Borrower Lying About Occupancy Status

[Alison Swain]

What do you do when the borrower tells the LO that she lives in the house, has filled out all her loan docs to that effect, yet it is very clear to you (the appraiser) that she is renting it out?

Here are the particulars:

1) Owner's mailing address (a street address, not a P.O. Box) is different than the subject address.

2) Owner does not receive homestead exemption on this property.

3) Owner's dad meets me for the appointment (he's not inside the house chilling, he's waiting in his truck).

4) About 6-8 young guys (early 20's) are all there, playing soccer in the yard, in and out of the house, etc.

5) All 4 bedrooms have 2 twin-size mattresses & box springs on the floor.

6) Absolutely nothing about the decor indicates a feminine touch.

7) Owner's father does not seem to have familiar, familial communication with the young men there.

My communication is limited due to father's broken English, young guys' insistance that they don't speak any English, and my inability to speak their language.

I KNOW, with 98% certainty, these guys are renting this house. Borrower insists she lives there too. Loan officer just says, "Well, she says she lives there and that's what she signed her name to."

How do I mark the form??? Tenant occupied or owner?

 

[hastalavista]

We just had a similar situation; borrower owns two houses on the same street. The appraiser concluded that the occupant of the house she appraised was the tenant; she indicated "tenant" on the report.

A. Loan agent threw a fit.
B. Borrower threw a fit- has canceled the CC charge (I'm not worried about that; we've never lost a disputed charge) and I'm sure will call and threaten to sue.

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.

Many say we are not the occupancy police, and I agree. However, we are the "eyes and ears" of the intended user- the lender. In our opinion, we did not make a mistake. We did provide the client with the method (go argue with the lender) to rectify the situation.

From what we heard, they are ordering another appraisal from someone else.

How you finalize your assignment is up to you. I don't want to penalize a borrower, and if I had a reasonable doubt, I'd give the borrower the benefit of that doubt. If I didn't have a reasonable doubt (which was the situation in our case above), I'd mark it as I considered it to be; in our case, that was tenant occupied.

I don't want to sound cavalier about this; client pressure is real, and I understand that. This is the type of situation that causes us to "fire" a client. You need to make a decision based on the information you have.

Good luck!

 

[Pamela Crowley (Florida)]

Get paid up front, mark it tenant occupied and explain why you believe that to be true. Let the games begin, get them to put what they want you to do in writing, and then report it at www.MortgageFraudWatchList.org

 

[JSmith43]

In a roommate situation, it is hard to know for sure. This is definitely an occupancy police situation.

I would have asked one of the alleged roommates, if they rented there, at the least. Maybe ask if it is month to month, yearly, or longer Maybe they were all adopted

You have to report likely tenant situations as likely tenant situations, IMO.

 

[Ross (CO)]

I have stated in prior postings on this very topic about occupancy verification....that we do what we can to gather information, and make judgment calls from what we know, and sense, and then indicate the appropriate check-box on the form. Unfortunately, as we all know, there is NO 4th check-box option for "other" or "unknown" ! I have stated that leaving those boxes completely un-checked just may be the only viable option with a supporting comment that "the appraiser is unable to determine the correct occupancy status for the subject property".....and submit the report as such.

If a client can not accept our conclusion of a "tenant" designation on the form then the client can surely convey to us a WRITTEN acknowledgment of the occupancy status for our workfile records.....and any subsequent change to our original report will have mention of that change (from our earlier designation) and the fact that we possess the client's signed-and-dated memo declaring the provided occupancy status that was clarified shortly after our report was submitted.

This occupancy status foot-trap which can be set for an unwitting appraiser joins with "purchase contract review" as being research elements aptly handled by our client since those tasks truly can conflict and shed bias upon the appraiser's freedom to deal with the market value issues only.....and leave that other client-stuff to their processors and underwriters. I really do NOT care who lives in and occupies the property, so any sparing of that particular check-box b.s. is perhaps just fine with most of us.

 

[Couch Potato]

My first step in such a situation is to search for other properties owned by the same individual. Most of the time, another residence shows up and I note the additional properties in the report. If the application contains a lie, that is mortgage fraud. Saying they lied is accusing them of fraud. Be sure you can prove that in court before you say the house is tenant occupied.

In a case like this one, if evidence is not easily found, in the form of another residence, I would demand information on the occupants observed at the residence from the client. If they will not confess to the attempted fraud, I would simply walk away from the assignment. It is a no win situation at that point. It's not worth the fee you would get.

 

[Caterina Platt]

Alison,

Here's my 'comprimise':

If Mrs. Borrower wants to insist she lives there, then here's what we'll do. In the occupancy box, I'm placing an asterisk in the Owner, and then I'll expand in my text addendum.

The borrower has supplied to the appraiser the attached
signed statement that she resides in this property as
her personal residence. The appraiser cannot confirm or
deny this statement.

Due to conflicting information found during the course of the appraiser's research, this occupancy cannot be stated one way or the other with the appraiser's comfort level of certainty. If this issue is of concern to the client, verification is suggested. ​

 

[The Warrior Monk]

This is a lender issue, not an appraisal issue, unless there is some type of long-term lease on the property.

I'd simply report the facts and let the lender deal with it. If the lender wants more from me, I require an affidavit from the owner stating the occupancy, and forward it to the lender.

 

[Vernon Martin]

If you are not in a position to dump any client that asks you to turn a blind eye to occupancy fraud, remember that many, if not most, residential loans are sold to third parties nowadays, so there is some liability to you as an appraiser for misrepresenting occupancy. I've been to several mortgage fraud conferences and have talked to some "loss mitigators" who aggressively pursue mortgage brokers, appraisers, etc. who they believe responsible for their losses.

In general I would advise appraisers to cultivate clients who genuinely want honest work, and then prove to them that you are the best one to provide it and protect them from loss, including loss from fraud.

Vernon Martin

 

[DH Wilson]

1) Owner's mailing address (a street address, not a P.O. Box) is different than the subject address. - snow bird or a legal or tax situation you are not aware of. I See this here where local owners have addresses in FL save about 50 percent in insurance and car taxes. They meet the legal requirement by doing their 30 days or so a year down south. My address does not match my home address.

2) Owner does not receive homestead exemption on this property.
May have 2nd house since homestead may be on other property. I think youre only allowed one i dont know if thats per state. No law against owning more than one home that I know of nor is there a requirement to have an exemption filed on either one anyhow. You might as well say "she doesnt have a 401k plan" (She could be protected by a corporate structure or legal scenario you are not aware of that negates the homestead.)

3) Owner's dad meets me for the appointment (he's not inside the house chilling, he's waiting in his truck). - owner is at work. My g/fs dad doesnt go inside when he is meeting someone at her house for her until they show up. - just respect for his daughters privacy

4) About 6-8 young guys (early 20's) are all there, playing soccer in the yard, in and out of the house, etc. - owners son is in college or is affiliated with the mafia, gang or what ever is prevalent for his ethnicity - or she is a well known soccer coach or she is a very very happy woman

5) All 4 bedrooms have 2 twin-size mattresses & box springs on the floor. - She hosts foreign exchange students and is divorced or a cultural thing. Ive done very expensive homes where every bed was on the floor - I wasnt going to ask why. - What would you do if you visited a house where there was a couch in every room?

6) Absolutely nothing about the decor indicates a feminine touch. - she could be a butch lesbian or a cultural thing. Im seen some europeans homes that have no decor what so ever - for some reason alot of people from countries than end in -vania are like that.

7) Owner's father does not seem to have familiar, familial communication with the young men there. - stepfather or dis functional family(because she is a lesbian), or he doesn't like college soccer players that hang out with his daughters foster child or exchange students.

My communication is limited due to father's broken English, young guys' insistance that they don't speak any English, and my inability to speak their language.

I KNOW, with 98% certainty, these guys are renting this house. Borrower insists she lives there too. Loan officer just says, "Well, she says she lives there and that's what she signed her name to." - What if she lets her son live there while she is shacking up with her boyfriend/girlfriend or whatever and the kid likes to party.

How do I mark the form??? Tenant occupied or owner?

Call the owner ask this question - Do you rent out your house? Its a yes or no answer. If she is the butch lesbian and playing around so her ex husband wont know about it (or the exchange student soccer place) it could be inferred that you are questioning her lifestyle choices leaving her 20yo son without parental supervision. Do not engage in any other line of questioning. If her answer is no - make a comment in your notes and you are done. If she says yes then you make a note and check the tenant box and you are done. IF you think she is lying, too bad. Your notes cover you. of course a roomate situation screws that scenario all together.

You are probably right - but if you're not, and you challenge her and the loan doesn't close and any of those above counter scenarios or better ones are partly true even in the tiny teenyist bit - then she could make sure your E&O plan is activated because you made an assumption based on your lack of exposure to her culture and lack of respect for her lifestyle etc etc. Theyll rake you on the language thing.

Based on your assumptions she has a better case against you than you do against her. Even though you are probably right.