Mr. Garcia - legal advice dealing with a lender - Posted by David Meek

Posted by Ed Garcia on July 06, 2001 at 03:10:24:


Regardless if I got a loan from you or not, I’m sure you know that I’m never bashful when it comes to giving my opinion. However, if you want to send a little business my way, I’d be more than happy to accommodate you. My phone number is 909-944-0199.

Thank you David,

Ed Garcia

Mr. Garcia - legal advice dealing with a lender - Posted by David Meek

Posted by David Meek on July 03, 2001 at 17:10:09:

Mr. Garcia and forum,

I have a situation that I am currently trying to work through with a lender here in Georgia. I am requesting a 75% LTV cash-out refinance on a single-family investment property at 7.5% and 1.125 origination & points, terms I am pleased with. The house was appraised by an appraiser of the lender’s choosing. The house was valued at $130,000 making a loan of $97,500 possible at the aforementioned 75% LTV.

All of this seems as if it should be no problem. However, the lender has become nervous about the fact that I originally paid $79,000 for the house exactly 12 months and 14 days from the time of the appraisal, or just inside the 12 month curing period. The net adjusted sales comps on the appraisal are $130,000, $136,000, and $137,000 (all almost perfect matches with little or no adjustments in square footage, etc. and in the same neighborhood) so the appraisal amount is not unreasonable.

To make matters worse, I was informed of this problem from the loan officer just 4 hours before the scheduled close. After firing off a stern email to the VP promising litigation and all-around bad-mouthing of the company the owner and loan committee have come back with an offer to make a loan of $87,500 calculated simply by lopping of $10,000 (mainly so that it may be easier to sell and look less fraudulent on the secondary market).

My position is that even if I had bought the house for $40,000 one year ago, it does not have an effect on the current value of a property. The whole idea after all is to buy low, hold, and sell much much higher in the near or even distant future. I currently own 4 investment houses and have been doing this for about two years now and have been very fortunate with the choices I have made thus far however I am still relatively a newbie.

I have counteroffered to the lender at $92,500 simply because I would like to have those additional resources available to me for other investment opportunities (You know, a bird in hand is worth two in the bush).

What are my legal options here? Can I sue for specific performance? I have a brother who is an attorney so litigation costs are not necessarily a factor and I could still bundle up the package and take it down the street. The risk involved is that the new lender may have a problem either of the same kind or a different type and may insist on a new appraisal which could end up even lower. Could I also lose my right to sue if I voluntarily walk away?

Thank you in advance,


Just Curious - Posted by Frank Chin

Posted by Frank Chin on July 05, 2001 at 19:58:54:

You said that you found out about this 4 hours before the closing. Didn’t you receive a commitment letter somwhere along the way for the $97,500, along with the terms and conditions you’re looking for?

I had mortgage companies trying to pull my chain right before and DURING closings. In one case I recall, the mortgage company found they had no choice after looking through their commitment letter’s terms and conditions.

Do you have an attorney? My attorney was a pussycat in the spat I mentioned above, and I had to do all the talking.

Frank Chin

Re:Mr. Garcia-legal advice dealing with a lender - Posted by Ed Garcia

Posted by Ed Garcia on July 05, 2001 at 10:21:31:


I can’t tell you your legal rights because I’m not an attorney. However I can tell you that you have met the requirements of seasoning that most lenders require. For your broker to suggest that it would look funny or fraudulent is ridiculous. You are not misrepresenting the value. I think you’ve got a WEAK broker. A good broker is suppose to fight for your deal, that’s what you pay them for.

Some brokers take the way of the least resistance and that’s exactly what I think your broker is doing with you. It’s easier for them to convince you to cut back on the loan, rather then go through the trouble of justifying the values change to a lender.

I’d BLOW OUT the broker and find me a broker that’s aggressive.

Dave, from what you’ve described, this deal should be a walk in the park, so I want you to know that your thinking is right and that it’s not you, but the broker you’ve chosen.

Ed Garcia

Re:Mr. Garcia-legal advice dealing with a lender - Posted by David Meek

Posted by David Meek on July 05, 2001 at 14:42:52:


Thank you for thoughtful reply and opinions on this matter. What’s interesting here is that I am NOT dealing with a broker rather a direct lender and that the owner and one of the VPs of this large mortgage company are the people that are proposing this nonsense.

By starting over I lose valuable reinvestment time and opportunity costs but especially take on the risk that the next inept lender will blow the deal on something they don’t find attractive with the package. I have been doing things the traditional way (conventional, 10% down, no owner finance, etc.) for the last few years and have yet to find a lender that won’t surprise me at the closing table, i.e. pre-payment penalities or PMI on sub-80% LTV. I have gotten left at the alter of the closing table by one broker who couldn’t close a $52,000 HUD house appraised at $65,000 closing in 60 days a couple of years ago which is now worth about $130,000… argh.

Unfortunately, it seems that I find out how incompetent some of these lenders are days and sometimes hours before closing. I am certain that negotiations with this particular lender will result in a eventually successful refinance on this current deal.

However to avoid these problems in the future I would like to start a dialog with you offline via email or by telephone to speak in more depth about the particulars of my real estate career. Frankly, I am looking for a lender that can do what they say they can do and has specific experience dealing with investment properties. My particular specialty is buying neglected single-family homes, doing total renovations, cash-out refinancing at 80% LTV and holding long-term with good quality tenants. I have done very well thus far but I am ready to take things to the next level.

I look forward to your reply.