Divining the Oracle of The Mortgage Law

It’s good to have friends in high places. I guess that is stating the obvious. But sometimes who those highly placed people may be, or where they show up, can be, not so obvious.

In my business, aid often comes in the guise of information … accurate and timely information. The problem sometimes originates in the many sets of lending rules – often confused, misquoted, misunderstood, conflicting and always subject to interpretation.

That’s where the “Highly Placed Beings come into the picture. I say “Beings,” but they are really more like Seers or Interpreters of the Mortgage Law.

One of the most reliable of these Seers is reached through dialing the FHA mortgage hotline for lenders. Sometime they answer in a man’s voice and other times a woman’s. The names will change but the incantation and rites remain constant. Only following the ancient ritual of call and response in the form of questions and answers about my “personal data,” only then am I permitted to address the oracle with my question.

Here is an example of a recent interaction. I begin. “If a borrower cannot qualify on their own income for a purchase loan, can another borrower co-sign and help pay for the loan even if they won’t occupy the property?”

I wait expectantly and hear indistinct clicking noises, which I assume are the dried bones being invoked and interpreted by the Oracle.

“Yes,” the incongruously cheerful voice chirps over the line. “But remember, the maximum mortgage is limited to 75 percent of the property’s value. However maximum financing up to 96.5 percent if the borrowers are related by blood marriage or law, such as spouses, parents-children, siblings, step-children, aunts-uncles, nieces-nephews or unrelated individuals who can document evidence of a longstanding substantial family-type relationships not arising out of the loan transaction” (sometimes Oracles can speak in italics).

Silence falls. I feel I need to respond but I have been momentarily stunned by so much information. Finally I hear myself squeak out “… Is that … all?”

“No … there is more … would you like me to read it?” The voice seems patient and helpful. Still, is it toying with me? Have I displeased it? I manage a reverential, “Please.”

The Oracle continues. “If a parent is selling to a child, the parent cannot be the coborrower with the child, unless the LTV is 75 percent or less.”

How Freudian, I think. I ask, “You mean to tell me that a parent can purchase with his/her child a home from themselves?”

“As long as the loan is less than 75 percent of the value home’s sale price,” say the bones.

“Can the selling parent gift equity to their child and also to themselves as co-borrower?”

There is a punctuated pause. The Oracle speaks again, this time adopting a puzzled tome. “The guidelines do not appear to address that. (“Guidelines” is Oracle-speak for bones and chicken entrails and the like, I think because it sounds more mysterious.) “You will have to consult your DU for further interpretation.”

I was then ceremoniously dismissed. “Would you like me to send you the guidelines which refers to these topics?”

I managed a “Yes please do.” I was a bit shocked, I don’t mind telling you, but I hid my emotion and thanked the Oracle for its time. The line went dead. Now I’ll have to go up the ladder another step and consult with another semi-divine being…the FHA Designated Underwriter!

Neil Funsch has been a mortgage broker for 18 years, the last five in Park Hill. He can be reached at 303-229-2684 or neil.funsch@gmail.com.