Wednesday, May 20, 2020

Wells Fargo Kills My Rental Prop Refi Due To Last Minute Change In Lending

I was minding my own business one day in early March, prior to even the earliest of measures to stay-at-home, when I received a phone call.  It was a Well Fargo agent by the name of Will.  I won't share his last name because that wouldn't be nice.  Will wanted to know if I was interested in refinancing one of my rental properties.  Wells Fargo owns the note so I thought, Hey...why not.  I was already in the process of refinancing my personal residence with Blue Spot Home Loans and that was going great.  I locked in at 3.3%, down from 5.125%.

Mortgage Refinance 101: What It Is and When You Should Do It ...

The rental property details

The rental property in question is my best performer.  I'd once already refinanced it, using Well Fargo, and taken $24K in cash-out.  This was back in 2018.  The refi process had resulted in an increased rate to 6.25%, 2018 rates.  This was high, but I was still cash-flowing nicely due to the rental market in Cordova, TN rising.  The property had appraised at $155K back in 2018.  I quickly looked on Zillow and other sites to see if there was any other additional appreciation to be had.  Comparable sales showed that properties in the same neighborhood had sold for $170K!  Holy smokes!  I said to myself.  I could do a cash-out refi once again and get a lower interest rate at the same time.

Will said I could get 5.125% now.  So I turned myself into a document uploading machine.  Wells Fargo would send me an email requesting documents, and I'd complete the "task," that same day.  It took like three weeks to get my first actual, non-automated response from Wells Fargo.  The Mortgage Processor, a woman by the name of Leticia, introduced herself and said she'd be taking over my application.  This was in late March.  I knew things were slow because of all the people attempting to do what I was doing.

In early April I started to worry.  Leticia had gone silent.  The reports of Covid19 leveling every industry in sight alarmed me.  I emailed Leticia and requested that she order the appraisal of my rental property asap!  I explained to her that I didn't want the value of my property to go down because of people losing jobs.  Finally, some time in late April, the appraisal was ordered.  I spent about $650 and crossed my fingers.  Remember...appraisals make or break deals.  If the property doesn't appraise at the price you need it to, the deal has to be re-structured.  I wanted $14K in cash-out and needed the price to come in at $170K.

Boom!  The property appraised at my price.  Leticia gave me an update, stating we would close by the end of May.  This was the slowest refi process I had ever been a part of.  It would be almost three months from start to finish.  But again, Covid19.

Then there was confusion.  Will called me in early May to tell me we could lock in at 5% now because the rates had gone down.  I inquired about the $14K cash-out, as had been stated in the disclosure forms that Well Fargo sent me.  I had a copy of it.  Will had not seen it.  He pulled it up on his screen and noticed it.  He said that the application was supposed to be simply to lower the rate, and not pull cash out.  He had to talk to Leticia and his boss to see if he could change it to a cash-out app.  Mind you, this was in the disclosure forms that both my wife and I signed, and agreed to!

Another week went by.  Will hadn't gotten back to me with an answer.  Leticia emailed me on Friday of last week.  She stated in her email that Will would call me and explain the outcome.  To this point, I only imagined one of two options: 1) I get the 5% rate and $14K cash-out or 2) I get the 5% rate only.  Will called me on Monday of this week.

He starts to explain to me that due to recent changes, Wells Fargo couldn't approve my cash-out loan.  Okay, no biggie, I thought.  I'll just take the 5% rate refi.  When I asked about just getting my rate lower, Will begins to explain that he couldn't do that for me either.  I was pissed now!

He explains that Wells Fargo decided to not approve any current or future applications where a borrower declares income from rental properties. 

Son of a bitch!  I'd spent at least 4 hours of my life finding docs and making sure they were PDF, uploading them, Docusigning legal documents, and answering emails FOR NOTHING.  I told Will that I was not happy, considering that a) it was he who had called me out of the blue and b) I was ready to close back in April had Leticia been faster at her job and not ghosted me for weeks.  (Once I left a message with her supervisor).

Will was apologetic and I could tell I was not his first let-down call.  He said to me that he would talk to his boss about the possibility of getting the cost of the appraisal refunded to me.  That's where we parted.

Mortgage Refinance Activity On the Decline

Out today is an article that explains why refinance activity was down 6.3% with the week ending on May 15th.  Sure enough, there is mention of lending standards changing among lenders.

Look, I get that banks want to ensure they take on performing loans.  I get that they see many people not being able to pay their rents, affecting landlord's bottom lines.  But to make a decision that affects every single real-estate investor, regardless of their individual circumstances, isn't right!  I have had all of my tenants pay their rent up to this point.  My rental properties are in a state that had limited closures.  Thank you great state of Tennessee!

Many real-estate investors have both W2 (salary from a job) and 1099 (from rental properties) income.  Responsible real estate investors keep enough cash on hand to cover their rents for several months.  I'm one of them!  I know I'm not the only one out there that this happened to.

Wells Fargo has all the right to change their lending standards.  It's good business in times like these.  But don't waste people's time.  They should've allowed loans in process to close and alerted new borrowers, those applying in mid-April for example.  This is just another example of Wells Fargo horrible customer service.  They had their reputation completely blighted by the news of their agents up-selling products and also creating fake accounts in late 2016.  Now they go and do this.

Shame on Wells Fargo!  Lousy, lousy, lousy, customer service.  Avoid doing business with them if at all possible.

If you had something similar happen to you with Wells Fargo, please comment below.  Thanks for reading.

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