Why Is My Mortgage Loan Officer so Nosy?

Why Is My Mortgage Loan Officer so Nosy?

When applying for a home loan, you expect your mortgage loan officer to ask about your income and discuss your credit score. However, some questions might feel more intrusive than others. How much of your privacy is on the table when you apply to buy or refinance a home?

Here are some common nosy questions you may receive, how to answer (or not answer) them and why the information is (or isn’t) necessary:

How old are you?

Age discrimination is illegal in the U.S. If you’re 90 years old and qualify for a 30-year mortgage, you can receive a 30-year mortgage.

Lenders are required to obtain your age in writing, because if you’re not at least 18 years old, you may not be legally held to the terms of your mortgage. In addition, some names are extremely common, and age helps lenders pull your credit report, as credit data is not always tied to your Social Security number alone. Here is the answer from Experian to the inquiry:

Dear Experian,

I am writing from an employee assistance program company. We help employees find answers and resources to deal with various personal problems. An employee from one of our client companies has the same name as his father. The son and father are having their credit information intermixed. How can they get this corrected, and is there anything they can do to help prevent this from happening in the future?

– IMB

 

Dear IMB,

The most common cause of mixed credit files is a father-son relationship in which the father and son share the same name but don’t always use a generational title, such as junior or senior.

Matching names, particularly when the generation is not provided, can be very difficult. This is especially true when the father and son share the same address. In some instances, even when the birthdate is provided with the account identification, they even share a similar birth month and day. When there is not enough information to clearly differentiate between the individuals, account information can get added to the incorrect credit history, resulting in a mixed credit file.

The father and son both should request copies of their personal credit histories and follow the instructions for disputing information. The files will then be “flagged” to help prevent the problem from recurring in the future.

The most important thing that anyone can do to prevent a mixed file situation is to be consistent and thorough in providing identifying information. I recommend using your full, given name as it appears on your birth certificate, even if you don’t like it. If your name includes a generation, always use it, even when you are the senior.

If you don’t use your full given name, always use the same nickname. For instance, if your name is Robert David Smith, but you prefer Bob, always use Bob Smith when you apply for credit. Don’t use Robert on one application, Bob on a second, David on a third and Dave on yet another.

Also provide all of the identifying information asked for on your application, including your complete address, previous addresses, birth date, and Social Security number. Experian does not match to a single piece of information. Instead, it matches all of the information you provide with the identifying information it has in its credit reporting system.

The more pieces of identifying information that can be matched, the less likely a problem with mixed information will occur.

Are you married, unmarried or separated?

Why is your marital status anyone’s business but your own? There are several reasons. If you apply for a government-backed mortgage and live in a community property state, your spouse’s credit history and debts are relevant. For instance, they can take on debt that obligates you, which can affect your debt-to-income ratios.

If you’re divorced, you may have child support or alimony obligations. Those payments affect your debt-to-income ratio when your mortgage is underwritten, so you’ll probably be asked for a copy of your divorce decree. If you’re separated, you need a legal separation agreement specifying who receives what and who pays what.

Finally, lenders need your marital status to make sure your mortgage documents are drawn legally and the title is issued correctly.

Are you involved in a lawsuit?

If you’re a plaintiff or a defendant, you’re involved in a lawsuit. Being sued or suing someone doesn’t usually mean you’ll be turned down for a home loan; however, it does trigger more nosy questions, such as:

  • Are you suing or being sued?
  • How much money is involved?
  • Is there insurance to cover a possible judgment?
  • Are there counterclaims?
  • How strong is your case?

In most cases, a letter from your attorney or insurance company can take care of the issue. Lenders need to know this information, because there may be a contingent liability, a debt that could adversely affect your financial health.

How many dependents do you have and what are their ages?

Some government-backed loans require this information. In addition, your lender may be able to use this information to find you benefits, like down payment assistance, subsidized mortgage rates and mortgage credit certificates.

For example, the Veterans Affairs (VA) mortgage program allows lenders to use one of two methods for determining your income eligibility. The first is the standard debt-to-income ratio, and the second is the residual income calculation. The residual income is often the more forgiving of the two, but to use it, your lender needs to include dependents in the formula.

Loans from the U.S. Department of Agriculture Rural Development also use household size when determining your eligibility.

What’s your ethnicity or race?

The final question on the standard mortgage application pertains to your racial makeup. You’re not required to answer this one, but before you decide to skip it, understand that whoever takes your application must check the box, and this person will have to guess your ethnicity.

It may sound crazy, but your lender must supply this information to prevent discrimination. The data is collected for millions of applicants and analyzed for patterns that could be related to racial discrimination. Providing this information helps the government discover and prevent discrimination.

What can’t your mortgage loan officer ask you?

Under the Equal Credit Opportunity Act (ECOA), some subjects are off-limits. For instance, you can’t be grilled about your health, even though it can have a major effect on your ability to repay a loan. However, you may choose to disclose a health issue if it caused you to have credit problems that have since been resolved. In this case, illness may be considered an extenuating circumstance, allowing the lender to approve an application that might otherwise be declined.

Lenders may not ask about your family planning. Even if you’re obviously pregnant, your lender isn’t allowed to ask about your pregnancy or if either parent plans to stop working after the child is born. By law, mortgage lenders must assume working parents will continue to work after childbirth with the same hours and income, unless the applicants volunteer this will not be the case.

If you’re currently on a family medical leave of absence, lenders can’t assume you won’t return to the workforce and deny or delay your application. Several of the nation’s largest mortgage lenders found this out the hard way when they were forced to pay huge fines for doing so.

What can you do if a question seems illegal?

ECOA was created to ensure mortgage applicants receive fair treatment. If you believe you’re being asked for information illegally, you have a few choices:

  1. You can simply answer the question, which is probably the easiest response if you don’t mind answering and don’t believe the answer will harm your chances.
  2. You can refuse to answer the question and follow up with the lender or the government.
  3. You can ask for the reason behind the inquiry and choose to answer based on the reasoning.

If you believe you’ve been discriminated against, you can file an ECOA claim with the Consumer Financial Protection Bureau (CFPB) online.

 


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