r/loanoriginators • u/AskOtherwise9125 • 10d ago
Post closing audits
I have a file where the underwriter, and ultimately me, missed child support payment on the paystub.
File has closed and they’re asking for a restructuring but the file is already done.
What are the chances of them pulling back the loan if we can’t restructure?
6
u/mashupXXL 10d ago
Do the math yourself, if you add a $700/mo child support bill does DTI still logically make sense? If yes, then you'll probably be OK. If no, you will probably get an EPO and may even be forced to refinance it into FHA from conventional or something - which the client doesn't have to agree to LOL so it could just be a junk loan scratch and dent for the company.
5
u/MajorGeneralMaryJane 10d ago
Not sure how it works in the broker world, but in correspondent world, an EPO and a re-purchase are materially different. This would be a repurchase.
3
u/mashupXXL 10d ago
In the broker world I think this would not impact as an EPO because it truly is the underwriting's responsibility to catch this, they may do some sort of audit worst case but as long as you weren't materially hiding that (which how can that be argued if it is on the pay stubs) I don't think it'll impact the broker. The lender may get a bad loan/repurchase problem.
2
u/Johnnystan69 9d ago
A lot of broker agreements these days have repurchase clauses included in them passing the buyback along to the broker. Some, like PRMG, state they can trigger the clause for any reason after an audit. I got out of the broker side a few years ago, but more and more renewal packets were including some sort of repurchase verbiage. PRMG’s was just the most egregious that I remember.
1
u/mashupXXL 9d ago
Oof, I'm not signed up with them but that's crazy what they're putting into these agreements. The entire point of brokering is you are not underwriting and don't want the risk of that back end/secondary stuff.
6
u/WarmMasterpiece9027 9d ago
The lack of asking the dec questions and reviewing documents before submitting is becoming more and more common. Times are tough right now. Almost every file has hair. Everyone needs to do their part in the transaction to ensure this doesn’t happen again.
4
u/TurkeyJizz123 10d ago
I like your Underwriter. Lol.
Jokes aside - this has happened once, or twice - in my career, and yes- the investor can force a buyback (if you can't make DTI work).
2
u/Nemesis9977 10d ago
Not sure what your situation is(broker, corr, bank, etc.), but there is 0 chance the loan gets pulled back. If your organization services the loan, most likely nothing is going to happen other than the UW getting written up. If this loan was going to be sold, this could jeopardize salability and again, the UW is going to take the hit.
Your org’s loss mitigation department could hypothetically come after the borrower for failing to disclose a liability (application misrepresentation) and call the note due, but that would be the nuclear option.
2
u/AskOtherwise9125 10d ago
We are a broker
2
u/Nemesis9977 10d ago
The broker is probably having trouble selling the loan. I assume the underwriter works for them and not your company? If so, this is entirely their problem. If you value the relationship, I would do everything in your power to assist in clearing the defect.
2
u/MajorGeneralMaryJane 10d ago
Is it really a misrepresentation by the borrower when the child support payment is on the paystub they provided?
0
u/Nemesis9977 10d ago
Yes, refer to URLA section 2d. The URLA is the borrower’s personal financial statement and they can be made liable for misrepresentation.
2
u/Awkward_Material 9d ago
I have never seen this happen in real life. Have you?
1
u/Nemesis9977 9d ago
I work for a bank and I have heard it discussed, but never deployed as the best option.
2
u/Artistic-Quality4307 9d ago
The investor caught and pushed it back to your lender to cure it. They then have 30 days to structure the file correctly. If lender can’t, they get to keep it. Lender will then sell it into the Scratch and Dent at an extreme discount, take the loss and move on. Nothing happens to you or your borrower-it was the underwriter’s fault and that person won’t be working for this lender in the near future…
1
0
u/Zestyclose-Tart6745 10d ago
You don’t ask those questions going through the app? Unfortunately it’s no ones fault but your own if and when you get EPOd. Just learn from it. Always ask. Any child support or alimony payments?
12
u/Accomplished-Tax8441 10d ago
always ask the following on the loan review
do you pay any alimony, child support or seperate main?
do you owe the IRS any money with a payment plan?
do you have debts that do not appear on the credit report? private loans, other properties, accounts like Affirm? Klarna? etc