Fraud Story

It's still happening! Even after all the news about fraud, loan originators are still willing to "bend" the guidelines.

I won't say who, but I am helping a couple of friends understand the process of obtaining a loan - as they go through it. We'll call the first one Jack. Jack owns his home free and clear. He has no provable income so he needed a co-borrower/co-signer. A friend of ours, we'll call her Paula (she does not live at Jack's house) agreed to co-sign on a home equity loan.

Let's get a bit of history first.

Jack (a non-banker, real estate, mortgage or finance guy) originally applied for the loan, by himself. He was told by his banker that he could get a loan - no problem.

First of all, this advice from his banker made no sense whatsoever. Jack is a great guy, decent credit, decent assets, but no income. By the way, the banker I am referring to works for the 6th largest bank in the country. They do not have a loan program for people with no provable income.

But when Jack hears his banker tell him that he would have no problem getting a loan on the home that he owns free and clear, Jack gets excited - of course. So Jack fills out the loan application.

The banker submits the loan. I have no idea what the banker listed as income on the application, but Jack certainly didn't lie and say that he had income, because he doesn't. Jack doesn't know enough about the loan guidelines to lie about income.

Response came back from the underwriters; they needed clarification on a few things. They saw a foreclosure listed from back in 2000.

Check back to read about the conclusion.