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Question from my lender for a new primary residence I'm under contract on in another state (my personal data has been replaced with fake addresses):

"BORROWER TO PROVIDE SATISFACTORY DOCUMENTATION FOR MOVING FROM CO TO OR, WHY THE MOVE? WHAT WILL BE THE DISPOSITION OF PROPERTY LOCATED AT 123 Easy St; Pleasantville, CO. WILL IT BE SOLD, USED AS A RENTAL? COMMENT ON MOVING STATES WHEN BORROWER JUST PURCHASED 2 RENTAL PROPERTIES IN THE PAST 12 MONTHS THAT ARE LOCATED IN CO AND WILL HAVE 4 PROPERTIES LOCATED IN CO."

I've never received such a question before. I did purchase 2 town-homes in my current state early last year right before the market went crazy. They make up my 2nd and 3rd rental properties, all of which cash flow quite nicely. I'm selling my primary and switching states - I can tell them that. But, why do they care/what answer are they looking for? I don't want to say anything that gets me rejected for the loan. This is the strangest thing I've ever been asked by a lender. My honest reason is, I just don't like CO anymore for a lot of reasons and I want to move. Also, the market seems right for both selling in CO and buying in this particular location in OR. I don't know what a satisfactory answer is - what their concern is.

  • I wonder if they're thinking you want to rent it out on AirBnB or something. – ceejayoz Apr 25 '16 at 22:06
  • That's what I thought at first... but then look at the part about "BORROWER JUST PURCHASED 2 RENTAL PROPERTIES." It's like their asking why I would do that. Or... maybe they just want to confirm - this guy is really moving after all that? Doesn't seem that inconceivable to me. – maplemale Apr 25 '16 at 22:33
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    Is the address referred to your former primary home address? Overall this looks like a question from an underwriter to a broker or originating bank office, if you're using an understaffed (so cheap, yay?) lender, they may not have a human broker available to translate this into a "friendly chat" question and just forwarded the underwriters comments naked. – user662852 Apr 25 '16 at 23:49
  • It is absolutely an "automated underwriting" sort of thing. I had to sign some notice informing me of that fact. Good observation! Perhaps I just hit a technical / software red-flag and they are just wanting a standard / any kind of response. – maplemale Apr 25 '16 at 23:57
  • @user662852 I think you should make that answer so it can be up-voted. It's a bit better answer than the one below... – maplemale Apr 26 '16 at 22:19
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Banks are obligated to assess your financial viability (multiple properties, even without mortgages are a large financial burden). Usually when people begin to collect multiple properties for the purposes of renting them out, they will form an LLC or other corporate entity to protect their assets. It is also very unusual for a landlord who owns multiple properties in their own name (not an LLC) to move out of the state of those properties because it makes them harder to manage (and more costly to manage). In short, to a bank, your actions likely raised some red flags and they want to ensure you are not engaging in fraud or overstretching your income, they are looking out for your interests and theirs.

  • I get some of what you're saying... However having an LLC is in fact very unusual (more usual for 5 or more rentals?). And pointless when in my case (since I do zero management) it would be treated as a personal investment (not a business) by the courts. However, would it not be pointless when applying for more loans maybe? Because the bank wouldn't care about the 4 rentals? I think the best answer here: It turns out to be an automated underwriter, asking if, then, else non-applicable questions. Also, I don't think it's at all unusual for people to own multiple rentals and switch states. – maplemale Apr 26 '16 at 22:18

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