Tenant occupied - Lender wants me to check "owner occupied".

[PhillyApp]

Whatever you do it should be prompted from your client, not the homeowner.
If you change the occupancy, you should note the change and the reason for the change, I note it in the addendum.
Whenever there are questions regarding the occupancy of a property, you should include your scope for determining occupancy and the fact that you are relying on that scope to determine occupancy. For example, when I have a questionable one, I ask the person meeting me there who is the occupant, and list the fact that occupancy was determined through an interview with xxxx, which could not be verified beyond the interview, any concerns regarding occupancy should be addressed by the client.
We are not investigators and when I place something in my report, there is a valid reason and a process for determining what is in there as well as a disclaimer regarding the accuracy. I am here to determine market value.

 

[Mark K]

Leave the report checked as non-owner occupied.

I'd tell the client that they need to verify to their satisfaction the occupancy status via tax return (see if there is rental income/expense form included for the subject property) or other method.

If they're satisfied and instruct you to change it, do it and note the change in the report and the reason for doing so.

 

[Gregory Beck]

Ask him for the electric bill or telephone bill if it's a true 2nd home The bills address should be in his name.
Also take lots of pictures showing the bedrooms with all the beds don't comment, just show, let the lender
ask him why so many beds, Is it a 2nd home area? Vacation area where a lot of people buy 2nd vacation
homes. It's possible he rents it in season and uses it himself in off season.

 

[Peter LeQuire]

The house might be the owner's second house, but from the OP it doesn't seem to have the attributes of a second home. Other than the distance requirement (which is meaningless - people in this area, near the national park have second homes less than 15 miles from their principal residence), and the property manager mentioned in OP's #2, one could argue that this has can't be proven to not be a second home. I would be very reluctant to try to use the lawyer's "you can't prove it" ploy and try to pass this off and accept direction from the lender (isn't that what HVCC & DF are all about anyway?) about something you've observed that. Particularly since the loan's pricing and risk are markedly increased if the property is a rental house.

I read the requirements for second home loans as requiring compliance with all of the criteria: it seems that, from what the OP described, this property doesn't meet at least 2 of them - exclusive control (since there are tenants in it). not a rental, and possibly 2 others - distance and a management agreement.




Second Home Requirements


Must be located a reasonable distance away from the borrower’s principal

residence.

Must be occupied by the borrower for some portion of the year.

Is restricted to one-unit dwellings.

Must be suitable for year-round occupancy.

The borrower must have exclusive control over the property.

Must not be rental property or a timeshare arrangement.

Cannot be subject to any agreements that give a management firm control over the

occupancy of the property.

 

[factsandtruth]

I'd ask why did the property manager meet me at the site instead of the borrower? Even if they claim he is letting his "friends" live there for free, it is still not "owner occupied"

Occupancy fraud was a major issue in the last crash. We probably all saw a lot of it, people have no problem walking away from homes they don't live in. And when you decide to buy 10 homes as "owner occupied" then the market crashes, you simply walk away from 9 of them. And everyone involved along the way, from borrower to lender had no problem lying on applications. It was only ever the appraisers that tried to do the right thing.


And as usual, we got punished.

I agree with you...

 

[glenn walker]

Too much liability for the appraiser to be playing occupancy police. First the lender knows the owner has a different mailing address etc. The UW always runs a check to see if address is same as where the owner lives. Second the owner may not own another home and does a lot of business travel and uses the home on weekends or when in the country. Third in the event the owner really does live there with room-mates or has a bunch of grown children he would have one hell of a good lawsuit to file against the appraiser who just killed his loan based on making assumptions that were not correct. Since the owner has a copy of the appraisal it would not be a problem for him to go down to his local real estate attorney and make his case. IN MY OPINION I WOULD HAVE THE LENDER send me a E-mail telling me the property is owner occupied and remove the tenant talk mark the owner occupied box and place the lenders communication in your work file. REMEMBER all borrowers sign a statement with loan app or docs stating the home is either owner occupied , a second home or a rental property. It would be a real nightmare if the appraiser ended up in a court and his 5 grown children showed up with mom and pop and testified they all live rent free. ** REMEMBER THE BURDEN OFF PROOF IS NOW ON THE APPRAISERS SHOULDERS THE OWNER AND LENDER ARE THE PLAINTIFF AND THE APPRAISER IS THE DEFENDANT. P.S. I am in California and we are a very litigious state this may not apply to folks in other states but in California this could end up as a quick discrimination issue.

 

[factsandtruth]

I've seen plenty of cases where applicants are actually getting prosecuted and going to jail for fraud on Mortgage applications....

 

[factsandtruth]

Check out Mortgagefraudblog.com there are plenty of mortgage fraud/application cases....

 

[glenn walker]

Agree there is always mortgage fraud and I work with attorneys who deal with some of those cases. The issue here is not about mortgage fraud. The lender does all and more background checks on a borrower than simply occupancy. Since the property in question shows a different mailing address etc it's not a hidden factor. If in fact it's a second home the owner may also have the tax and utilities sent to another address. The go go days of 2000-2007 are long gone and it's almost impossible to buy multiple owner occupied houses and not get caught. But in summary once again this is not about mortgage fraud the lender knows the situation. The issue is about liability for the appraiser to make statements of fact when it's possible the owner does live in the house or its a second home. Like I stated in a previous post there is way to much liability on the appraisers shoulders to determine the owner is not telling the truth. Nobody is coming after the appraiser for occupancy issue especially if the appraiser has a written communication from the lender telling him the property is either owner occupied or a second home.

 

[Peter LeQuire]

A lot of what appraisers put in reports are not necessarily statements of fact - they are conclusions based on what is observed. The greater liability would attach to an appraiser modifying an appraisal report, after drawing a correct conclusion about occupancy and then changing the conclusion when instructed by the lender. The conclusion isn't a "statement of fact". If I were in the OP's position, and convinced that I had some obligation to go beyond what I'd observed and "prove" that the property was a second home, I'd have the lender client obtain from the applicant the information that would establish that the occupancy status of the property met all of the criteria required of the loan program, and review it: if that were convincing, I'd probably change the indication of occupancy. If it wasn't, I wouldn't.