Mortgage Loan Originators

Preapproved: Well, It Sounded Good

Posted on Monday, February 07, 2011

MELISSA CALDERONE was ready for a fresh start when she made plans last year to move to Florida from New Jersey. Recently remarried, she signed a contract in mid-March on a house to be built in Windermere, Fla., by Pulte Homes, the nation’s largest homebuilder. The neighborhood had good schools for her three children and two stepchildren. It was also close to where Ms. Calderone’s parents lived.
Her local bank approved her for a mortgage. But then a Pulte Homes saleswoman told her that she would get a $4,000 credit toward closing costs if she took out a loan with the homebuilder’s banking unit instead. Ms. Calderone, 38, agreed. She deposited $20,000 in earnest money and set aside $80,000 more for a down payment on the $347,000 house. Her closing date, documents show, was scheduled for late summer, about six months later.
Then her troubles began. Although she had been “preapproved” by Pulte, the company ultimately denied her the loan. Then, contending that Ms. Calderone had defaulted on the purchase agreement by failing to close on time, Pulte kept her $20,000 deposit. The house went back on the market.
“They have my money and the house, which they are selling to somebody else,” Ms. Calderone said. “I have no house and no deposit.”
Asked about Ms. Calderone’s complaint, a spokeswoman for the PulteGroup declined to comment, citing concerns over customer privacy.
But the spokeswoman provided a general statement: “Preapproval does not guarantee the final approval or closing on the transaction, since a buyer’s financial situation can change during the homebuilding process or the buyer may be unable to verify certain aspects of his or her credit profile. If the buyer fails to close on his or her financing for any of these reasons, the purchase agreement allows the seller to retain the earnest money to offset any financial damages.”
But Ms. Calderone is not the only Pulte customer with this kind of complaint. Last year, the attorney general of Arizona filed a lawsuit against Pulte, contending that the company’s mortgage sales practices deceived consumers. That suit cited borrowers who thought, as Ms. Calderone did, that they had been approved for a mortgage when, in fact, they had not been. Those people lost their deposits as well.
“In the earlier contracts there was a 60-day period for refunds,” said Nancy M. Bonnell, the assistant attorney general for Arizona who litigated the matter against Pulte. “It seemed like the disapproval of the loans came after the 60-day period. Then consumers would find out they did not qualify for the loan or rate.”
Ms. Bonnell said that Pulte customers in her case forfeited deposits ranging from $2,500 to $25,000 each.
Even when a customer notified Pulte within the specified refund period, the company did not return deposits, according to the Arizona complaint. Some customers were told they had “prequalified” for a loan at one interest rate only to be charged a much higher rate when the loan came through, the complaint said. One customer was promised a 7 percent mortgage but received one carrying a rate of almost 14 percent, it said. Knowing she could not afford the loan, that customer canceled her purchase; Pulte refused to refund her deposit, the complaint said.
Pulte settled with the Arizona attorney general last August, without admitting or denying wrongdoing, Pulte agreed to pay $1.18 million, including restitution.
Under the terms of her contract with Pulte, Ms. Calderone had 45 days to cancel her purchase and get her deposit back. But as occurred in Arizona, her problems with Pulte Mortgage — indeed her first contact with the loan-processing unit — did not come until well after that period had ended.
E-mail correspondence between Ms. Calderone and Pulte shows that the lending company did not contact her until May 25, 2010 — some 67 days after she signed her contract. At that point, she began supplying documents, like the terms of her child-support agreement with her ex-husband, which was her only source of income.
Over the next three months, she continued to respond to questions and requests from Pulte, even when it asked for materials she had already submitted. Pulte also asked about small transactions in her bank account. Where did a $500 cash deposit come from, Pulte wondered? A wedding gift, Ms. Calderone replied.
AS the summer passed, Ms. Calderone kept supplying documents. But she was growing worried that she would be unable to move into the Windermere house by the Sept. 9 closing date. She was living with her parents, and a delay would mean her children could not attend the Windermere schools, where she had registered them.
During this back and forth, nothing changed in Ms. Calderone’s financial situation. At one point, the Pulte loan processor told Ms. Calderone that questions were arising because of new rules imposed by Fannie Mae and Freddie Mac, the mortgage finance giants. “Then she comes back to me saying ‘You haven’t been divorced for a year yet, so we can’t verify how much income you are getting every month,’ ” Ms. Calderone recalled.
It seemed to her like one big runaround. “I had the income; I had the credit score,” she said. “They preapproved me, and I had a closing date. To me, is seemed like they were looking for a reason not to complete the deal.”
The closing date came and went with no contact from Pulte, Ms. Calderone said. The extension she had received from the local school district, meanwhile, was set to expire on Sept. 23.
On Sept. 13, she received an e-mail from a Pulte representative saying the company was submitting her loan application to its regional underwriting manager for review. “I should know today,” the e-mail concluded.
But Ms. Calderone did not hear about her loan that day. About a week later, she received a phone call saying the loan had been denied. Unsure if her children would be able to stay in the local school, she canceled her contract and asked for her money back. She was told that because she had failed to live up to her end of the deal, Pulte would keep her $20,000.
In early December, after she wrote a letter complaining to Pulte’s chief executive, the company offered her a $10,000 credit on the purchase of another Pulte home. She declined. She and her family are now renting a home in south Florida.
By GRETCHEN MORGENSON, THE NEW YORK TIMES


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