an ignorant little man. Maybe you will grow up some and realize 2x the mortgage payment is a recipe for disaster.

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