Income approach on URAR 1004 Fannie Mae

[The Scholar]

If you get a 1004 assignment for a refi and you find out that the property is tenant occupied would you automatically do an income approach or only do it if the lender requests it?

 

[J Grant]

No- just disclose it is rented but do not need to do an income approach

if lender asks for it they usually want a rental survey done .

 

[Terrel L. Shields]

And if they want it post-report then unless they asked for it in the engagement letter, it is an extra charge.

 

[glenn walker]

I do not police who is a tenant-The borrower-sighs essentially a affidavit that says they occupy the property at least X- % percentage of the time , if a post closing review shows they are not at that property and live somewhere else they broke a Federal Law and the lender "in theory can- call their loan due. In the real world we all know people play games BUT the risk for the appraiser is to say the occupant is a tenant , and the borrower comes back and say no that's my Uncle-Cousin--Son-daughter who let the appraiser into the house while I was on business. This is very big in the areas where there are large immigrant populations.

I often do reports where the owners-buyers-sellers all have the same last names. In one Asian community there is one specific last name that is like 20% of the community. I decided after my nephew handled a lawsuit where an-appraiser claimed the occupant was a tenant and the borrowers loan was declined. The borrower sued him and he was awarded damages, saying the appraiser had targeted him because of his race and that his last name was very common. The tenant had told the appraiser She rented it but in her deposition , She said she did not understand and in her Country that did not mean you paid rent. Anyway the poor appraiser was hammered , declared a racist blah, blah, blah. My nephew the attorney said what ever you do -never be the occupancy police- If the lender says it's owner occupied that's there problem and they can deal with it if something goes south down the road.

 

[Andee]

I do not police who is a tenant-The borrower-sighs essentially a affidavit that says they occupy the property at least X- % percentage of the time , if a post closing review shows they are not at that property and live somewhere else they broke a Federal Law and the lender "in theory can- call their loan due. In the real world we all know people play games BUT the risk for the appraiser is to say the occupant is a tenant , and the borrower comes back and say no that's my Uncle-Cousin--Son-daughter who let the appraiser into the house while I was on business. This is very big in the areas where there are large immigrant populations.

I often do reports where the owners-buyers-sellers all have the same last names. In one Asian community there is one specific last name that is like 20% of the community. I decided after my nephew handled a lawsuit where an-appraiser claimed the occupant was a tenant and the borrowers loan was declined. The borrower sued him and he was awarded damages, saying the appraiser had targeted him because of his race and that his last name was very common. The tenant had told the appraiser She rented it but in her deposition , She said she did not understand and in her Country that did not mean you paid rent. Anyway the poor appraiser was hammered , declared a racist blah, blah, blah. My nephew the attorney said what ever you do -never be the occupancy police- If the lender says it's owner occupied that's there problem and they can deal with it if something goes south down the road.

Good policy to have unless they are straight up asking for a 1007 or 216 to go along with the 1004. These lenders have ways of finding out the property is occupied or not by the borrower. I used to work for one of the "Big Lenders" in California on that end in the 90's, part of my job was to actually determine occupancy on new loans. The majority of the time they would have to provide an electric bill that showed the owners name, billing address, and property address (because most landlords don't want to pay for the electricity) when they couldn't provide it, we gave them the option to refinance the loan as a tenant occupied property or pay down the current loan to under 80% so it was no longer a federally guaranteed mortgage.

 

[Fernando]

I did an appraisal in which the owner said it's rented. Lender didn't request a 1007.
I did the appraisal as tenant occupied because I asked directly to owner and he said its rented.
Haven't heard from lender in past few weeks asking for 1007.

 

[Andee]

I did an appraisal in which the owner said it's rented. Lender didn't request a 1007.
I did the appraisal as tenant occupied because I asked directly to owner and he said its rented.
Haven't heard from lender in past few weeks asking for 1007.

Some lenders don't care, they just want a value on the property, rented or not. I've done properties that the Lender knew were rentals but was not concerned with having a 1007, I straight asked if they wanted the form and the answer came back NO, for about 4 properties, same owner and lender for all properties.

 

[Fernando]

Some lenders don't care, they just want a value on the property, rented or not. I've done properties that the Lender knew were rentals but was not concerned with having a 1007, I straight asked if they wanted the form and the answer came back NO, for about 4 properties, same owner and lender for all properties.

I always thought all nonowners needed a 1007 from my experience.
So if the borrower is so strong financially, the lender won't need a 1007?

 

[Andee]

I always thought all nonowners needed a 1007 from my experience.
So if the borrower is so strong financially, the lender won't need a 1007?

I'm not sure what the thought process was behind it, I just did what they asked. I'm guessing he had rent rolls and bank statements to show that he received enough in rent to cover all costs and that they were somewhat aligned with the market, but that's just my guess. I don't know the whole story, I just know that I met his dad for access to one of the properties, single guy who worked investing his money, and these were refinances. This also was not a Mortgage Company that hired the AMC to assign work, with a loan that would eventually sell to another lender to take on the servicing, it was the actual bank that was funding the loan (smaller bank here in TX) that I did these for.

 

[Carnivore]

I am not sure how or why they give the Borrower a specific Interest Rate for a loan. It used to be if the property was not your principal residence then your Loan Interest Rate was Higher. It makes sense that if you run into hard times, you will always do your best to make the payment on your principal residence, even if that meant not paying your rental property mortgage payment. Risk Management.