Our couple went to the developer with their problems, then to the New Home Warranty people,
then to the Township, and finally to the board of Health.  This latter authority agreed with our
couple that the water supply was indeed undrinkable, and almost forced them to abandon their
house.  To make a long story short, the couple ended up suing the Developer, who went bankrupt.
The creative financing I eluded to above was by way of Vendor-Take-Back financing.  The
developer had agreed to lend our couple an amount of money by way of second mortgage to
secure the purchase.  When the developer went bankrupt, the second mortgage was assigned by
the Bankruptcy Trustee to the main creditor for the Developer.  That lending institution then sued
our couple to recover the (second mortgage) money.  They refused to pay. The battleground was a
court of law.  For our couple, lawyers fees had to be paid as the fight dragged on.  Eventually, the
lending institution agreed to settle out of court for a fraction of the amount that was owing.  Even
though the account has been settled, the lender rated the account a “write-off” or R-9 (which is the
worst rating in the system).

All along, our couple lived the “rob Peter to pay Paul” syndrome.  They charged everything on
credit cards and dealt with high rate finance companies, to prove that they had been wronged, and
to try to beat the system that had attacked them.  In the end, they finally had a residence with a
secure water source, and less debt than in the beginning, because of settlement.  Then they started
to take care of the rest of their debt load, cause by escalating legal fees.  They struggled for a
number of years to clear the credit cards and to fix up their credit.  All their ratings are now good
(rated 1).

They went to one of the Banks to get a pre-approval certificate to go shopping for another home.
The Bank knew about the poor ratings prior to issuing the pre-approval certificate, but the Banker
explained to them at the onset that the whole sorbed affair was explainable, so he issued the
certificate anyway. They were pleasantly surprised to find out they were approved.  Maybe the
system wasn’t all that bad after all.  They listed their house for sale and were successful is selling it
rather quickly.

They now went back to that bank with pre-approval in hand to apply for a mortgage on the new
house they want to buy.  They filled out all the paperwork, went home and started packing.  Some
time later, the bank called back with the news that since the credit card companies had rated then
poorly in the past (historical data), coupled with the “write-off” from the old creditor, their
application had been rejected.  How could this happen?  They had a pre-approval certificate!
Again the fine print explained that the pre-approval certificate was subject to underwriting
guidelines.  They challenged the Banker since he knew about the poor historical rating, but to no
avail.  Now that they have sold their house, they have nowhere to go.

I was able to get approvals for them from “fringe” lenders, but they felt the cost was too high.
Once again, they feel slighted by the system.  I explained that the system was indeed flawed, but it
is the only system available.  The pre-approval certificate is just a piece of paper to placate you into
thinking you have been approved, therefore  keeping you from shopping.