May 16

Lenders Put Borrowers Through More Scrutiny

Lenders Put Borrowers Through More Scrutiny.

Lenders Put Borrowers Through More Scrutiny

Lenders Put Borrowers Through More Scrutiny

Home buyers and refinancers applying for a mortgage are being caught off guard in what all lenders are asking for when approving a loan.

The Wall Street Journal reports an incident where a borrower was even asked for a copy of her divorce decree — from two years ago — and asked to explain a deposit of about $200 into her bank account when applying for a mortgage.

Lenders are being more careful in who they issue a loan to nowadays, tightening underwriting standards and carefully documenting applicants’ finances and ability to repay the loan.

Practically nothing is off the table these days when it comes to what a lender may ask for. Lenders may question any deposits to bank accounts, increases in a borrower’s income, and any disputed balance over a late payment, even if it was from years ago. Some lenders are even requesting college transcripts and diplomas in verifying employment history.

Any credit inquiries on a person’s credit invites red flags and more questions from lenders, Rhonda Porter, a loan officer in Seattle, told The Wall Street Journal.

“I have customers who know they’re a strong [borrower], and they’re still asked for documentation,” Porter says. “Some of them get their feathers ruffled.”

Some borrowers — particularly refinancers — are getting so frustrated by the extra paperwork and questions that they are increasingly just stopping the process, according to news reports.

Stella Adams, a fair housing advocate in North Carolina, says banks need to lighten up. Banks should return to “solid, old-fashioned underwriting” standards that were used prior to the housing boom and stop making it so difficult for people to get financing.

Source: “Lenders Want to Know Everything,” The Wall Street Journal (May 12, 2012)

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