After years of anything goes loans-writing, the pendulum has swung far, far, in the other direction. Patrick tells the story of how his loan with Wells Fargo was denied, 1 day before he was set to close on a new condo. Even though he has an 800 credit score and was putting 20% down, this hiccup was enough to make Wells Fargo back up. And because of it, he and his five-month pregnant wife now have one week to find a new place to live.
I’ve been a Wells Fargo customer for 15 years. Recently, I applied for a home loan with Wells Fargo. I’m a well-qualified buyer and planned on putting 20% down on the condo. I did all my paperwork, turned it into WF one month prior to close. I prepared to move. I packed, and filled out the exit paperwork to my current apartment. My wife and I where excited to be home (condo) owners! We we’re buying it because we needed more space as my wife is 5 months pregnant. As the closing date neared, the lender said everything was in order, but they would need to check to see whether the Home Owners Association of the condo association carried Fidelity Insurance.
Fidelity insurance is a small part of overall insurance. It’s like flood insurance for your home; if you’re not in a flood plane, the flood insurance is somewhat optional. I live in Texas, and it is not a law to carry Fidelity insurance. Fidelity covers the loss of embezzlement by employees. In this case, the HOA does not personally handle any of the money sent to them each month. Oftentimes, it is common for HOAs to use a vendor for accounting and billing and money-handling. This vendor has proof of Fidelity Insurance. The HOA does not handle the money, and therefore does not carry the insurance. They have the 3rd parties insurance covering it.
Wells Fargo denied my loan 1 day before closing because of this. The felt it was too risky. Apparently 20% down, 800 credit score, and almost 30K in the bank is too risky for Wells Fargo. What is truly risky is being a customer of Wells Fargo, as I did everything right with the loan, the HOA did due diligence, the 3rd party had the correct insurance, and now I have to tell my pregnant wife we have one week to move out.