Consumer complaint received 2016-03-12
Company: Flagstar Bank, N.A.
State: IL
Product: Mortgage
Sub-product: Conventional fixed mortgage
Issue: Credit decision / Underwriting

Complaint:
To whom it may concern, During mortgage refinance process, Flagstar provided me deceptive/unclear information, and unfairly treated and denied my refinance application. XX/XX/2016, Flagstar had promotion online offering interest rate of 3.375 % ( APR around 3.5 % ) with a closing fee around {$11000.00}, I called in and get informed that I could start the refinance application and my credit score was checked with approval ( above XXXX range ). I decided to pay all closing cost upfront to lock the 3.375 % rate. Currently, my mortgage rate is 3.75 %, and monthly payment is {$1800.00}. After the refinance, the monthly payment would be around {$1600.00}. Next day I received an email indicating the bank thought the refinance would not be beneficial for me. I called in and was informed by a rep that the bank had some policies called net tangible, the bank could not recoup the cost in 24 months so could not continue with the application. The terms they used were very vague financial language that a normal customer could not understand. I stated the bank 's decision was not for my benefit, because I calculated if I pay closing fee upfront, I will still save {$30000.00} over 30 years. I could not understand how they could make a decision on my behalf, I further informed the rep I would like to continue with the application or they might lose me as a customer. The rep said he would reach to management for an exception. I was later informed the exception could be made. Next three weeks, my wife and I both spent days reviewed and signed all the loan documents Flagstar provided, gathering and submitted all the documents they requested. Refinance application was in progress until XXXX/XXXX/2016. I received a call from the same rep, stated, '' sorry we could not refinance because Illinois requires Net Tangible policy, we could not help you. '' Again without any explanation on what Net Tangible policy was, the rep suddenly hang up. I requested an official rejection letter in writing with clear explanation of why I get rejected 2 times, and they provided a letter with one line : " Rejected due to Net Tangible Benefits ( NTB ) to Borrower. '' I researched by myself and found out the following : 1. NTB is for borrower 's benefit. Whether a refinance has net tangible benefits should be a borrower 's decision. I do not understand how Flagstar could impose their decision using this term on us. We as borrowers see clear net tangible benefits and confirmed multiple times we would like to go with the application. And I do not understand why they kept on mixing this Net Tangible Benefits ( which is a term for us normal customers do not understand ) with their internal recoup policy and even with a state regulatory requirement. 2. NTB is for FHA streamlining refinance only. However, my loan is conventional 30 year fix, and I requested to refinance under same term, so this does not even apply in my case. 
3. NTB requires proposed monthly rate drops at 5 % after the refinance. In my case ( although not applied ), my monthly rate would drop from {$1800.00} to {$1600.00} which would be more than 5 %. 
4. From an online research - based off a state requirement of NTB XXXX, IL does not even require NTB worksheet. 
Flagstar sets up customer expectation with deceptive approach. When Flagstar found out the refinance is not to their benefit or interest, they used unclear/deceptive information to decline my application without any further explanation. I have the signed loan documents, all email communication, official reject letter ready if needed. 
Flagstar pulled both my wife and my credit scores, and misled us spending three weeks preparing required documents and unfairly declined our application. This could potentially lower our credit scores, and letting the chance of getting good mortgage refinance rate slipped. This is a substantial loss to us. 
Sincerely, XXXX XXXX

Company public response: Company has responded to the consumer and the CFPB and chooses not to provide a public response
Company response to consumer: Closed with explanation