Lenders leave much to be desired
I think people should be aware of how hard the banks are trying NOT to lend money. Current Situation: One of my colleagues shared the following anecdote with me last week. She is in the process of refinancing her existing residence in an effort to take advantage of a lower interest rate.I hesitate to tell you the name of her lender because that would be indiscreet. That said, I’ll give you a hint. Its initials are "C-I-T-I".
According to my colleague, Citi (at the 11th hour the day before the attractive interest rate lock expired) called and demanded that her condo management company provide a copy of its voluminous flood insurance policy because the flood insurance is provided through a private insurer.
The condo’s management company replied that they have never been asked for this information (Noteworthy is the fact that the building has over 300 condominium units and there are numerous refinancing transactions that have taken place since the building’s opening in 2005). The condo management company added that the last mortgage that Citi provided to a resident was in the summer of 2009 and the flood insurance policy information was not requested.
What makes this request even more outrageous is the fact that my colleague’s condominium is located on the 10th floor of her building and the building is located on 23rd Street between 10th and 11th Avenue in Manhattan. If my colleague’s condo is damaged by flooding caused by a flood plain incident, 32 of the lower 48 states in the United States would be under 10 feet of water (Source: Statistical Abstract of the United States - 2004).
The condo’s management company deemed Citi’s request unreasonable since the building’s policy is to keep this type information confidential (i.e., no outside party/bank has a right to see what kind of economic deal the building has negotiated on coverage, terms, conditions, limits, pricing, deductibles, etc.).
Separately, Citi’s underwriters have required my colleague to provide H0-6, dwelling coverage for walls-in insurance in the amount of 20% of the appraised value of the apartment. When she checked with the insurance side of Citi‘s mortgage department (Note: My colleague is not allowed to speak directly to the underwriters - only thru the mortgage broker), Citi’s own insurance department said they have never heard of such a requirement. It gets better. Noteworthy is that Citi’s appraisal of my colleague’s condo came in 4% higher than her original purchase price (at $1069 per sq foot).
The Grand Finale: Citi has an issue with the condo building’s Certificate of Occupancy ("C.O."), which is temporary, but expires in the spring of 2010. According to the building, all 300 loans made to condo owners in the building, since the building opened, have closed with a temporary C.O. in place.
The Bottom Line? It certainly appears that Citi is trying to get out of the loan, which was struck for 5.5% for 30 years with 10 years interest only. The principal amount of the loan is slightly above conforming.It is yet another example of why Citi needs to be broken up. It is too unwieldy to be managed by anyone. Mind you, this is the same Citi that installed drive-thru Automatic Teller Machines ("ATM’s") for the visually-impaired off of I-95 in Connecticut. As Charles Barkley, National Basketball Association Commentator & Analyst, would say, "This is Trrrrrible! What a knuckleheeeead!".