Mortgage and Real Estate Blog

BUYER MUST BE APPROVED BY XYZ MORTGAGE COMPANY.  WHO BENEFITS?

What is behind all of the listings that say "buyers must be approved by "XYZ mortgage company". 

These third party lender requirements are included in about 1/3 of the bank owned listings.

EXAMPLES FROM A FEW LISTINGS FOR BANK OWNED PROPERTIES FOR SALE:

• "pre qual from Wells Fargo (REQUIRED!!)"
• "Pre-qual with Countrywide, free credit report and appraisal if Countrywide is used"
• "BANK OF AMERICA PREQUAL REQUIRED"

PRE-APPROVAL, PRE-QUALIFIED, BREATHING.  We're used to this requirement in the listing remarks and generally don't object.  While our buyers are well qualified and our contracts prepared in great detail with pre-approval letters, financial statements, etc., we understand that many contracts received by listing agents are not.  Listing agents receive written offers that are incomplete and accompanied by so called "pre-approvals" where the only thing reviewed by the loan officer is the credit report.  Quite often the loan officer has not verified the money to close or income to qualify.  Once the listing agent receives our offer, they do not require third party lender pre-approval of our buyers.

A NEW TWIST ON AN OLD REQUIREMENT.  In consultation with a Maryland broker in my network yesterday, the broker related a situation that was very revealing.  While we're aware of this requirement stated in the AGENT REMARKS in many REO/bank owned property listings, this particular situation was very revealing.

ENOUGH IS ENOUGH.  We understand the need for the seller to feel comfortable with the buyer's ability to close.  However, this situation appeared to involve more than just verifying the borrowers ability to obtain a mortgage loan.  After contacting the loan officer named by the listing agent as the person to review the buyer's financial information, the buyer called and related the conversation.  There's something fishy in. . .

HOW FAR DOES A QUALIFYING LENDER GO??  The loan officer took the buyer's credit information and shortly, after reviewing the credit report told him that his credit was fine, however, to make sure that he got the contract, he should change his offer to include: 

• a price of $xxx,xxx
• remove the home inspection
• etc., etc.

This, mind you, for a very, very well qualified home buyer with excellent credit scores, money to close and making a 106% offer with only a customary split of transfer and recordation taxes which is pre-printed in our contract of sale.  The buyer did, however, want a home inspection. 

WHAT'S UP, DOC?  This loan officer is NOT the bank/seller.  It is the loan officer identified by the listing agent to pre-approve the buyer.  Seems to me that this lender, and the listing agent/seller, went beyond the normal pre-approval by a third party lender requirement. 

The Maryland Association of Realtors Residential Contract of Sale includes a clause that states:

36. NOTICE OF BUYER'S RIGHT TO SELECT SETTLEMENT SERVICE PROVIDERS:  Buyer has the right to select Buyer's own title insurance company, title lawyer, settlement company, escrow company, mortgage lender or financial institution as defined in the Financial Institutions Article, Annotated Code of Maryland. 

WHAT PART OF "BUYER'S RIGHT" DO THEY NOT UNDERSTAND?  The loan officer clearly gave the home buyer the impression that, if his suggestions were followed, that the buyer would be more likely to be accepted by the seller.  What the buyer also got from the conversation was that this loan officer was not an objective third party lender. 

WHAT'S GOING ON?  Inquiring minds want to know.

*  Is the listing agent using their property listings to STEER buyers to a loan officer?

*  Is the loan officer giving the listing agent some benefit for these referrals?

Fortunately, the home buyer, an attorney, believed that the loan officer was going too far, broke off the conversation and immediately contracted his buyer's agent. 

QUESTION:  What action, if any, would you take or recommend that the agent take?  I'm a pro-active practioner and prefer to take advantage of any opportunity to enhance our buyer's position rather than sitting by an doing nothing.  I know what I would do. 

I value the experience and opinions of my ActiveRain friends, therefore:

Would you relate the conversation to the listing agent?

Would you notice the agent's broker of this conversation?

Would you do nothing? 

WHAT WOULD YOU DO???

 

(Warning: Not for babies or whiners :) [Unless you read it as it was written: the vent, the whole vent and nothing but the vent] If you plant your tongue firmly in your cheek while you are reading and go ahead and hit a great big old Cheshire Cat smile right now you will probably make it through this ... erm ... post.

Last week I closed an FHA purchase in 8 days from application to the closing table. It was a miracle. It happens. Last month I closed an FHA streamline refinance in 5 days. No joke. 5 days. It happens. Yesterday I had a call from a client wanting to know if we could close a Fannie Mae purchase by the end of this month - it's the 22nd. Uhm, no. 

First of all it's the end of the month and the 11,000 people who had their application, appraisal and documents in underwriting last week also want to close "by the end of this month". So the agent called me. Why? No idea - boy did he ever tell me a few things about my business and what a tool I am if I can't get a loan closed in 7 business days because HIS lender certainly could do it.

Why, then were they wasting time on the phone with me?

Ah, the buyer is self employed, has two other streams of income, owns 16 homes, is moving from a bigger house to a smaller one and the old one isn't sold and it's just down the street. Hmmmm ....

Let me state this for the record: Loan officers ocassionally lie. One of the things they lie about is their turn times. They like to say, "Our turn times are 48 hours". That may well be true - with absolutely no hiccups and a perfectly clean file submitted and an acceptable HVCC appraisal which will take a MINIMUM of 10 days to get back. Then there's the issue of middle lenders are sitting on files for days AFTER the approval because the secondary market won't purchase loans fast enough BECAUSE THERE IS A MONEY SHORTAGE. There, I said it.

There is a money shortage even with all the TARP money that went mostly to big banks. Guess what they did with it? THEY SAT ON IT AND GAVE EACH OTHER BONE BONE BONUSES. Okay, I know, I'm typing a lot in caps. You'll get that with people who have a long fuse when it gets down to the nib. And if I hear that snivelling weenie Barney Frank say one more time this is not his fault I'll fax him a picture of my bootie. No wait, better not.

One problem is with people, like Bozo the Barfly agent who obviously called me from the local watering hole, thinking they know how to qualify a borrower. "Man, Ken, I've known this guy for umpteen-eleven years. He took my baby sister to the prom back in 1988. He's a big time developer with a bazigillion jillion dollars. In 2006 he sent my whole family to Hawaii for a week. He owns a 36' SeaRay up on the lake. What's the problem?"

Pretty much everything you have told me is the problem. At best this is going to take 30 days because, believe it or not, people who can fog a mirror and have nothing more than a good story can no longer borrower money BECAUSE THEY DON'T PAY IT BACK! As I have written at least once before during the last 4 years just here on AR - the stupid loans for stupid people are going, going, GONE! Now it is an across the board requirement to PROVE everything. Regardless of what "your lender" says. (Especially that lender - rhymes with GunRust.)

Then there's this little thing called "buy and bail". Haven't heard of it? It's where people buy a smaller house they can afford, move out of their bigger house they cannot afford and let the bigger house go or file bankruptcy! Then there is the very high likelhood that Mr. Country Club the mega-developer took about the same amount of a paycut over the last 24 months as yours truly - making us both suitable for the soup line.

So STOP GIVING ME CRAP about how long it takes to close a loan and for PETE'S SAKE SHUTUP ABOUT "YOUR LENDER"!!!! I know you called me last even though I can do things that make Countrywide, Ditech, Wells Fargo and Chase spit burning nails. I even do it faster and less costly - always could, still do.

If you have any issues with my comment please see my manager, Lenn Harley. Thanks, bye.