I had a real estate agent call me the other day that I did not know. She was calling around looking for a lender to place a loan for her borrower. She specifically asked me if my company can offer her client a Fannie Mae HomePath loan. I told her yes, got out my yellow steno pad and started to ask her certain questions to uncover the best loan option for her borrower. In some states the new lending laws are pretty clear that a loan originator must provide a borrower the best lending option based on their situation. It just happens that Fannie Mae HomePath options do not usually offer the best terms in comparison to FHA options except in the case of 2nd homes and investment loans. So I asked her straight up, “Why does your client want to use Fannie Mae HomePath?“, she says because her client’s wife is short selling her home (on her credit only) and this is the only way that we can do a loan is by placing it in the husbands name only. Now on the surface this seems correct. Go conventional, because you do not have to use the other spouses credit. So I asked her further if the husband was living with his wife in the home that is being short sold. She said “Yes“. I also asked her if the wife going to be living with him in the new home once the short sale is finalized. She answered “Yes“. So I explained to her that even though conventional loan guidelines do allow a buyer to purchase a home in his own credit, he did live with her a had a communal responsibility for the debt that is being sold short. Most Mortgage Investors treat this like a buy and bail and just are not comfortable with granting the new loan. I explained further that the loan could be done, but my company (Sunstreet Mortgage, LLC) did not have an investor who would buy the loan from us. The guidelines basically say “Yes” but the investor says “No“. I told her politely that she would need to seek out another lender to help her with the loan. This is when the conversation when wrong:
She says “Don’t tell the bank about the wife’s situation.“. Beyond the fact that the investor would of figured it out, I said to her that I cannot leave out materials facts about the borrower’s situation for a loan decision. This is called “Mortgage Fraud”
Wikipedia defines Mortgage Fraud-as “a term used to describe a broad variety of criminal actions where the intent is to materially misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have been obtained had the lender or borrower known the truth. In federal courts, mortgage fraud is prosecuted as wire fraud, bank fraud, mail fraud and money laundering, with penalties of up to thirty years imprisonment. “
By leaving out the facts that the husband is married to a wife that is short selling a home in her name only is leaving out material information that could change the outcome of a loan decision (LOAN FRAUD!!).
I am still not sure if the real estate agent understood this. A lender cannot leave out the facts to grant a good decision for a client. Now if all information is presented to a lender and the bank that is making that loan grants a positive decision to take on the risk, then this is NOT loan fraud. Understanding the difference is key.
Gary Miljour is a licensed Loan Originator (NMLS ID: 207208) in the State of Arizona.
MyCityLender | NMLS ID: 161428 | ARIZONA MB-0910380 
Very interesting article. Glad you did the right thing!
So punish the homeowners who are trying to survive and get out from a bad investment BUT not punish the mortgage brokers and home loan officers who screwed them originally?
If the husband isnt on the loan OR the title, there is NO reason why get could NOT go get another property while the wife is going through a short sale. He has NO legal obligation to the home. I think its a great idea to do. I wish most people that are in this predicament does it as well as others who are suffering with this BS of morals and values of not walking away. DO IT! Life is to short to feel like your hurting the bank and putting your family through that stress.
Mortgage Fraud? Go look in a mirror.
Bad World Economy
Nobody is punishing a homeowner from making a hard decision to short sale a home. Banks have the right to make decisions on who they feel are a worthy credit risk. It is easy to point blame at the big bad loan originators correct. Finger pointing is not a solution to the problem. There was greed on all sides. I am not hear to listen to you playing the victim card or defending that position. Is does nothing to solve that issue at hand.
2nd, you are missing the entire point of this post. The homeowner is not being punished. The banks look at risk and risk alone. Some banks would take this risk why others will not. Hiding material facts off a mortgage loan application is just plain and simple fraud. No matter what party is involved.
Furthermore, I have no idea who you are and you really do not know myself, so stating because of what my profession is that I commit mortgage fraud is ridiculous.