Commitment Letter from Underwriter

jennywasko · Joined: 19 Jul 2008 Posts: 3 2.24 Dollars($)

My husband is self employed. We applied for a new home through USDA Farmers Loan (chase is the underwriter). We have gone through pure hell with it so far. We had to have our accountant do an amendment to our taxes to pull off 18,000 of our legitimate tax write offs to show more income on our returns. This is going to cause us to owe an extra $8500 in taxes. My husband thinks it's worth it because as long as he's self employed, we are going to have to pay it one way or another, and we really want this house. Accounting lady told us that we have three years to file the amendment. The mortgage broker submitted our amendment and the first return with the package to underwriting. It was in underwriting for a few weeks...they kept telling us they would know "the next day." They REALLY checked us out.

We FINALLY got a commitment but they had a couple small conditions (obtaining a child support order from the court, etc). I did all that the next day.

yesterday at around 4 pm, the mortgage broker called and said that now my loan has gone into pre-closing quality control at the underwriting place and that I would have an answer by the 28th! What! Am I approved or not. She said she's never seen this before and does not know what this means. HER boss called in and asked broker lady to call me back and tell me he had some "real concerns" about my taxes and loan BUT he wouldn't call me back until mid day next Monday because he was out of town. Shouldn't this have been addressed A LONG time ago?

I told mortgage broker lady that if the concern is that the taxes haven't been filed, which they already knew, I am unwilling to file them until we are at the settlement table. I am afraid that they will then start messing with me about reducing my available income because of the taxes due and lost the loan anyway.

She said they told her to continue processing (appraisal and title work, etc). What is happening here? Does anyone have any clue if this is in any way normal?

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

Hi jennywasko.

Welcome to the forum.

Your loan has gone into pre-closing but doesn't mean that you get approved. I think you need to wait and see what the mortgage company decides. I think if the loan has gone into pre-closing then there is a big chance for you to get approve for the loan.

Best of luck,
Larry

jennywasko · Joined: 19 Jul 2008 Posts: 3 2.24 Dollars($)

One more question to you if you don't mind...What about the loan commitment letter that I received? I thought that was the approval? Does this quality control mean that they are re-doing their work and making a new decision? thanks!

Guest 0.10 Dollars($)

Has the bank sent you commitment letter? After sending the commitment letter they are again have the problem with your tax issues? This is strange!

jennywasko · Joined: 19 Jul 2008 Posts: 3 2.24 Dollars($)

The broker says they've never seen them to a quality control pre closing. The broker knew all the tax story a month ago, NOW it's an issue AFTER the commitment letter? I am so confused. I also have given notice to my landlord. They said I have until 11 a.m. on Monday to either take back the notice, or if the loan doesn't go, I will have no place to live AND have to pay a lease breaking fee. This all is so awful. I really thought we were done after we received the commitment letter.

Jeanette · Posted: Sat Jul 19, 2008 7:43 am Post subject:

This is a precarious situation to be in but seems as though you are approved. Commitment letters are formal and legally binding documents that are issued by a lender to a loan applicant. The main purpose of the commitment letter is to inform the borrower that the loan has been approved, as long as certain conditions are met. Known as an Offer of Advance in some parts of the world, the commitment letter in a sense serves as a cover letter to the actual contract that will be signed by both the lender and the borrower. Receiving a commitment letter does not place the applicant under any obligation to pursue the loan through that particular lender.

Now, the reason behind the pre-closing mystery is that lenders are being very careful these days. Due to the the subprime mess that have caused a lot of lenders and brokers to be on the losing end. They now have quality control where they are doing a post-closing and a pre-closing to beef of their quality control.

in-house processing and underwriting staff consists of “real professionals
who understand the processes of underwriting, collateral and documentation, thus making sure ‘docs’ are on the up-and-up and collateral is secure. Finally, a lender needs to have good, sound quality control processes on a pre-closing and post-closing basis.”

Hope this helps

Jeantte Smith
Mortgage Planner
Union Mortgage Group

gmakerley · Posted: Mon Jul 21, 2008 8:03 am Post subject:

jeanette, what is that you are quoting from?

jenny, have you retained legal counsel yet? hopefully so, and hopefully even more so, that this counsel will be independent of your lender. if you have a true commitment letter, you'll be in good shape to require that it be honored.

the quality assurance aspect of lending is truly something that everyone in the lending field will encounter at some point, but it ought not to hold up the closing of a file that has already been approved.

evolovik26 · Posted: Mon Jul 21, 2008 9:57 pm Post subject:

Well I'll chime in.
Until your file has been cleared to close (meaning all the conditions have been satisfied) all you have is a commitment to close the loan at best. This can go sour for a number of reasons. (Adjusted taxes maybe one of them) Even after the clear to close you are not in the clear 100%. I've seen 3 loans in the last year get kicked out after clear to close due to title issues and one time cause the lender stopped its operation. Nowadays nothing comes as a surprise.
However remember that the loan officer is on your side and its in his best interest to close this loan for you. So if he/she can do it they will.
It is very likely that the amendment to your taxes caused the underwriter to question the loan. After all you basically went back and adjusted your annual income. Depending on underwriter he/she may decide to ask for explanation, more information, or flat out deny the loan based on suspicion of fraud. No one wants to lose their job nowadays. Be patient, hopefully things will work out, but look for a lender that might do the loan for you if this falls through just in case.
Most lenders are pretty paranoid in todays market.
Good luck.

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