Be Careful When a Lender Asks for the TDS

We are going to start with a TDS is a Transfer Disclosure Statement, not Trump Derangement Syndrome!  But good try! 

Freddie Mac recently changed a guideline that I think every real estate agent should know about. Freddie Mac now specifically requires lenders to review a property disclosure statement, if provided, for anything that could adversely affect the property’s value, condition, or marketability. If the lender finds something significant, it may have to provide it to the appraiser and investigate it further. This could include prior water intrusion, mold or moisture damage, structural problems, foundation issues, or other significant property conditions.

Why am I bringing this up? Because I picked up a loan yesterday from a Realtor who was incredibly frustrated with another lender. The seller had properly disclosed several items to the buyer, including prior water intrusion, mold, and moisture damage. The issues had been repaired, the buyer knew about them, and the buyer was comfortable moving forward with the purchase. Then the lender asked for the Transfer Disclosure Statement. Once the lender received it, suddenly everyone put on their detective hats. Now the lender wanted additional mold testing, water-leak detection, and further documentation to prove that the previously repaired problems were completely resolved.

The transaction went from:
"The buyer knows about it, it has been repaired, and everyone is comfortable."
to:
"Now let’s investigate everything that has ever happened to the house."
That can create delays, additional inspections, additional costs, and even new appraisal or underwriting conditions. Let me be very clear about that. California sellers and agents absolutely have disclosure obligations to the buyer. A TDS is specifically designed to disclose the physical condition of the property and potential hazards or defects. But disclosure to the buyer and voluntarily sending an entire disclosure package to the lender are two different things. Freddie Mac’s current guideline says that once the lender receives the property disclosure statement, it must review it for adverse property conditions. If something could affect the property’s value, condition, or marketability, the lender may need to involve the appraiser. That can open up a completely different underwriting conversation.

Think about something as common as water intrusion.
Maybe the seller had a roof leak three years ago. They repaired the roof. They repaired the drywall. There hasn’t been a problem since. The seller discloses it to the buyer, exactly as they should. The buyer understands it and is perfectly comfortable.
But if that information gets handed to the lender, the lender may now start asking:
Was the roof professionally repaired? Do we need a roof certification? Was there mold? Should we get a mold inspection? Do we need a leak-detection report? Does the appraiser need to comment on it? Is there still moisture present? You can see how quickly a relatively simple disclosure can turn into a much bigger lending issue.
If a lender asks you for the TDS or the entire seller disclosure package, don’t automatically send it without understanding why they are requesting it.
You certainly should never conceal a material fact or ignore a legitimate lender requirement. But before sending over a document containing every issue the seller has disclosed over the life of the property, pick up the phone and ask the lender what they need and why. Sometimes there may be a legitimate reason. Sometimes a particular loan program may require additional review. And sometimes you may be unnecessarily introducing information into the underwriting file that then has to be investigated. This is particularly important now that Freddie Mac has made its requirements clearer.

My simple advice:
If somebody asks you for the TDS, call me first. I would much rather spend five minutes talking through the situation before you send something that creates five new underwriting conditions.
There are some things Underwriting doesn’t need to know.  

FANTASY FOOTBALL WEEK 2!

Move the Chains Greg – 145.70 – WINNER! $25 +$25.00 for most overall points = $50!
Jaqui – Jack Mihoff: 132.62 points. WINNER! $25!
And the BIG winner of the week…
Ground Game Brian – 140.88 points – Winner $25.00
I really need all the Venmos for the above, or someone will send me to collections.  

Interest Rates
I think we need to talk about rates over a weekend of drinking! This has been what I would call a very bad run! The good news is they will likely get better someday, but we are currently in the 7s for everything, and we will see some 8s pop in with lower credit scores. being positive again, I bury my head in the sand and don't think about it! Everything is going to be OK and we just need to work a little harder!   

Loan Programs Snapshot

• Government loans (FHA/VA/USDA): in the low  7’s –
• Conventional (≤ $832,750): in the 7’s
• High-balance: in the 7’s
• Jumbo: In the 7’s
• Bridge Loans: 8.250%

Additional options:

• Bank statement loans (10% down+)
• P&L loans (20% down, no bank statements)
• 0% down options (620+ score)
• DSCR loans (15% down)
• Buydowns Available (3/2/1, 2/1, 1/0)
• Private Money loans – Hard Money  
• Construction Loans
• 203K loans
• Commercial Loans
• Fix and Flip Loans  

Rates subject to change without notice.

Condo Update

Good news:
Nothing this week!     

Bad news:
Nothing new!

We love your Non-Warrantable Condo loans!!
Need help checking a condo? Call me, and we can look it up in real time.
Also:
Full California “naughty list” available here:
https://mikemeena.com/non-warrantable-condos/

If you or your clients, friends, or family need guidance, I'm here.

📞 661-291-2222 (Direct)

📞 661-714-6258 (Cell)

📞 661-260-2970 ext. 2222 (Office)

📧 Mike@AugustaFinancial.com
Sincerely,