Top 10 Reasons Investors Are Rejecting Loan Purchases

Written By: Marx Sterbcow, Managing Attorney at the Sterbcow Law Group LLC


Don’t think that as a mortgage loan originator, this issue does not affect you. If investors in the secondary markets are refusing to purchase your company’s closed loans, it’s only a matter of time that they will go out of business — or tighten up their UW or increase the amount of overlays to a point that it’s difficult to get a loan approved.

After speaking to clients, Rich Horn and I came up with our from banks and lenders right now.

One of the main reasons for some of these seemingly innocuous loan rejections is because the secondary market is now worried about their future if they decide to sell the loan. Some in the secondary market appear to be concerned whether the next investor who buys the loan from them will refuse to purchase the loan or purchase the loan at a discounted price if they need to sell but can’t, due to the unknown legal liability risks.

The downstream investor risk is trickling back upstream. Here are the top ten reasons we discovered:

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