I have never heard of having to write a letter to the mortgage company explaining why a person needed a home loan and certain family circumstances associated with this loan. But that is the story coming from the New York Times as a Linda Falcao and her husband were asked to write a motivation letter on why they were making a home purchase and the family status while making the purchase.
Besides asking for information about their family plans, which was paired with questions about plans to change the “property size,” Wells Fargo also requested that the letter include information that supported the fact that the property, in Glen Mills, Pa., would be their primary residence. The bank also asked them to include their commuting distances to work, as well as other properties that they may own in the area. The request for the so-called motivational letter was included in the bank’s mortgage commitment letter, which offered to approve their loan if they answered the bank’s questions and provided other documentation.
A Wells Fargo spokesman said that motivation letters were generally requested when the loan underwriter had more questions about a borrower’s “occupancy intentions.” For instance, he said the company might request such a letter when a family’s existing home is not yet sold and it wants the buyer to show that the new home will indeed serve as the primary residence. via the NY Times
There are certain questions that federal lending standards prohibit lenders from asking. The Fair Housing Act prohibits lending based on disability, sex, or family status, yet Wells Fargo seemed to have crossed that line.
We all know lending has tightened up these days and borrowers are willing to divulge more information to get a home loan. That is not the issue. The problem is when the banks cross the line.
I think Wells Fargo might have in this situation.
No related posts.
{ 10 comments… read them below or add one }
Tom, thanks for writing about this, I hope others who have experienced what we did will contact HUD. W/r/t to WF’s assertion that the motivation for this requirement is that the “family’s existing home is not yet sold,” I ask you, on the day you go to apply for the mortgage on your new home, whose old home IS sold at that point? Don’t most people (like us) wait to put their old home on the market until they’ve found a new house, so they have a place to live? WF continued to insist on this requirement (we didn’t provide the letter right away, hoping they would come to their senses and revoke the requirement that we give it) even after we had a signed A/S on our old house- how could we have possibly held onto our old house at that point? Aside from the illegality issue, which is not inconsequential, how is our economy going to get moving again if lenders treat qualified borrowers like this? Thanks for bringing attention to this subject, Linda
Wow, this is the type of stuff that insults people. It’s like they expect a borrower to grovel for a loan now. Don’t banks want to make money any more?
I don’t think it’s actually illegal though because this isn’t discrimination (like questions of disability or sex), but it may be an invasion of privacy. At the very least, it’s not good for customer relations. I would consider getting a loan from another bank if I felt mine was treating me with disrespect.
This is really a bad thing which is done to Linda Falcao’s family because if a person is requesting for a loan then it mean’s he/she is in need of it but I think this is done to them just because they have not sold their old home and they have requested for the new home loan. but in any case if a that bank is having any problems in giving loan you can opt for some other bank.
Articles like these put the consumer in the dirver seat?very important.
I'm not sure that Wells Fargo has crossed the legal line with their request for a motivation letter (and other items), but if I were the buyer, I wouldn't be happy about having to provide the additional paperwork. If Wells Fargo asked me for all that extra paperwork, it just might inspire me to go to the competition.
I know that Wells Fargo requesting a motivation letter is a hassle and more unnecessary paperwork, but I was just curious what would be illegal about requesting this information. Thanks.
Thanks for sharing this story,It is not fair that a person will apply for the home loan needs a lot of explanation why the apply for that?it is understandable, she/ he apply because they want to have a new home and need cash to buy or build a new home for his family.and what is the purpose why they are asking a mortgage letter?will intact the answer is already given.
To respond to questions re: why is it a problem to ask about "increase/decrease in family size" (NOT the motivational letter itself, but this particular query IN the motivational letter), please see this quote from the original NYT blog post:
"Offensive or not, basing a loan decision on a borrower’s family status or future plans is also against the law.
It violates the Fair Housing Act, a law enforced by the Department of Housing and Development, which prohibits discrimination in lending based on disability, sex or family status — including pregnancy or having children in the family.
“The question itself certainly suggests that the lender is violating the Fair Housing Act by making decisions based on their familial status,” said a federal investigator who would speak only on the condition of anonymity."
hope this helps,
Linda Falcao
Give me a break. You peeps are so ignorant. This is FAR from a Wells Fargo thing. All the lenders do it now, BofA, Citi, etc, etc. And why? Because Fannie/Freddie require such because you would not believe how many people are either doing the jump and dump or buying new primary residences that are nothing more than investment purchases in which the borrower lies and says they will live there to get the better rate. And here's why the lenders ask for such and must ask for such:
http://online.wsj.com/article/NA_WSJ_PUB:SB100014…
I was trying to do a refinance with Wells Fargo a year after my husband died, I have paid the mortgage on time for a year and have a credit score of 790. Wells Fargo is requesting 12 months of bank statements also there were four large deposit in my checking account which they are requesting proof of the deposits, I explained that they were insurance checks & CD's that matured, but because i' m not able to provide proof my refinancing is being declined. I have been a customer of Wells Fargo for over 20 years & paid one loan off, it is hard to believe that they are not allowing me to refinance because I'm not able to to provide company of these transactions.