Closed yesterday on refi loan - signed many docs I literally discovered at close yesterday...clause regarding occupancy was a surprise and the terms were not entirely clear...particularly that I must stay in house for one year! It also said "the timeframe could be changed with written agreement from lender AND lender has no right to refuse unless it has good reason!?"..I figured it was ok, especially as I have time (3 days) still to cancel this loan before it funds - I want do things right. Here's my case...I currently own the home as my principal residence - there has been nothing misrepresented about that. It has been our home for 10 years. I have Excellent credit scores. I am a consultant and now make sufficient money such that I could easily pay all my monthly payments for a year in a short time (a month or two). Our son is entering school, but the schools in our area are not good, so we recently signed a lease establishing residency so he can go to good public school- it is a "personal residence," but not sure if it falls under definition of principal residency...or if it does, when does it? I make sufficient money to easily cover rent and mortgage. We have the keys to the new place, but have not moved in and probably will not move in for quite some time...Loan application process did not ask or reveal new renting situation as we have not even moved anything there. We are going on annual vacation before school starts for example and won't be anywhere near either home. I spoke about my concern to loan officer and his boss today: both of them informed me that there is no compliance issue and no risk - that the terms are there as an effort to protect against application fraud/misrepresentation- which they said is not the case. The year occupancy, they said, is a protection for the lender in case of problems/default/fraud. Our primary ownership is this house we are refinancing and we will own no other house certainly for a minimum of one year, it's just I cannot guarantee I will always be in it (sleeping/living). Our plan was to eventually rent it out once we were ready, the house was ready, and any timeframe for occupancy was met, but we weren't expecting timeframe requirement to be a full year all previous disclosures we had seen mentioned just 60 day occupancy requirement - which we would meet...In your professional opinion, is this a case where I should truly just cancel this loan before it is funded? WIll it create problems, even though I can easily pay all payments to cover a year of payment upfront if the lender were concerned, i.e. so no concern for default...or does this go beyond default concerns? As I said, I want to do things right, and would like to keep this loan but not if there is risk or I am doing something wrong/negligent.
State/Country relating to question: California
Good Morning, Thank you for your question
My name isXXXXX am a Licensed, Practicing Attorney with 25 years of experience in real estate and business transactions,, 1. What was the primary purpose of the refinance, OOR.e., lower interest ? cash out ? etc.
2. Do loan documents state that non-occupancy is an event of default ? Thank you, ANDREA
Refi was for lower rate, yes.
Borrower either currently occupies and uses the Property as Borrower' s principal residence, or Borrower will occupy and use the Property as Borrower' s principal residence within 60 days after Borrower signs the Security Instrument. Borrower will continue to occupy and use the Property as Borrower' s principal residence for at least one (1) year from the date that Borrower first occupies the Property. However, Borrower will not have to occupy and use the Property as Borrower' s principal residence within the time frames set forth above if Lender agrees in writing that Borrower does not have to do so. Lender may not refuse to agree unless the refusal is reasonable.
BorrowerwillalsonothavetooccupyandusethePropertyasBorrower'sprincipalresidencewithinthe time frames set forth above if extenuating circumstances exist which are beyond Borrower' s control.
Good Moring, again, Please forgive te delay, I posted my Answer and it disappeared,. We are having some tecnical difficulties, I will have to retype it, please give me about 6 minutes and I will repost it, Okay ?
Again, I apologize for the delay and wanted to let you know I have not forgotten you, nor am I ignoring you
Thank you for your patiience and understanding
Thank you for letting me know...I found your question interesting in that it does NOT mention occupancy as a default, but it does refer to the application process (Which is in-line with what the loan officer's emphasis was.)... In the interim I also found this clause:
Occupancy. Borrower shall occupy, establish, and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower' s principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating
circumstances exist which are beyond Borrower' s control.
8. Borrower's Loan Application. Borrower shall be in default if, during the Loan application process, Borrower or any persons or entities acting at the direction of Borrower or with Borrower' s knowledge or consent gave materially false, misleading, or inaccurate information or statements to Lender (or failed to provide Lender with material information) in connection with the Loan. Material representations include, but are not limited to, representations concerning Borrower' s occupancy of the Property as Borrower' s principal residence.
9. Protection of Lender's Interest in the Property and Rights Under this Security Instrument. If (a) Borrower fails to perform the covenants and agreements contained in this Security Instrument, (b) there is a legal proceeding that might significantly affect Lender' s interest in the Property and/or rights under this Security Instrument (such as a proceeding in bankruptcy, probate, for condemnation or forfeiture, for enforcement of a lien which may attain priority over this Security Instrument or to enforce laws or regulations), or (c) Borrower has abandoned the Property, then Lender may do and pay for whatever is reasonable or appropriate to protect Lender' s interest in the Property and rights under this Security Instrument, including protecting and/or assessing the value of the Property, andsecuringand/orrepairingtheProperty. Lender'sactionscaninclude,butarenotlimitedto: (a)payinganysums secured by a lien which has priority over this Security Instrument; (b) appearing in court; and (c) paying reasonable attorneys' fees to protect its interest in the Property and/or rights under this Security Instrument, including its secured position in a bankruptcy proceeding. Securing the Property includes, but is not limited to, entering the Property to make repairs, change locks, replace or board up doors and windows, drain water from pipes, eliminate building or othercodeviolationsordangerousconditions,andhaveutilitiesturnedonoroff. AlthoughLendermaytakeaction underthisSection9,Lenderdoesnothavetodosoandisnotunderanydutyorobligationtodoso. Itisagreedthat Lender incurs no liability for not taking any or all actions authorized under this Section 9.
Are you still having technical difficulties? It says you are now off-line...Should I open this question further to other experts?
I am posting your Answer right now
Thank you again for your patience. If I were you, I would have the lender's agree in writing that they will not declare you in default if you do not occupy the subject property 100% of the required period, The basis of my Answer is this. For a moment, forget that the lender agreed to forbear declaring you in default. You siged the Affidavit in which it was stated that any misrepresentation would be considered a default under the loan documents. The significance of this statement is that if a lender declares a borrower in default, the entire balance of the loan becomes due and payable immediately . Therefore, in the absence of a written agreement signed by the bank, they can, if they chose to, declare you in default and you would be required to immediately pay the entire outstanding balance.
What the lender told you about "reasonable" and occupancy is only partially true. Occupancy is of the utmost importance to the lender because if the property is vacant, or appears to be vacant, lenders always fear vandalism and destruction of their security for the repayment of the loan. Therefore, your "non-occupancy" of the subject property would be considered a "material breach" again, exposing you to unnecessary liability of paying the loand in full immediately.
Additional considerations are, what if the lender's representatives who gave you these assurances left their position with the lender and worked elsewhere, or if they were hit by a truck six months into the loan. You would be dealing with other individuals and you would have no documentary evidence of the lender's agreement to forbear declaring you in default.
Therefore, the safest approach you can take is to ask them to put these assurances in writing. Please be kind enough to rate my service to you as "Excellent", If you rate me at anything less than 3 stars, it will appear as a negative rating against my name, If you need clarification, please let me know by pressing the "Reply" button, Thank you for allowing me to be of service, ANDREA
I have practiced law for 25 Yrs,emphasis on Real Estate & Business, Criminal Defense & Family Law
In addition, the site is using a new program, so just now when I redid your Answer, I typed it in "Word" so I woulod not lose it again, But, when I posted it to your Question page, I had to reformat the whole thing, Please accept my sincerest apologies, this was totally beyond my control
I believe these loan officer's represent a group that will rapidly transfer the loan to a new group...Should I wait to request this letter from this new group, or should I press these people to offer me such a letter...if so, do I try to get the letter before the loan is funded?
You should request it now because the i group who will buy these "packaged loans" are investors, or intermediaries for investors to whom they will sell the loans. They never play any part in the loan itself, nor do they ever have any communication with the owners of the properties. They not only take assignment of all the right, title, and interest of the originators of the loans, but also take subject to all the obligations attached to these loans. Therefore, you need a letter fron the individuals who made this agreement with you so that it will be part of the "obligations" to which the invvestors take "subject to". Thank you for your "Excellent Service" rating, I appreciate it greatly, But what I appreciate even more is the confidence you placed in me to allow me the opportunity to assist you. If you have additional concerns, please let me know. If you have questions in the future, please feel free to ask for me. You may do so by typing my name at the beginning of your question like this, "For Andrea only .........." And your question will be directed to me,Kindest Regards, ANDREA
Hello…I have a new question now. You may recall a few days ago, I closed on a loan that had a surprise for me: the Owner Occupancy requirement to be in the house for 1 year. Your advice was to request that the loan officer(s), who had assured me that it was a non-issue, provide in writing that I would not be held in default for non-occupancy. As I suspected, they did not wish to put that in writing; I didn’t think they would. As a result, my wife and I decided it was in our best interest to cancel this loan. Remember, it has always been our intent (intent being a key word I think!) to do the right thing. With that said, when we learned of the 1 yr occupancy requirement, we were not as ease and it had never been our intent to commit to something of that sort. Familiarity with (knowing the ins-and-outs of) these loans is obviously not our area of expertise, and apparently these clauses are well known. My question now comes, as a result of subsequent interaction with the loan officer. ..
After submitting my letter stating my desire to cancel the transaction, I received a call from the loan officer, who said I was “shooting myself in the foot,” that “he’s never seen anyone do this before,” that “the lender doesn’t care as long as you are paying and that they wont be investigating.” So I said, “well, lets just get that assurance in writing”…again they said that they won’t do that, as they will need to sell the loan later on. I said, so much more the reason to get these agreements/understandings in writing…of course, they could not, as it became more and more clear, that is not the nature of these loans. I said I couldn’t in good conscience continue with the transaction with the way the loan is written and (again) maintain our original intent to do things correctly. He started getting a little upset at this point and calling me a “by the book” type of guy and too conservative for my own good. I said, yes that is who I am, and the fact that he was saying I was doing things by the book implied that his assurances were not by the book - in essence, not appropriate and a risk.
Here’s where things began to change and the source of my concern and my question: His stance hereafter became the following…He started saying that "the loan is dead...it has been cancelled and that I have been declined"..."What?!" I asked....He said that “they were now declining my loan!” I said "But it is me who is cancelling." He said, “don’t’ worry: the deal is dead, but we could refinance as an income property, because that is what you have”...I said, "no, it is my primary residence...that is where I live"....He said, "you are being declined because it is an income property." I said, it is not...He asked: “Will you be there the whole year? I said, "this is actually the first time this question about timeframe has ever come up,…but no, I don't believe so...that is not our plan." He said "then for the loan, it is not a principal residence." He asked: “Are you going to sell?” I said: “Maybe now or Maybe rent – I don’t know”...He said "then it would be a Rental Property and, in fact we can't even refinance, because you don't have 25% equity...so we can't even consider that." I told him "I knew that, but I was concerned that he said they are declining the loan." He said that based on the fact that I will not be occupying a full year, then the loan will be declined...I said: "I had already been approved and the loan transaction is being cancelled by me...He reiterated and concluded the conversation saying, "the loan is cancelled."
My concern and question: It seemed like he was twisting the chain of events such that it sounds like THEY are declining ME...which makes me concerned that my excellent credit could be impacted by an incorrect entry in their database and subsequent reporting of this falsehood. His multiple reiterations that they were declining me made it sound like they were refusing my application. Can they do that?…my fear is that they claim it was a decline due to “misrepresentation” on the application or mortgage fraud, which is not correct. Again mortgage fraud is all about intent, as I have learned…and as I have said, it has NEVER been my intent to do the wrong thing. My only weakness, I suppose, has been relying on these guys for their professional advice in guiding me through the requirements and application process. Sooo, Am I just being paranoid, or should I be worried about my credit, or some other vulnerability of which I have not even considered??? Are there things I should be doing to protect myself or prevent any possible issues?
Relist: Other.Mine is a follow up question several days later - My guess is that Andrea is not on-line at this time. Otherwise I am very satisfied with her help.
Unfortunately you either need to wait for Andrea to do a follow up for you or post a new question.
Hi, and Welcome back, Thank you for your new question
As to what the loan officers will do, nobody can say, only they know theiragenda. But, it is clauses like this that cause problems for borrowersdown the road. If they were completely above board, they would not have a problem giving you the assurance you are looking for in writing. They are probably telling you that they are declining your application in order to save their own face because they would have to give some kind of explanation as to why a customer was rescinding the loan since very few applicants go through the whole process and then rescind at the last minute.As to whether or not it will impact your credit score will depend on what thelender's comments will be, or if they reach the credit bureaus. The steps you can take are to send the lender a letter specifically stating that you are exercising your right to rescind, that the property is not, nor has it ever been an income or investment property, denying their allegations of mortgage fraud, that from the very start of the refinance process you told ______________ and ________________ loan officers the situation of your son's school, outlining the reasons why you are rescinding, and informing them that if anything other than this is reported to the credit bureau that you will take every legal step available to you against the lender. Then every 2 or 3 months for the next 12 months you will have to get a copy of your credit report to be sure they have not reported anything which negatively impacts your credit score. Be sure that you mention the names of the loan officers in your letter because they are the ones who will be responsible if anything derogatory is placed on your credit report.
Please be kind enough to rate my service to you as "Excellent", If you rate me at anything less than 3 stars, it will appear as a negative rating against my name, If you need clarification, please let me know by pressing the "Reply" button, Thank you for allowing me to be of service, ANDREA
Before giving a "threat" of legal action, I did reach out in an email to ask if my credit score would be impacted...one of the two (not the one who had called me) replied in written email that "the credit score should not change since you cancelled. The only thing that would show would be a minor change for having run your credit reports for the loan." but this is normal. Is this written statement and acknowledgement sufficient to defend/protect me should they in fact report anything to the contrary to the bureaus?
I do not trust these people because of the speed and the way they changed their attituude. One minute they were friendly and in a split second, they were threatening to tell you that you were not only declined, but you had something to do with mortgage fraud. If they said that to me, I would be up in arms because it not only has civil implications, but criminal consequencesm also. In addition, the email you received was not unqualififed. If I asked someone a
question which could be answered with a simple "Yes" or "No", I would be wary of the answer they gave you which was, "...the credit score should not change since you cancelled. An unqualified answer should have been given to you and should have stated "your credit score will not change. And this response was not from the one threatening to report your loan as "declined",
I agree, my level of trust has been shattered, but perhaps I wasn't quite clear in my posting to you...You said "One minute they were friendly and in a split second, they were threatening to tell you that you were not only declined, but you had something to do with mortgage fraud." Yes and no...It's true that particular conversation was rather "agitated" mostly because I think the guy just learned I had cancelled (so no commission for him I suppose)...but he never threatened me with mortgage fraud...he never said that...the closest he came to such a statement was when he said "you are declined because you applied for a loan that is not your principal residence" (which is not true, except in the "new" definition requiring a year of occupancy) ...it was just My fear (or paranoia) that perhaps he might later, unbeknownst to me, report it as a decline for misrepresentation out of spite or to protect himself...just a paranoia because he kept using the term decline interchangeably with a "dead" loan...when I kept saying "Me: I cancelled it" he would reply "yes it's a dead loan...I cancelled it"...I didn't want to get into a semantics discussion because he didn't seem to be catching the nuance I was trying to assert...only later was I concerned that maybe he did in fact know the nuance and was purposely being obtuse.
If I were in your position, I would inform them in writing of my cancellation and outline the reasons therefor. In other words everything I stated above, minus taking legal action. Say something like,
Thank you for approving my application for refinance of _________________ loan in the amount of _______________. After reviewing the documents I would be required to sign, and specifically the Affidavit, I find that I must rescind and withdraw my application for refinancing. The primary reasons are the same as I had discussed with you several days ago, specifically,.......... etc. And state here that you would be dividing your time between your primary residence and _____________ . As a result, I could not, in good conscience, execute the Affidavit required for settlement on this refinance and I did not want to mislead anyone, ..........etc. Furthermore, and to avoid any misunderstanding, my primary residence is not, nor will it be investment property since it is not, nor will it be rented to anyone, since it will continue to be my primary residence.
They would have to include this letter in your file and would have to think twice before reporting the loan as "declined",Please be kind enough to rate my service to you as "Excellent", If you rate me at anything less than 3 stars, it will appear as a negative rating against my name, If you need clarification, please let me know by pressing the "Reply" button, Thank you for allowing me to be of service, ANDREA
Interesting...Just to be clear: the loan had already been approved, the papers were signed: but I cancelled within the allowable 3 days before funding, largely because I was NEVER provided the papers that I would sign and was literally discovering the fine print at the signing...the affidavit apparently has the standard language about occupancy, but it seemed like it said the lender couldn't refuse a request to not occupy the property...my subsequent research suggested this is not correct and that to do so would potentially constitute misrepresentation...so, I cancelled the signed loan, and to do so, I sent a letter registered mail already similar to what you propose here, EXCEPT I did NOT summarize any of my current situation or my intent. Is this information important to have stated (I suppose the importance is that it establishes my intent in writing, right?) Given the clarifications in this posting, is it a good idea to write them again? Since I have already submitted my cancellation and they have already reimbursed me, I'm not sure the pretext for me writing them again....And would a future letter be required to go in my file?
Please accept my apologies, I was offline taking a brief break from the computer screen, Another letter would not really be necessary, but I would send one anyway to address the issue they raised, that of your primary residence is not investment property in the same way I stated it in my previous Answer, starting with "In order to avoid any misunderstanding, my primary residence............etc. You can start the letter off saying this is a addendum to my letter of rescission to you dated ________________.
I would do so just to set the record straight and avoid any room ro them to make any negative comments in your file. But, I leave that decision up to you to make. Please be kind enough to rate my service to you as "Excellent", If you rate me at anything less than 3 stars, it will appear as a negative rating against my name, If you need clarification, please let me know by pressing the "Reply" button, Thank you for allowing me to be of service, ANDREA
Ok very good advice. I do appreciate.
Thank you once again for the rating of "Excellent Service" and the Bonus. I appreciate it greatly. If you need anything further or have questions in the future, just address your concerns to me by typing my name at the beginning of your question, Kindest Regards, ANDREA
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