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August 28th, 2010

As if getting a mortgage wasn’t hard enough



We all know that lenders today are incorporating much stricter standards for mortgage borrowers, but I have never heard of anything like this before:

When Linda Falcão applied for a mortgage from Wells Fargo, she didn’t realize she would be required to write the type of essay that’s more commonly included with a college application.

So she and her husband, Kemuel Ronis, were taken by surprise when Wells Fargo asked the couple, both 50, to pen a “motivational letter” explaining why they were moving. What they found even more shocking, however, were some of the themes that Wells required them to include in their statement, specifically, their plans regarding an “increase/decrease in family” or property size.

According to HUD, the Fair Housing Act “prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability).”

Why would Wells Fargo make such a request? :

A Wells Fargo spokesman said that motivation letters were generally requested when the loan underwriter had more questions about a borrower’s “occupancy intentions.” For instance, he said the company might request such a letter when a family’s existing home is not yet sold and it wants the buyer to show that the new home will indeed serve as the primary residence.

The spokesman did not say why the bank would request information about a prospective borrower’s family plans, but said that “under no circumstances would any information about family status be used by Wells Fargo as the basis for a decision on a loan application.”

But then why did it ask? The spokesman said he could not answer that for certain without knowing more about the specifics of the case.

Do yourself a favor and read the “motivational letter” Ms. Falcão sent to the New York Times.

Be sure to read HSH.com’s article “What Mortgage Lenders Can and Can’t Ask Under Federal Law.”

Readers: Have any of your lenders made an odd request like Well’s motivational letter? If so, we want to hear all about it — leave us a comment below.

2 Responses to “As if getting a mortgage wasn’t hard enough”

  1. Vernon Appenzeller Says: August 29th, 2010 at 6:53 am

    Seems that ‘Big Brother’ aka Fed Imperial Gov’t has required borrowers to justify their request/ actions/decisions by submitting a ‘benefits of transaction’ as if the borrower is not competent to judge the merits without government oversight. As if the poor borrower is blindly following the lead of the conniving lender. Case in point, an old customer of mine refinanced his primary residence from a 30 year to a 15 with the payment, in spite of rate reduction, about the same…but the term is half. Clear to him what the benefit is yet he still had to submit the explanation and, without a considerable payment change, UW would not initially approve it…’til much haranguing later. Just another aspect of life we have to justify to government. There is not an aspect of lending left, including compensation of principals, that is not controlled or overseen by government Fed and local. Welcome to the new DMV for lending.

  2. Tim Manni Says: August 30th, 2010 at 11:32 am

    I hear you Vernon. Seems like a case of over-correcting to me…or possibly the case of “a few people ruined it for everyone else.” Thanks for your comment, Tim

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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