Wells Fargo Home Mortgage / failure to fund puts 1031 in jeopardy
We are presently in the middle of a 1031 exchange when Wells Fargo Home Mortgage decided to cancel our loan on 2/26/09.
We had been in contact with Wells Fargo Home Mortgage consultant since September 18, 2008. We initially applied for the loan through the WFHM website. During that time we continuously shopped for lower rates. However, most lenders we contacted were not willing to loan on the complex because the property is a condo conversion.
On November 28, 2008, unable to find a traditional lender, we commenced working with Well Fargo Home Mortgage. We were informed by Wells Fargo Home Mortgage consultant that Wells Fargo had an exclusive arrangement with the seller of the condo to provide loans and that WFHM would likely be the only company that would be able to do a loan for the project.
On December 2, 2008, we provided Wells Fargo Home Mortgage with all the documents to facilitate the loan. On December 9, 2008, we also provided a $600 fee for appraisal. On December 15, 2009 we received a commitment letter from Wells Fargo Home Mortgage located at 4420 Auburn Blvd. Suite 110, Sacramento, CA [protected] approving the loan application. In compliance with the requirements of this commitment letter, we provided all the documentation due by us and returned it promptly on December 19, 2008. On December 17, 2008, we received a packet from Wells Fargo Home Mortgage containing Disclosure packets, Truth-In-Lending, Good Faith Estimate, and Applicable State Disclosures for our records. On December 24, 2008, we also informed Wells Fargo Home Mortgage consultant that additional information was provided to WFHM underwriting department. We kept in touch with the WFHM mortgage consultant throughout the process regarding the status of loan documents as well as the appraisal.
On February 9, 2009, an e-mail from the WFHM mortgage consultant indicated that it is finally in receipt of the appraisal and the value came back at the sales price and that the loan was in underwriting for final review. On February 21, 2009, the WFHM mortgage consultant informed us that a second review of the property for the appraisal was needed and should be completed by the following Monday (2/23/09) or Tuesday (2/24/09) but did not tells us why this second appraisal was necessary. On February 24, 2009, the WFHM mortgage consultant informed us that the loan documents had not gone out and that she was "struggling" with information in the appraisal. Finally, on February 26, 2009, the WFHM mortgage consultant informed us that Wells Fargo would not be able to close because of the slow sales in the complex and changes in the new condo and condo conversions rules. The WFHM mortgage consultant also mentioned that the final decision on an exception for the appraisal was not granted. Please note that the appraisal came in at the sales price and so, we are still somewhat bewildered as to how it affected the loan approval.
The Disclosure Booklet provided a discussion of the various factors that may affect the loan such as appraisal value, loan to value, and borrower’s credit profile. The Disclosure Booklet provided by Wells Fargo Home Mortgage indicated, "The value of the property (usually determined by an appraisal) as compared to the amount you wish to borrow (the "loan-to-value ratio" or "LTV") also impacts your loan price.” Please note that the value of the property was appraised at the sales price. Our down payment consisted of the entire proceeds from 1031 and cash for a 25% down payment making the LTV at 75%. With respect to the credit profile, the WFHM mortgage consultant checked the credit report and informed us that the FICO scores were 765 and 790. To date, we have not received a copy of the credit report from WFHM mortgage consultant.
In accordance with the “Prompt Action/Notification of Action Taken” (ref. page 12, Buying Your Home), the lender or Mortgage broker must act on the application and inform the borrower of the action taken no longer than 30 days after it receives the completed application. It seems like the WFHM mortgage consultant deemed the application complete as of December 24, 2008 when the WFHM mortgage consultant acknowledged the receipt of all the documents. A follow-up on the status of the loan was made on January 05, 2009, to determine if additional documentation was needed. Our WFHM mortgage consultant on the same day responded that Wells Fargo had everything they needed. The 30-day timeline for notification would have been 1/24/09.
We would like to point out that a $600 fee that covers the appraisal was collected on December 9, 2008. Based on the information discussed in the Buying Your Home information Booklet, Wells Fargo Bank, N.A., Affiliated Business Arrangement Disclosure Statement the fee for appraisal ranges from $275 - $500. Information on the Good Faith Estimate of Settlement Cost final print date 12/17/08 showed $450. We have not been informed of the cost of the appraisal to date nor have we received a refund on the remainder of the $600!
We continuously followed up on the status of the appraisal and were finally notified that it was available on 2/9/09. It is also worth noting that in accordance with Buying Your Home information Booklet, Obtaining Your Appraisal, the lender or Mortgage broker is required to notify the borrower that they have the right to get a copy of the appraisal report per The Equal Credit Opportunity Act (ECOA). The notice will tell the borrower when and how the borrower can ask for a copy. Please note that the lender failed to issue a notification advising us of such a right. We requested a copy of appraisal for our own reference uninformed of our right for a copy of the appraisal.
On 2/26/09, we received an e-mail from the WFHM mortgage consultant that Wells Fargo is unable to make the loan because of the following: (1) the appraisal was not granted an exception (although we weren't told what about the appraisal required an "exception", (2) the sales in the complex have been very slow, and (3) Wells Fargo has experienced huge changes with new condos and condo conversions. The WFHM mortgage consultant mentioned that she was unaware of the changes until the last moment. To date, Wells Fargo has not offered any explanation as to what changes in the condo conversion affected the loan approval. During my recent research, we have read that FANNIE MAE sent a fact sheet to lenders regarding condo and condo conversion dated December 16, 2008, so the WFHM mortgage consultant's claim that she just found out about the information on 2/26/09 does not seem accurate.
Furthermore, the WFHM mortgage consultant letter dated December 17, 2009 provided an assurance that she’ll do everything to ensure the program selected is best fit for our financial needs. We believe that Wells Fargo Home Mortgage should have advised us of the impending changes on loans for condos and condo conversions so we could have made an informed decision whether to pursue the loan, or attempt to purchase one of the other properties identified in our 1031 exchange before they were sold. In the meantime, we had lost the opportunity to make an offer on the other two properties we had identified in the 1031 exchange and are now in jeopardy of losing the proceeds from our 1031 exchange due to Wells Fargo Home Mortgage’s failure to notify us of the policy changes.
We've complied with every requirement of the loan. The appraisal had come back at the sales price. Our credit profile met WFHM’s requirements. The loan is not considered at-risk based on the down payment and LTV. And yet the underwriting decided to cancel the loan at the last minute. We are now left struggling to find another comparable loan and we are in jeopardy of losing the proceeds if the 1031 exchange fails.
A letter dated March 6, 2009 was sent to various officers of Wells Fargo Home Fargo via e-mail and regular mail. To date, we have not heard any response from Wells Fargo regarding the issue.
It seems like after all Ms. Mary Coffin’s (Executive Vice President of Loan Servicing) speech on February 24, 2009 as she testifies before the subcommittee on Housing Financial Services Committee was all for show and part of an act to satisfy the regulatory committee. In her speech she requested for a continued collaboration with the Housing Committee such as, FHA granting the Wells Fargo the authority to expand and allow the assignment of mortgages to FHA and the payment of claims upon modification of the FHA loan as well as approval of recommended changes to Hope for Homeowners that Wells Fargo believes will make the program a more attractive alternative for at-risk customers. Let us not forget Ms. Coffin’s claim on Wells Fargo’s effort to lessen the impact on the community affected by mortgage industry crisis. These speeches and appearances of corporate leaders before the regulatory committees has been a familiar scene in today’s economic condition with every industry from auto, airline, banking to mortgage industry. These corporate leaders would like to assure everyone that they are doing everything they can to help alleviate the people’s pain and they have the community’s welfare at heart. However, after the loan disaster they have caused me with no offer of a resolution in sight except for an unexplained decision to cancel my loan at the last minute makes you wonder. I am sure that there are other cases out there and I am most probably one of the millions that these “honest” corporate leaders have caused discomfort and havoc.
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