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Home >> Lending >> Home Mortgage
Loan Denied because of Co-Borrower?
I recently applied for a owner-occupied mortgage loan through my credit union as a co-borrower on my son's loan. The house will be his primary residence. He doesn't make enough money to qualify on his own, so I am trying to help him with the purchase and monthly payments. The loan was denied because they claimed they could not use my income to approve the loan because I would not be living in the house. Is this a common practice for all lenders?
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 No, it isn't. Investors, those who buy loans from originators such as your credit union may impose certain requirements, but at face value, what you describe is questionable on the lender's part. They are not allowed to treat co-borrowers differently based on their relationship to one another. In this case, they are on the verge of doing that, but have not done it outright. Ask them if they feel they have violated the Equal Credit Opportunity Act with this decision, and if they have ever made a similar loan even if for commercial use.
As a co-borrower, you must understand it is your responsibility to ensure the payment is made as scheduled, not to step in if your son has a problem, but to ensure there is no problem.
If the lender stands by that decision, you may complain to their regulator, to an attorney, and/or take your loan request elsewhere.
Published on BankingQuestions.com 12/22/10
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