Loan Made with Bankers assurance's not upheld

I bought rental properties (single families and doubles) with credit cards. I rehabbed them and then refinanced them to pay off the credit cards. I was very judicious in my spending, I did all my homework in the buying area to make sure I didn't get alligators, and I did all the rehabbing personally...making my roperties THE nicest properties in their respective neighborhoods. When I had 5 properties (all bought with seller financing and rehabbed with credit cards) I wanted to refinance..but not unless I could buy more/rehab them/and refinance them too. I told the Loan Agent this, she called in the VP of the Bank, he said "Of course we'll do any refinancings for you in the future, we love your kind of people"...so I did the 5 property refinance. I went back 2 years later...and they wouldn't even talk to me, they gave me a we can't make the loans on these new properties because you have to many properties already letter. I had their verbal promise of new loans as long as my credit held and all payments were made (which they were and to which the loan officer (last I talked to her) is still willing to testify to). It cost me all of my properties and a subsequent bankruptcy. Isn't there anything I can do? [email protected]

No because there was no contract. And in mortgage financing, as you know, there must always be certain qualifications of the borrower and the property ie. credit check, income check, real estate appraisal etc. Also every mortgage lender must issue a loan commitment and various other docs ie. Truth in Lending Statement, Discloure Form etc.
So you were not even in the playing feld on this one.
That's why you did not apply for financing in the first place and used your credit cards instead.
You have no case as the lender had no obligation to you.

How about: 6.5 (1993) The Consumer Sales Practice Act represents an effort by the legislature to provide remedial relief to "individuals" against unfair or deceptive acts or practices in connection with consumer transactions and, as
such, is to be given a liberal construction: Buddies Inc. v. Fair, No. 62433 (8th Dist.), <=25> 1993 Ohio App. LEXIS 2386.

17. (1987) An act is deceptive under RC @ 1345.01 et seq. if it has thelikelihood of inducing a state of mind in the consumer that is not in accord with the facts: Crull v. Maple Park Body Shop, <=37> 36 OApp3d 153, 521 NE2d
1099

51. (1975) To violate the consumer sales practices act all that is necessary is for the supplier to make a representation which has no basis in fact. His ORC Ann. 1345.02 (Anderson 1996)

knowledge or intent at the time he makes the representation is immaterial. The intent of the new law is to indicate that a deceptive act or practice is such as has the likelihood of inducing a state of mind in the consumer that is not in accord with the facts. In other words the place to look to determine the presence of a deception is in the state of mind of the consumer, and not at the intent of the supplier. Thus, if the supplier does or says something, regardless of intent, which has the likelihood of inducing in the mind of the consumer a belief which is not in accord with the facts, then the act or statement is deceptive: Brown v. Bredenbeck, <=85> 2 OO3d 286 (CP).


I've got more....if you'd lke a larger look, head on over to http://www.siscom.net/~yotraj/R_Estate/Frontpage.html and you can gain a little more insight. By the way, are you a legal-legal expert? Pleas take no offnse in my asking...just curious as to your credentials. Mine can be found at http://www.johnreed.net. and thanks for answering! John

I took a larger look and my response is still the same. I suggest you look at the applicable Federal laws.

What is a legal-legal expert?
If you want to know my credentials on this website. Start a new post titled To: IAAL and Legal Beagle Re:HomeGuru
Then pose your question to them.

Thanks for the reply and I did as you requested. As I was researching for this case (I'm no Attorney) I recall (which I could find it again) a case (I believe Federal) which stated something to the affect that when a Bank involves itself with the decision making process a company makes and that decision predicates the direction that the company will take then the bank assumes a part of the risk of that decision....I wish I could remember the exact verbage used. In my wn case, I informed the Bank that I wanted NO loans UNLESS I could do future financings of more properties with them. At that time, almost every Bank (at least around here) sold all of their mortgages to Fannie Mae or Freddie Mac and they both have conditions in their arrangements with All Banks that they will not accept a mortgage written on an individual who already has 5 mortgages. I knew of this condition and that was why I went to this particular bank (they hold their own mortgages, and are the only Bank in this area that does, so the limits don't apply). I informed them that I knew of the Fannie Mae/Freddie Mac condition (which they acknowledged) and I went on to tell them that I liked doing the rehabs/refinancings, that I had been doing them for several years, but that unless I could get FUTURE financings on new projects, that I was not going to refinance any of my present holding with them, as the payments on the properties would increase substantially and the cash flow would not support them BUT if I did more properties, then the cash flow plus the equity I gained (from the rehabbing)(and the cash infusion from refinancing them) would more than cover any of my expenses. My business decision was predicated on their assurances of future financings. And they participated in my business decision making. I hope I'm making this understandable. Some of the applicable law I believe would be under commercial law (as this was a business I had been operating for almost 20 years and it was my sole source of income) Thanks again! john

Then that makes your case even weaker because the other banks sold their mortgages on the secondary market to Fannie and Freddie Mac, which is government backed and therefore have numerous restrictions. The bank that keeps the loans in their own portfolio or uses private investor money, has different criterion and qualifications which I am sure you did not accept. Because you did not really know what the terms and conditions of the loan application/acceptance/closing would be because you were not issued a loan committment. If you check into the banks procedure and protocol for approving a loan, there are various steps that the bank must take in order to approve the loan. For instance, the bank must have a completely filled out loan application, loan application/credit check fee, complete a credit check, depending on the type of loan, review a credit report, tax returns, pay stubs etc. and then go to loan committee for approval. This is where you will be also shot down. As there is always approval of the loan committee prior to any loan committment being issued to you by said bank.

I do not know of any rule handed down by FNMA or FHLMC that limits the number of investment properties one can own. I think the people you spoke with who told you Fannie & Freddie have a limit on the number of investment properties, were actually refering to their employers specific limitations.

Lenders place limitations on the numbers of loans they will grant to any one investor to limit exposure but I do not believe Fannie or Freddie does.

As for the rest of your comments I have no expertise regarding this area and am not an attorney so I'd depend more on HG's respsonse than mine.

My opinion is the same as HG's. Besides, the bank's got more attorney's than you do and much deeper pockets so even if you are right, they'd bury you in legal fees fighting your point. Furthermore I view your situation as someone who was asking for an opinion and received an opinion, not a contractual commitment. Perhaps the person should have offered a disclaimer that future borrowing opportunites are not guaranteed and are based on a credit review but at the same time if your financial future depended on the bank lending you additional capital you should have gotten more than a banker's opinion.

Thanks for the reply...a little history here...back in the 70's & 80's one could purchase a home that had an existing VA loan on it for less than $200 and the assumption of the debt on the property. The VA had not written their mortgages prior to this time with a clause in them that prohibited their assumption by anyone...for any reason. That's right, anyone with the administrative fee (aless than $200) could "assume" a VA mortgage without first getting a credit check, having a job, or any other "normal" criteria that one would expect to do today (ask an older Realtor). When this became "known", it was abused. Many, many people went out and bought as many properties as they could for rentals just by "assuming" the sellers mortgage. Add to this the ability to cultivate the friendship of a Real Estate Appraisor, and you have a license for fraud. There were many, many cases where someone went out and actually bout 50 or 200 (or more) properties for little or nothing, then had their appraiser friend appraise that property for more than it's worth, and then take that appraisal to the Bank and borrow more money against the property than the property would support. Since Banks used to follow the Fed's examples, many Banks (particularly the Saving & Loans) were also caught up in this same situation. I'm not talking small bucks here...with average house prices back then around $50,000, and property ownership following into major problems (the factories closed...the recession, etc.) you could pick up the family home (once worth $50,000) for $25,000 or less, then refinance it for 70 percent of $50,000 (and many times more) or $35,000...not bad for about 4 days of effort is it? This process eventually led to the Real Estate Debckle of the 80's where all the Saving & Loans went down the tubes. Individuals actuallu went out, bought, then refinanced hundreds (actually thousands) of properties, and then, without a clue as to how to manage them effectively (and in some cases with pre meditation), took the bucks offshore, and then filed bankruptcy on ALL of the mortgages, leaving the Banks, or the Govt. holding the properties. In 1983 (as best I can recall) the Fed changed it's lending policies to reflect the damage it had sustained by changing the VA loan assumption process to requiring any new buyer to undergo a credit check, and an income verification check, and set the rules in place for the 5 loan limit I previosly mentioned on any mortgages they buy from any lending institutions. At this time it also starting requiring lending institutions to have "on deposit in their vaults" a certain amount of funds against which loans could be made. Prior to this time, a lending institution couod be in business with almost "no funds" of it's own! That's right...it could operate completely as a paper entity by writing loans, and then selling that paper to fannie mae or freddie mac. Remember Keating? This new requirement by the Feds is what put so many Saving & Loans out of business. On this next oint I am not absolutely sure, but I believe it was at this time, because of the inability of the Banks to generate enough "holding capital" to stay in business, that the Fed let the Banks start using "judgements against Creditors" that it had obtained as if it were "holding capital". Thus, instead of having a mililion dollars in it's vaults, a million dollars worth of "judgements agains it's creditors" became a viable method of staying in business. If you've ever gotten a judgement against someone yourself, you should realize that for the most part, they are a worthless piece of paper with no use at all to anyone....except a Bank! I'm sitting on about $70,000 worth of them myself and have as of yet ever to receive a dime on any one of them...after 4 lawyers and 5 collection agency's! No-one gets to use a jugement like a Bank does. Back to the timeline. So in the mid 80's, the Banks started NOT holding mortgages they made, but selling them off to Fannie Mae & Freddie Mac...almost entirely. I live in Dayton Ohio, and here, out of all the Savings & Loans (that were still open) and all the Banks, only one had pockets deep enough to loan "investor's money on multiple( read more than 5 per person) properties. Today this situation is different. With the formation of company's that buy mortgages, group them by risk and then sell them on the Stock Market, the "Rule of 5" (still in effect on Govt. purchased securities) has less effect on the average Real Estate Investor. No matter, I agree that the Bank has deeper pockets than I. They trashed my credit rating (initially saying I owed them over $20,000,000 on 7 properties (single or double family homes which I only owed about $200,000 at most on), putting double judgement on my record...they sued and obtained a judgement for first the "entire amount of the mortgage" even though I had been paying them down for years, and then sued again for the difference between what I owed them and what they sold for at public auction. Example, I borrowed $44,000, paid it down to $25,000...they sued for $40,000 got that, then sued again for the difference..ex..I wed $25,000 and the property sold for $10,000 at auction...they sued for an additional $15,000. Let's see, that means the got judgements (something of "value" to them) and got (in my hypothetical scenario) $55,000 worth of judgements for a property that they only loaned out $40,000 on in the first place. Then, as if that isn't enough money for them...THEY BOUGHT THE HOUSES AT AUCTION! That's right, happens every day all of the US. They buy the houses...and exchange no cash for it because they are they ones owed the money on it in the first place, then they sell the house for whatever they paid for it at auction ($10,000 in out hypothetical scenario above) and put hat money "on deposit" along with the judgements. So now they have increased their "coffers" by a total of $65,000. Since Banks make their money by Lending out money, and are able to "borrow money" from the Fed at a rate of $4.. to every $1 they have on deposit, they have increased their lending abilty by 4 X $65,000. Do we see the picture yet? Don't believe what I have said above, please, check it out for yourself. You hear, the Banks don't want your properties, they're in the business of lending money, not owning Real Estate"..and that's true to a point. They are historically terrible "keepers of property" they have reposessed, letting them run down and devaluating other properties in the neighborhoods....but in the late 80's and early 90's (and probably still) loved it. I've rambled enough....L8tr! John

While you have obviously done more homework on this topic then I, I am familiar with what you are talking about. I used to be employed by a company who's parent company was one of the S&Ls that went down with the proverbial ship. Our company went under reservership with the resolution trust (RTC) and I spent many hours dealing with those homeowners that were impacted by the S&L scandal. I do not have much recollection of every detail and frankly do not wish to.

The bottom line here is I believe all of this has little to do with your present set of circumstances regarding, specifically, whether the bank should bear some burden for their supposed false commitments. The simple point I am making as is HG is that the bank made no "commitment" to you. And even if the law or a judge (recent circumstances warrant a distinction) agree with you the cost to find that out would be huge. Unless you are willing to sacrifice that cost to test your theory, your ramblings (respectfully) are in vein.

That is not to say that I have no appreciation for what you are saying because I do. Good luck.

yotraj, you have raised some valid points and shared a little financing history.
The fact remains that this history does not support your instant case.
I will provide you more of my opinion later.