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This one defies logic Todd!

But, they got the home, you made the sale, and all is well in Clark Land!

This is one of the largest problems that we are facing right now!! The pull back was so extreme that it is ridiculous now!  I'm shaking my head with this one as well!

Todd,

I can't follow the dots on this one either. It seems odd.

Todd - Wow!  That is just nuts...in what world does this even make sense?? Oh yeah, the underwriting world!

Todd, all I can say is not much makes sense these days.  But as Craig said, all ended well. 

Todd - Wow.  Simply wow.  Logic takes a holiday, huh?  Glad to hear that it worked out, but it makes zero sense.

This is the stupidest thing that I've ever heard of.  Maybe the underwriter didn't actually look at the checks to see where they came from.

Stated income, commissions and all the rest are done. I probably couldn't get a loan either with my commission income. Hope I don't need one anytime soon.

At this rate how are most of us agents ever going to buy another home?  I guess we are going to have to stay where we are at!

Hi Todd,

It seems as though you have to fill in the right "ovals" and if there is anything outstanding (one wrong answer) you are out on your tail!

It's odd, its strange, it makes no sense, and it is crippling the market.  Too many are locked out of th market.

According to the underwriter it is because he is commission based and there is no way to guarantee he would have a check every month.

So glad to know that if we were get a paycheck we have a guarantee. 

I still have checks in the checkbook, what do you mean there's no money in the account?

Todd - Up is down...Down is up.  That is the lending world today.  We have snapped back way too far in the other direction. ~ Doug

Welcome to 2010.  Your guess is as good as mine.  UW's are showing less and less logic.  Isn't the lack of logic when undwrwriting a file what got us into this mess in the first place?

Wow that is crazy!

This is pretty unbelievable! The underwriters must have really looked into the paperwork on this one, crazy. Well, at least they were able to buy the house.

I suppose if he wants a bigger house someday he should just give his wife a huge raise, LOL.

Now there's one for the books. Literally! Unbelievable. It's good that it worked out. Saying something might have turned things the other way.

Odd indeed. If he has a two year history of making the income and doesn't have the write offs on his taxes that whipe out that income this should have been a slam dunk deal.  Time to find another bank for your loans.

Believe it or not Steven but Meridian has a stated income loan program but it is very strict.

WOW!  Can't believe how backwards it all is. That just crazy!

I wish I could explain the logic, but apparently there is none.  A paycheck today is no more of a "sure thing" than is commission income.

That is called a loan officer who CANNOT think for himself!  Welcome to the world of socialized everything were rational thinking and good logic are things of the past. 

Todd: I suppose we could blame it on Fannie and Freddy. They're the ones setting the rules for purchase of the loans. That's the game these days; very few lenders keep and service their own stuff. In the meantime, expect loans for self-employed borrowers to continue to be scarce. My colleague above states that it might be time to get another banker. That may be halfway true. We all are sourcing our money from the same place. That means if a larger entity can't get a loan done, there is no way that a smaller outfit could either. Red flags these days include significantly declining income, changing from W-2 to 1099 or vice-versa, and tax returns with either significant write-offs or losses. Thanks for the post. Things will get better although it's anyone's guess as to when!

OMG - that made me laugh in that "Oh my gosh it is so ridiculous" kind of way!  So true though that us commission income self-employed types are not finding it easy to get approved for even a refi.  We did a refi last year and I had to write a letter stating what I thought I would make this year in real estate???!??  Since our loan to value was going to be all of about 55% all I could think was the bank would actually be in pretty good shape if we did default!

Reminds me of the "logic" in an illogical syllogism. Socrates is a man, Man is immortal, therfore Socrates is immortal. Makes about as much sense. 

Todd - This is crazy and I understand depending on commission isn't guaranteed, but neither is a "regular" paycheck in my opinion.  People who get a "regular" paycheck are losing jobs left and right.  This particular scenario is even crazier.

times are changing! :(

Since when do logic and underwriting go together. I had an underwriter express concern that the seller was granting $1000 towards some repairs of the house. The property appraised for about $8000 more than my buyers was buying the house for. The underwriter said he/she was concerned about the deferred maintenance. I said, "The house is 40-50 years old. It is going to have deferred maintenance. It is not a new construction home." I was like, "what are you talking about." But this is what we get when the pedulum swings so hard in the opposite direction.

Cal

Ha!  Somewhere in Beaverton, an underwriter is looking for a new job....

It would seem they were dealing with an underwriter who clearly did not understand the file.  Unless, his accountant was "very good" at writing off all of his income - or there was a serious decline.  I get loans done for commissioned people all the time.  Tax returns require careful analysis but if the income is there - it can be done.

Nope I don't understand this, but we are hearing and ready pretty strange things these days.

What a story.

Can you hook me up with that lender and underwriter?  I want to try that trick.  LOL  What a joke.  This just proves my theory about what's going on in our market right now.  The banks are so inundated withbad loans, good loans, foreclosures, short sales, etc. etc. etc. that they have had to hire "less experienced" folks (IMHO) to do a lot of the necessary work, and errors are being made and good judgment is an oversight.

This one absolutely takes the cake. Underwriters nowadays seem to have to come up with something even if it makes no sense at all.

Shhhh.....be thankful you got it, and the UWer appeared not to have caught that. If she had, no loan. Surprised other lenders on hee didn't catch that either. This by the way makes sense. Even in the old days of 3-4 yrs ago, we had to take Realtors on the stated program as most of the time they couldn't veryify income, or it was very reatic. You being in the business as long as you have should know this and not act so surprised. You got lucky.

Theatre of the absurd...............Doctors with thriving practices in Connecticut have been denied mortgages because they are self employed. A few years ago all it took was a breath to fog up the mirror to get a mortgage. Today, the pendulum has swung too far in the opposite direction. Hopefully we will return to "normalcy" and logic at some point.

Write a check to yourself every week and use it as a draw. Then you show a steady income.

Tsk, tsk.... guess he'll have to find a way to beat them at their game.  Form a coporation and issue yourself a weekly paycheck as an employee of your own corporation!

The wonders of our financial systems!  Perhaps if he wrote his dog a paycheck every week, they could have gotten a second mortgage, too!

Thanks for the post today. Interesting for sure and a little crazy.  Times are changing and not all for the good...unfortunately!

Patricia

We just went through the same thing.  My husband and I bought a home and I was not included on the mortgage becasue it would "muddy the waters".  IT was a good thing we did not need my income to qualify. 

Thanks for the post today. Interesting for sure and a little crazy.  Times are changing and not all for the good...unfortunately!

Patricia

There's not much you can say to this ........

Unbelievable.  There have been quite a few times when I have considered changing jobs simply so that I could get a loan.  I had to have my dad co-sign on mine to get it to go through.  Luckily he was in a position to do so.  The situation you posted is just ridiculous.

Underwriters and lenders are too scared to make logical, common sense decisions due to the overcorrection in the industry.  On Verification of Employment they want the companies to guarantee that the employee will have a job for "good".  No employer is going to guarantee that you have a job forever or "good". 

With credit bureaus make more and more mistakes and the majority of people not finding out until underwriting goes through the reports with a fine tooth comb we are seeing people with high FICO scores, 6 figure incomes for both parties, long term employment being turned down.  The days of "letter of explanations" to justify credit bureau errors are gone. 

Self- employed are being penalized so we either pay cash - go to niche loans with higher interest rates and higher down payments or learn to like our current homes and upgrade the homes.

Again the homebuyers are paying for the banks mistakes.  Tell your clients past and present to pull their own credit reports and get their FICO scores and dispute any mistakes as quickly as possible to make sure their credit is up to date and correct.

More documentation instead of less will be the norm.

As my own broker I think I will start using a payroll system to pay myself.  Hmmmm.

O M G.  That is hilarious.  too funny.  You know we are all going to be telling this tale to others

As a broker, I pay myself a salary from my company (this is figured as % from net profit). This reduces medicare and social security payment. BUT, I qualified for a refi. Perhaps lender was the wrong choice...

Sounds like my situation one time...my husband called me so furious with a lending institution because my FICO score was higher than his score.  Lending institution said it was because I carried a balance on my credit card and paid off over a few months while he pays his off every month.  Can you believe he was a doctor making ten times my salary as a teacher.

...but as women we have come far because in the late 70's I was working putting him through his last 3 years when we wanted to buy a home, we couldn't do it based on my income.  Lender said I could get pregnant (of course teachers were not allowed to teach once they started to show); my response, yea, and he could drop dead tomorrow.  We did get one but we had to set up the money from the sale of a business as monthly income to do so.  Whoever, said these people had to make sense?

Todd, I am with you don't know whether it is software or the human making the decision.  May be in few months she can ask for loan modification.

Now that is just plain crazy. I guess as the owner of my company I will not take my commisssion, I'll just withdraw it as salary. Same money coming from the same place but different paperwork.

That's a first for me Todd. I've never heard of that happening but can't say I'm surprised. Everything with the loans today is about written verifiable PROOF and if you dont' have it you won't be getting a loan anytime soon.

Logic went out the window when:

• FRPTA in which we are required to give a buyer the seller's social security number, no questions asked...but we are suppose to protect our clients identity...hemmm
• Loan moderation is offered to home owners who don't ask for it, have great credit, don't need it, but fills the banks quota for loan modifications required by the federal government
• Banks are exempt from following the same guidelines as mortgage brokers because banks have enough employees to be able to regulate themselves
• HVCC was suppose to help buyers, yet resulted in buyers not getting the house they want and costing the buyers more.

Logic? Where's Waldo comes to mind...just try to find it in this mess!

Todd - Didn't you hear?  Logic is dead.  It was a slow painful death, but it couldn't hold out any longer.  Shame too, because I loved logic.

OK.  It kinda sorta made some crazy sense (a little, maybe, possibly) up until the end, Todd.  Then I was just left scratching my head and saying "Huh?" 

Todd,

I am just sitting here shaking my head. I can find no logic in that unless the right hand and left hand aren't aware of each other?

Defies comprehension eh?    I am speechless, head scratching.  I would love a qualified loan professional to weigh in on this one.

Hey Mr. Todd! Good article as always. I like how you present a dilema and then discuss it. Very nice. Hope your business is going well. Blessings to you and your family.

Jill

Completely idiotic --- but nothing should surprise any of us in this crazy world now- nothing.

Thank God for Quit claim Deeds!  Blows away my strategic motto of "inspect what you expect". 

Todd,

I think you're gifted to be in on the funniest scenarios that find success. Thanks for sharing this one.

Steve

Todd,

This is today mortgage industry's logic. I gave 2 similar examples to Jeff and Bill about people with FICO score above 720 not qualified for loans...We just have to deal with that now...

That is the way that banks positioning themselves over-correcting a problem that contributed to the meltdown. . .hopefully they will soon rationalize that they have to be balanced when it comes to self employed customers with no paychecks!

Like us

Unless he hadn't been in the business long enough to qualify him as self-employed, it's highly likely the real difference was that the loan app was simply easier to put together.

Thanks for sharing this story.  So much of underwriting makes no sense these days.

I don't think this type of scenario is going to change for awhile now.

Todd, I can't decide whether this is just too funny or too sad.  Maybe a little of both.  Thanks for the post.

This is pretty senseless, but nothing really surprises me anymore in finance land.

Todd, there is no logic in this. People in business for themselves have always had a hard time borrowing money. Lenders will usually look at the last three years tax returns to see if the income is consistent and give a loan based in the returns. However, with the real estate market the way it is lenders might have a hands off approach to any one associated with the real estate industry.

Ridiculous. At the highest level of revenue, all businesses are straight commission. As the saying goes, "wealthy people cash large checks, super wealthy people write them."

I am gonna call BS on this post.  There is more going on than what is being written about.  Realtors really need to learn more about the financing side of the equation.  Yes, underwriting can be mindnumbingly stupid at times, but most banks are still underwriting and approving commission and bonus income if it meets guidelines.  NewsFlash:  Most people aren't anywhere near as qualified as they think.  Just because you or your client get denied a loan does not mean the bank is nuts.  Sometimes the person simply isn't qualified.

Comission income needs at least a two year history and is averaged over 24 months.  Most Realtors are 1099'd so they are considered self employed.  What probably happened is that business fell off in '09 for this agent and the reported commissions are preventing him from qualifying when averaged over the past two years OR he has written off so much in expenses to avoid taxes that the reported income is lower than it actually is.  Banks are not going to use what you think you may be making in 2010...

I have closed a couple of loans for Realtors recently and all sailed through underwriting with no problem because these agents didn't see any significant drop in income as reported on their tax returns and everything could be thoroughly documented.

This is the problem with lending today....no common sense.

All I can is....WOW! But, for some reason, I'm not totally shocked. I don't believe banks are willing to any chances on commissioned sales people.  

Regarding mortgage brokers; The more things change, the more they stay the same.

Fannie Mae is the one that wants the 4506T executed. This is the tax transcripts where the underwriters can see all the write offs being done on the taxes.  Yes, write offs are great so we don't pay much in on taxes however, when applying for a loan now a days, it hurts if you need the inocme.

Todd-

I may need to use that underwriter!! YIKES!

Todd,

It's sad to notice that the mortgage industry has swung from one extreme, the easy one, to the other. While it takes some time for things to settle down, in the meantime we'll see underwriting like this one and prolong the upcoming recovery.

Sounds like some disagree with the post.  The underwriter should not have granted the loan to the wife if the husband couldn't qualify because the income came from the husband.  So something is not right in underwriting land.

I'm not an underwriter and don't play one on TV.  What happens behind the scene is probably different from what you know, Todd.  :)

I know a few underwriters... and I certainly wouldn't want their job right now. It's not just that the rules changed, but what are the rules? Underwriters by decree are supposed to be unbiased and adhere to the guidelines. Yet, now they are as much under pressure (if not more) than ever. Regardless, this one defies logic to the point of absurd. Wow, sounds like someone drew the line, sadly a victim of 'new math' ;0)

What saddens me is the fact that 'the system' now interprets everything to the negative. They want guarantees that can't, and never could be... Just because you have a steady paycheck doesn't mean you will next month or next year. We certainly live in interesting times.

Professional real estate blog. Thanks for sharing this information with us.

Sale Houses Miami

Wow, that does seem crazy.  I must agree with Linda that it does show women have come a long way - and it was best for everyone!

Todd - Now that's a funny story, and what makes it even funnier is that it is a true story.  It just goes to show you that there is not a lot of logic in how loans get approved by lenders and underwriters.  The system was flawed before, and obviously still is.

Thanks everyone for stopping by, I see some of you want more information, but I just don't have it. I was the listing agent on this one and I have to go with what I was told. But, to me this is just another reason that owner financing is such a good option for so many people, including the banks if they would start to allow it again.

Todd, that is absolutely ridiculous.  Not surprising, but ridiculous.  If it wasn't so sad, you could almost laugh at the ignorance in this logic.

Todd,

This doesn't surprise me, it has happened to me.  It is harder to get a loan when you are self employed.  Our  income they feel is not steady, like people working full time jobs getting a pay check.  I think  more laws need to be changed to help the self- employed obtain loans.  I'm glad this story had a happy ending. 

It doesn't seem there was any logic involved here, but no surprise, due to the mortgage housing crisis our country has experienced these last couple of years.  Todd, I'm glad the end result worked out for you on your loan, although not the way it should have.