Borrower Lying About Occupancy Status

[Carnivore]

The only problem I have with this form is that it's fine for a purchase - but on a refinance the owner needs to be occupying the property AT THE TIME OF CLOSING. They do not have the option of saying they will move in within 30 days.

What would the lender say in 30 days when they say they've changed their mind?

Good Point, I modified it to cover you thought!

go look at the new improved version above.

 

[Joanne Rauenzahn]

Ah that's better - tho I would never ask an appraiser to have anything like that done. This is usually a mortgage closing document as well as the fact that it is marked on an application. Any underwriter worth her title will catch this kind of situation (believe me I have MANY times). I might appreciate if my appraiser gave me a heads up on a tenant situation (and I HAVE had it done) but I would never fault them for not.

I had a file that ran for months where my LO took the app as owner occupied when the borrower's main residence was in a southern state. They maintain a business in MI so we tried to do it as a 2nd home - until the appraisal came in marked tenant. (he even tried telling me the tenants were employees and the owners still stayed there when they were in town_ Later on my LO insisted they had kicked out the tenants for not paying and now could we proceed as a 2nd home. I also was fortunate enough to have some additional knowledge that their business was not doing well and their cash flow was really struggling. Knowing that they would most assuredly be renting it out again I was NOT going to sell this to an investor and take a chance on anything coming back to haunt me in the future. Ok long enough sorry to run on!

 

[airphoto]

Freeform text works fine on the occupancy choices .. just cover over one choice with 'undetermined.'

 

[Joanne Rauenzahn]

with no explanation? might be a reason to request an addendum

 

[hastalavista]

Both the borrower and agent told us they would give us all kinds of information (utility bill, letter, etc.) showing that the borrower did live there. Our reply was that we are required to provide our opinion (appraiser did some follow-up research and determined that the occupant had lived in the house prior to the borrower buying it) and that any argument to the contrary needs to be addressed to the UW; not us. The UW can make a decision if it is owner-occupied or not.

I do also believe that it's the lender's responsibility (and yeah the buck usually stopa at the underwriter) to make the call and be as sure as they can about the occupant - the non-homestead tax status, any addresses on the bank statement, paystub, W-2's - should be a strong indicator!

Joanne-

May I clone you and then infiltrate you into all my clients?:new_smile-l:

 

[Josh Shapiro]

Who here asks for ID of the home owner /borrower / person met at subject property? I know I don't. Lets say this house was well maintained, looked like a "family"house with single beds in each room, a king in the master, didn't have 8 kids playing soccer out front and looked like it had a "womans" touch, and the father was sitting on the front porch waiting for your arrival. Would you have any question that this was an owner occupied home. Does it have anything to do with the value of the home? Not at all. Mark it owner occupied and put a statement in the addendum that as per the owner of the home is owner occupied and that if this statement is false than the appraisal will be null and void.

 

[BenLuby]

Okay, here is my question on this particular issue, then. We've already heard of insurance agents using the cost approach for insurance purposes, which is messy for the appraiser at times, it seems.
Now, if the insurer uses the appraisers check of tenant/owner as verification of the status, then the property gets ruined, who is responsible? And not the usual finger pointing, either. What would a lawyer say?
I have a feeling that a good lawyer could use due diligence and pin this on the appraiser. What say the wise heads?

 

[Webbed Feet]

Darryl

Assuming a 1004 ver 3/05 published by a GSE. How do you propose to do away with or side step the Supplemental Standards Rule in USPAP?

http://commerce.appraisalfoundation.org/html/2006%20USPAP/SUPPLEMENTAL_STANDARDS_RULE.htm

<snip>

Mr. Picarsic,

Since you are declaring the applicability of the S.S. Rule here, do you care to document what S.S. you are talking about? Because I know of none that are applicable to the occupancy boxes.

Your affidavit is worthless if it's not notorized. Besides, we want to set a precedence it is the responsibility of appraisers to obtain affidavits from borrowers? That's crazy. I happen to stand on the side of the issue that believes those occupancy boxes should be removed from all the residential forms or a "Unknown" box for that should be added.

Barry Dayton

 

[Couch Potato]

Who here asks for ID of the home owner /borrower / person met at subject property? I know I don't. Lets say this house was well maintained, looked like a "family"house with single beds in each room, a king in the master, didn't have 8 kids playing soccer out front and looked like it had a "womans" touch, and the father was sitting on the front porch waiting for your arrival. Would you have any question that this was an owner occupied home. Does it have anything to do with the value of the home? Not at all. Mark it owner occupied and put a statement in the addendum that as per the owner of the home is owner occupied and that if this statement is false than the appraisal will be null and void.

Generally I ask for a driver's license. I need the number to put on the check to prove who wrote the check. :new_smile-l:

 

[hastalavista]

Generally I ask for a driver's license. I need the number to put on the check to prove who wrote the check. :new_smile-l:

IMO, the purpose/intended use of our reports (mortgage finance transaction, required to be reported on a Fannie/Freddie current form) is two fold:
1. Provide information to the intended user necessary for it to make a lending decision. Part of this information includes data regarding the subject's eligibility for a particular loan program/type.
2. Provide an opinion of value.

If the information requested/required (and, occupancy is specifically mentioned in Fannie's guidelines as Andrew points out) wasn't considered germane to the clients evaluation of the subject property, then we would just skip it and go to market and subject descriptions. That is not the case. Risk evaluation is part of the intended use of the appraisal report. And, it is riskier to loan on a non-owner occupied property than an owner occupied property.

I don't do a DNA test on the occupants. I do attempt to accurately describe what I see when I go to a property. Occupancy is a significant consideration (significant in terms of loan-type) for the intended user. If I were a lender, I would expect the appraiser to provide me with their unbiased and honest opinion of the subject's occupancy.

In the vast majority of the cases, occupancy isn't questioned; and, I'm sure, in some of those cases, I've been factually wrong and the subject was indeed not owner-occupied. But, at the time of the site visit, what I observed was consistent with owner-occupant and I reported it as observed.
It is only in those cases where there is significant doubt as to the occupancy that I "go against" what my client is telling me. Again, that is part of the engagement agreement and my responsibility to the intended user; one that I'm sure the intended user will hold me to if I fail to exercise due diligence in my reporting.

There is a gray area here; where we as individuals draw our lines is up to us. But I wouldn't want to characterize occupancy status as something non-significant or something that the intended user doesn't expect us to report diligently.