The Realtor's 'Make It Work' Text
You work for a small Indiana brokerage. A realtor, Dana, has a buyer under contract at $295,000 with a 3.5% FHA down payment. The buyer's file shows a $620 monthly child support obligation and a $14,000 student loan with a $0 income-based repayment. Dana tells you the child support 'shouldn't count' because it's paid informally to the ex-spouse and not through the court. She also forwards a text from your branch manager: 'If this doesn't close by Friday, we lose the $6,500 commission and the realtor will stop sending us referrals. Make it work.' Dana offers to pay the $500 appraisal fee personally so the borrower's funds aren't depleted. You know the child support is court-ordered and the student loan has a $0 payment documented. The borrower's DTI is 48% using the child support and 41% without it; FHA AUS approve/eligible allows up to 50% with compensating factors.
1. How should the child support and student loan be treated in the DTI? Can you simply follow Dana's instruction?
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No. Child support that is court-ordered and continuing is a recurring obligation and must be included in the borrower's DTI, regardless of whether it is paid informally or through a wage garnishment. The existence of a court order is the key fact; Dana's assertion that it should not count is not an underwriting guideline. The student loan with a documented $0 income-based repayment must be treated according to the applicable FHA/AUS guideline; a $0 payment may be usable only if the guideline permits it and the documentation supports it, otherwise use the prescribed calculation. Using the child support, DTI is 48%, which is within the FHA approve/eligible limit of 50% with compensating factors. So the honest path is to disclose the debt and document compensating factors - not to omit it. Omitting a known court-ordered obligation would be fraud and a violation of your duty of candor.
2. What are the problems with Dana paying the $500 appraisal fee personally?
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A realtor is an interested party in the transaction, and a payment toward the borrower's closing costs can be an interested-party contribution or an inducement. It must not be a kickback or a thing of value for referral under RESPA Section 8. It also must be disclosed on the Loan Estimate/Closing Disclosure and must fit the investor's and FHA's interested-party contribution limits. A personal payment directly to the appraiser or lender outside closing creates a paper-trail problem: it can look like a payment to influence the appraisal or to ensure the loan closes. The safe course is to refuse the personal payment, or route any permissible contribution through the closing agent with written disclosure, borrower consent, and investor approval. Never let a party with a financial interest pay an appraiser directly; that undermines appraisal independence.
3. How should you respond to the branch manager's text, and what should you document?
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Refuse the instruction. The manager is asking you to make it work by ignoring a known obligation and is tying your compensation and referral flow to the outcome. That is pressure to commit mortgage fraud and violates your duty of loyalty and candor, as well as federal and Indiana law. Respond in writing that you will underwrite the file accurately, that the child support must be included, and that you will not omit it. Escalate the text to compliance or the company's designated ethics contact; preserve the text and Dana's request. Document the correct DTI, the compensating factors, the borrower's explanation, and any contribution. If the manager retaliates or continues to pressure you, report it through the company's whistleblower process and, if necessary, to the Indiana regulator. You should not rely on the manager's statement that the loan must close by Friday.