NJ First-Time Home Buyers

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The Loan That "Can't" Be Done, and How the Big Lenders Can Hurt You as a Buyer

The Loan That "Can't" Be Done, and How the Big Lenders Can Hurt You as a Buyer

Can My Lender Really Do This Loan?I've been working with a certain buyer (Mr. Buyer) for a few months now. Since he is looking at the low end of the market his home selection is very limited. We had to work on his credit profile, and we successfully got his credit scores boosted enough to get him approved in the automated system (DU).

So with all this excited Mr. Buyer goes out and finds a GREAT deal, a home that appears to be about $50,000 below market value, which in this case is like having a 33% price reduction. The MLS listing is misleading - it states that the property is corporate owned, when really it is a REO. (Realtor mentioned something saying she can't put "bank owned" anymore on her listings ... that's another topic) FRUSTRATING!!

The MLS also states that the buyer must be approved by"XYZ Big Bank" (Name kept secret since you may work there). We weren't sure if they had a special relationship with the "corporate" owner of the home. Typically we wouldn't care and would just tell someone to get pre-approved with the said lender and then we will write the loan for them. But this one is different, and I knew it before the buyer even talked to the "Big Bank" mortgage rep.

The mortgage rep from "Big Bank" stated that there was no way my buyer could get approved.

I BEG TO DIFFER!!

I told my buyer before he talked to the "Big Bank" mortgage rep that they would say this. We have him approved for a more specialized loan program called the Tax Credit Prefund Mortgage Program.

Big Lender = No Loan for You?

In the case of a big, nationally known lender, a buyer may have less home buying options. A big lender like this most likely will not have access to state/county/local programs. Score one for the local mortgage banks! Frankly the "Big Bank loan officer" should have said "I CAN NOT DO THIS", and not "There is no way a lender can do this!" 

"SPEAK FOR YOURSELF" hot shot!

I founded a career on closing loans "Mr. Big Bank Loan Officer" said could never be done. I thought when Alt-A was out the window that specialized lending was also. Man, was I wrong! - it is more important than ever!

You lose, I lose, We all Lose

So Mr. Buyer is rejected from buying a home because it is owned by a bank. Mr. Buyer's income docs have already been reviewed by an underwriter. We can even get a commitment for Mr. Buyer. But this STILL wouldn't mean anything to "Big Bank" since they themselves can not get Mr. Buyer approved. Everyone loses, and another home sits longer negatively affecting the local market. If this is the protocal for big banks and their REO inventory, there may be a lot of "shooting of the feet" yet to come.

 

 


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Steve Kappre is a Mortgage Planner with Treasury Mortgage. Steve specializes in;

• All areas concerning First-Time Home Buyer Mortgages, grants, down payment assistance, police and fire loans, rehab loans, and more.

Reverse Mortgages

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

Comment balloon 77 commentsStephen Kappre • August 24 2009 08:47PM

Comments

This is extreme frustration that I feel in this market right now!  The banks seem to think that since they cannot qualify per their guidelines they are out.  Two majors (won't mention here) have differing qualifying ratios and I had this happen to one of my buyers back in spring.  Why can't the list agent just call the LO?  THat would be too easy!

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) about 9 years ago

It can be frustrating working with the banks, mortgage companies, or LLC's that own the foreclosures.  And to top that off, much of the banking industry is thriving now on our tax dollars.

Posted by Sybil Campbell, REALTOR® ABR, SFR, SRES Williamsburg, Virginia (Long and Foster REALTORS® 5234 Monticello Ave Williamsburg, Virginia) about 9 years ago

Renee - It would be easy, and it would make sense - why would that be allowed?

Sybil - It is a complex and oft confusing system. It is both exciting and frustrating.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Steve great topic - I just went through the same exact scenario - and it didn't matter - the buyer lost the property.  However they did buy another one and funny how the loan DID go through even though they said it would never be approved.......AND the big Banks aren't getting the loans through as fast as we are.  I'm hearing nothing but nightmare stories.

Posted by Colleen Craig, Socal Mortgage Pro (Southern California Mortgage Professional) about 9 years ago

Colleen - Ditto! Local lenders kickin' butt ;-)

Rick - I'm not a broker, BUT you are right - brokers are getting stuff done that big banks can't.

Typical - we have approved buyers and they are having trouble buying homes ... with all the REO's, etc. Go figure.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Steve....  this is beyond frustrating, from 2 sides of things. One, a loan officer that says can't, because they don't know it all.  Secondly, because of their stupidity, it hurts a buyer that likes the house.

Question... did get a hold of the listing agent?  Because it sounds like said Bank is trying to control the listing and the buyer...  I am not a lawyer or a realtor, but misleading the MLS, couldn't this be against some code of ethics amongst realtors?  And if so, can't you report said bank and or realtor?  If I told that listing agent to jump, would she do it, without asking how high?  Would see jump of the bridge if said Bank said so?  And I would take this to the local board of realtors and to NAR.  Ruffle some feathers.  Again, I don't know the laws, but common sense doesn't seem to prevail here.  Just food for thought.

Jeff Belonger

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) about 9 years ago

Jeff - That is food for thought - I would kinda like to see what would transpire if I did ruffle some feathers. The listing agent was very kind, of course that isn't to say she or her broker are not crossing any lines here.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

I just hired a monster loan officer today.  He told a realtor last year that he couldnt do a deal.  Then he told the realtor that he couldn't do a 2nd deal.  The realtor came back this month b/c he's tired of dealing with big lenders who say they can do deals, but invariably can't do the deals.  Needless to say, the realtor said that she's tired of lenders wasting her time.  At least my LO told it like it was w/out a lot of BS.

Posted by Larry Bettag, Vice-President of National Production (Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001) about 9 years ago

Larry - True ... I'd rather say "no" than look stupid putting together a train wreck.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Steve this is one of the reasons I like having my clients work with a mortgage broker that is not stuck with one set of options.

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) about 9 years ago

Bill - And I've seen both Big Lenders (national ones) and in-house lenders with narrow options. I guess people don't realize how much potential business they are really missing.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

If I was going to specify what you had to do on a loan to get a house, I would say "must use local lender". More short sales fall out with the big box and direct lenders. At least if you use local lenders you get someone who knows the market especially on that type of price reduction, and will probably get a real appraiser who works in the specific market. These are crazy real estate times we are living in. I look forward to the new normal.

Posted by Joe Pryor, REALTOR® - Oklahoma Investment Properties (The Virtual Real Estate Team) about 9 years ago

Steve: Sorry to hear about your predicament. I haven't run into this yet but probably will. My take is if the bank wants to hang onto their crappy real estate let them. Remember the FDIC is putting enormous pressure on banks to rid themselves of so-called "toxic assets". I don't have alot of love for big banks right now even though they're our investors. It seems to me like they're controlling the playing field right now and I don't like the rules! Thanks again for the post!

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) about 9 years ago

There is a lot of frustration when dealing with some REO properties. Also, you guys are right on the money. Honessty is vitally important in the process. 

Posted by Darrell Walters (W. Darrell Walters) about 9 years ago

Great post.   I am fairly new at the buisness but I am trying to specialize in HUD's, REOs and short sells.  Ive noticed more listings with Must be approved by "our bank" as you mentioned.  I chalked it up to they have to assure that your client is qualified because in the past, Agents would just get their "buddy" loan officer to get a prequal or approval and then find out a month down the line that he wasnt approved, Waisting valuable time and money.  Most of these great deals have multiple offers and if the bank takes yours above another qualified buyer they want assurance that the above will not happen after a month. 

   Not taking the side of the bank just trying to understand the buisness.   Most of my clients are Military with awesome scores so I have not had this issue yet. But like you we learn from our past and evaluate our current situations and move on.  At the end we learn the system and are better prepared to help our clients. :)

Posted by Adan Aguillon (Clark Realty & Associates LLC) about 9 years ago

A lot of those big bank mortgage reps are just order takers.

They can't get a referral if their life depended on it so they go to a big bank where leads walk in the door.

I feel your frustration......

 

Posted by Tom Burris, Texas/Louisiana Mortgage Pro - 13 YRS Experience (NMLS# 335055) about 9 years ago

Steve - How unfortunate for everyone involved.  I will definitely keep this information in mind if one of my clients gets denied for a loan through a "big bank."

Posted by Michelle Gibson, REALTOR (Hansen Real Estate Group Inc. ) about 9 years ago

Steve,

This is just another reason why the big banks should not of received any tarp money.  They were horrible banks to start with and now you cannot compete with their stupidity. 

If they had no tarp funds the bank you described probably would be bankrupt and we would not be competing with them.  Instead our government continues to reward bad behavior. 

Great Post,

Posted by Gary Miljour, Mortgage Originator NMLS Licensed in AZ and NC (Lend Smart Mortgage NMLS#207208) about 9 years ago

Steve, this amounts to big bank blackmail.

You only get the house if you finance with me.

It is thinnly disguised as "we need to make sure the buyer of OUR property is qualified"

The world sees through this, and nobody likes big box banks right now.

They are arrogant and answer to no one.

 

Posted by Janet Guilbault, San Francisco Bay Area Direct Mortgage Lender ( Guild Mortgage) about 9 years ago

My only curiosity is why the people who write about the "big banks" do not identify them by name. Why protect them if these stories are true? I am assuming it is some fear of liability, but if the stories are true, is that not protection? Or is it just politically correct to protect corporations no matter what they do? I am sincerely asking this, not trying to be a smart ass :)

In thinking about this for two seconds more, I realize if you are a mortgage broker and want to broker to these big banks in the future, then maybe you are protecting your relationship.

Posted by Deborah Ryman, M.A. Feng Shui Services, Santa Cruz County about 9 years ago

Steve,

As a loan officer who works for a big bank and specializes in REO's and who also handles many pre qualifications for buyers I find this post quite insulting.

 Quite simply, most good REO agents rely on Loan officers like myself to make sure a deal is solid before they take the house off the market.  You may be a mortgage superstar that can figure out how to do deals that the big banks can't, however not every mortgage broker is as talented as you are.  I can tell you I review approval letters from brokers all the time and most are fine.  I just let the listing agent know that the presented offer is good to go.  Quite a few times I am able to pick up things that were missed by the broker and work with that broker to correct their qualification or if not restricture the deal so it can be approved.  Our main focus isn't to steal away deals! 

Another issue is that many brokers do honestly think they can get the loan through underwriting but a few weeks later I get a call that the loan wasn't approved once the loan had been turned in.  Loan officers are not underwriters.  It is the underwiter who makes the final decision. The industry has changed and guidelines are much tighter today so we are just making sure the deal is strong enough in a multiple bid situation.

  Just like a regular transaction the listing agent is presenting all offers to let the seller decide who has the best offer with the highest probability of closing on time.  I am not expecting people to love the big banks. I have worked for both big and small banks and know that there are advantages and disadvantages to both, however I enjoy posts that educate people as to how to solve problems.  I can't imagine every Realtor on Active Rain finds the big banks and the loan officers that work there as incompatent as you are making them out to be in your blog or some of the comments in this blog.  I just wanted to add some balance to your blog.  

Mike 

Posted by Michael Cantwell (Envoy Mortgage - NMLSR ID #644428) about 9 years ago

Seriously, I had a buyer who was approved by BIG BANK for $350,000. Found him a new construction home for $289,000 and had to cross qual.  The new home guys said no because of debt.  Apparently when big bank pre-approved him, they didn't look at debt-to-income ratio.... DUH.

Posted by Linda K. Mayer, Realtor, SRES, SoCAL, A REALTOR YOU CAN TRUST (License # 01767321) about 9 years ago

Steve:  This just proves that most times it is the individual loan officer that makes the difference, not the entity they work for.  You took the initiative and found a program and answer for your customers.  Others did not ... or would not.  It boils down to service, willingness, caring, and creativity of the loan officer to make a transaction work and deliver a loan to the closing table for a customer. 

Somehow we have to get the word out that options and freedom of choice exist regarding the loan officer and lending institution to be used in these sales.  They cannot stipulate mandatory ...   

 

Posted by Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi, 708.921.6331 - 40+ yrs experience (NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656) about 9 years ago

This is one of the reasons I work with several lenders and usually try to make sure there's something different about them.

Posted by Michael J. Perry, Lancaster, PA Relo Specialist (KW Elite ) about 9 years ago

I know of several large banks that cannot do a loan if a client has less than a 660 middle score.  My lender makes a living on loans to people with less than a 660  middle score!

Posted by Damon Gettier, Broker/Owner ABRM, GRI, CDPE (Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert) about 9 years ago

I agree. Too many big banks only loan to 660 and higher. I love the fact that I'm able to work with folks lower than that. Still many options that are "outside the box".

Posted by Nicholas Goraczkowski, Your Mortgage Resource - (720) 83-RATES about 9 years ago

I agree with Gene Mundt - it comes down to the individual loan officer's ability. Good loan officer's know up front what the chances are of getting a loan done through whatever channel they fund their loans through. They also know when to say no and refer them to someone else.

Posted by Phil Caulfield, I Get The Loans Done That The Big Banks Don't! (Guarantee Mortgage) about 9 years ago

Steve, kudos for getting a lively conversation going! I'm not sure why you put the emphasis on 'big banks' though when the issue seems to be the mortgage rep making a mis-leading statement.

None of us know every product out there -- in my state for example there area number of down payment assistance programs offered by municipalities -- some of them I have access to (working for a 'big bank,') others I don't.

The key point here seems to be, just as you said, that a mortgage rep should speak for their programs, not for the general market -- especially when it comes to reviewing a loan package for a seller.

The unfortunate issue you ran into is that the particular mortgage rep that was screening your buyer mis-lead the seller. Ironically, in my market a lot more of the pre-screening is being done by small, local banks who financed the development, than big natioanl banks.

Perhaps the real lesson is that any time a buyer is going to be screened by the seller's lender, we as the buyer's mortgage rep do a solid job prepping that 'screener' by communicating any pertinent information to them (such as 'hey I have an automated approval for a really niche program you may or may not be familiar with, here's the info on it).

The screening mortgage rep would have to be an ignoramus to not recognize the eligibility of the buyer if it were made clear regardless of whether he had the program. And if he still wouldn't give the nod, well that has everything to do with LO, and really nothing to do with who he works for.

Thanks for the post! --James Wirth

Posted by James Wirth about 9 years ago

A very sad sorry state of affairs at the banks today. When I ran banks in the 90's it was very different. Bank REO are so mis-handled in our market I just want to cry.....

Posted by Dave Humphrey, Broker, Real Estate Advice You Can TRUST! (RE/MAX Marketplace) about 9 years ago

What a coincidence---I just had the same thing happen with Bank of America. The offer was contingent upon BofA qualifying the borrower. Borrower didnt want to do it. Listing agent said tough, thats the way it is. BofA said no and I turned around and had the borrower approved for a pure A loan the next day at a different lender. Problem was another buyer beat mine to it by then. My borrower was mad as hell but couldnt do anything about it. I thihnk there could be grounds here for some form of legal action.

Over the yerars Ive delighted in taking borrowers who were turned down by Wells, Countrywide, BofA, etcs retail agents. and sending them right back through the SAME companies wholesale side to be approved, LOL

 

This is the difference bewteen a professional mortgage counselor and a bank employee who just works with large numbers.  Funny that many real estate agents want to have the borrowers go through the big pillars of an institution like a bank instead of a broker.  I am licensed as both real estate and mortgage broker so can talk about either with impunity

Posted by Marvin Von Renchler Security Trust Mortgage, Inc. about 9 years ago

As a Realtor I don't even want to deal with short sales, REO's and that whole mess AT ALL, but its almost impossible to avoid it. It is inconceivable to me how fast everything slid into the swamp.

Posted by Pat Mullikin - KW Milwaukee (Keller Williams Milwaukee) about 9 years ago

Steve, Congratulations on being an expert!  Gene makes a good point that it is the individual loan officer that makes the difference.  If you are an "order taker" it doesn't matter what company you're at.  If you are a professional loan officer you can make all the difference in the world.  I spent 8.5 years as an underwriting manager and believe me, it's all in the packaging along with a complete understanding of available programs.  It sounds from your post that you are a true professional.

Posted by Jane Penttinen, NMLS #222178 (V.I.P. Mortgage ) about 9 years ago

I have had "Big Banks" screw things up a few times.  Not a "Big Bank" guy and it fact I was going to write a blog along the same lines as this.

Posted by Chuck Carstensen, Minnesota Real Estate Expert (RE/MAX Results) about 9 years ago

I've been working against the same thing for the last couple of weeks with a client. In this case GMAC won't make any seller concessions unless the buyer is using their financing (even if you offer over asking price) and my buyer needs help with closing costs in order to make it work. GMAC doesn't have a anything that she can use but there are several local brokers who easily could, with local/state first time buyer programs we have here.

Still, she can't buy the house she wants because without the seller paying closing costs it's a dead deal. It's different from the scenario you describe in that they aren't refusing to consider an offer but the net effect is the same when a REO seller's rigid policy keeps foreclosures from being sold.

Here's the other kicker. The LO that GMAC requires you to call...doesn't answer his phone and doesn't return messages until you leave the 5th one. Someone told me, "Try him right at 8am, he usually answers his phone between 8 & 8.10."

Seriously?

Posted by Julia Odom, Chattanooga Homes for Sale (Select Realty Professionals) about 9 years ago

Boy... my two favorite things... 

  • LOs that say a loan CAN'T be done, when the reality is that they just can't do it, but someone else can.
  • LOs that say they can do something that they are pretty sure they can't, but they think they can string it along long enough for the circumstances to change. 
Posted by Lane Bailey, Realtor & Car Guy (Century 21 Results Realty) about 9 years ago

Brokers working out of the trunks of their cars screw up too......

But the big banks are hurting the industry with tactics like this.

 

Posted by Tom Burris, Texas/Louisiana Mortgage Pro - 13 YRS Experience (NMLS# 335055) about 9 years ago

Joe - Abnormal is the new normal

Paul - I don't care about me, I feel bad for Mr. Buyer.

Integrity - I'd have to say the Realtors certainly feel more pain with REO's than us lenders!

Adan - I agree with your comment - but would say that if a lender is so concerned, than require a commitment upfront and an agreement to terms such as "keeping deposit" and "MUST close in X days"

Tom - I must admit from my experience many (certainly not all) are just that.

Michelle - Glad I could inform. Hope it helps you in the future!

Gary - Ironic how we reward the failures . . . hmmm something fishy here.

Janet - You last statement has been on my mind often lately, "Do the big banks really answer to anyone with regards to the handling of REO's ... sudden broken contracts, mandatory lender use ... what's next, requirin their appraiser?

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Deborah - When I started to write this post I didn't mention the bank, but I later thought it wasn't fair to my fellow professionals that are hard working, knowledgable and earning a living. I don't have issues with all "big bank" lenders, just the ones that tell a buyer he can't buy a home when he can, and tell my buyer there is no way I can close a loan for Mr. Buyer that I have already done and will do again. To answer your other comment, as a bank I do not work with this particular investor, anymore - used to months ago. The change was not at all related to this article.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Michael - First off, thanks for commenting. I am very happy you vented your frustrations here!! :)

The "big bank" mentioned above regarding my experience was not yours. There are also a few things that you stated that I would like to clarify. First, I didn't think the "Big Bank" mortgage rep was trying to steal a loan. I don't worry about that, because I feel if my professionalism and advice don't "win" a client over, than they should never be obligated to wotk with me.

As far as painting a picture of incompetent LO's for big banks ... that wasn't my point at all. Although I must admit since you brought it up, that LO's I personally know that are in, or were in "big bank" scenarios. were not as "on the ball" as most others. But that is only my experience. It would not be fair to make that generalization, because there are plenty of superstars that work for major lenders.

My issue is mainly that a hard working borrower is "disqualified" by an ignorant mortgage rep that is pre-qualing solely for his own bank's REO department - and when a bank such as this one who has probably 1,000's of REO's - - - well lets just say that customer satisfaction or even "fairness" is not  important. It just seems like a bit of favoritism, and often the big banks make their own rules.

The whole situation was shady, starting with the wording on the MLS.

 

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Linda - That sounds like a weird situation

Gene - I can not agree more. This guy could have just said, "I'm glad Steve can approve you but I can't" - that would have been professional, and responsible.

Michael - Few people do everything perfectly. A professional is honest and can tell you when to send the file elsewhere. It is highly unlikely that I will pick up a commercial deal - I'd send it out, even to the competition. It just isn't right to treat a buyer any other way.

Damon - ditto. And that probably relates to $xx,xxx in your pocket! :)

 

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Nicholas - to think we were financing borrowers with a 500 FICO and lower some years ago - crazy.

Phil - Agree

James - Part of the issue was the mortgage rep. Part was that the MLS was misleading. Part was that it feels to me like the big bank is doing a little more than pre-approving buyers to buy their own homes. I just feel the rules should be different, not for my benefit, but for the home buyers. Allow a commitment contigency before an offer is accepted, and a non refundable deposit, etc. (just an example). As far as communicating with the bank's lender, I can't say I've tried that - I have no problem with that - just don't see it possible though unless there was only ONE offer on the REO for months on end ... again the buyer doesn't get a fair shake.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Dave - Maybe you should jump back in and save the day! Certainly they need all the help they can get :)

Marvin - Interesting. I know where you are coming from.

Pat - We better get used to working with REO, it doesn't seem like it is going to change anytime soon.

Jane - I agree and well said.

Chuck - write that blog and come back and throw the link here :)

Julia - I have to chuckle at your comment. It is both crazy but completely believable.

Lane - Gotta love'em both.

Tom - Both true.

 

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Hi Steve -- It's so sad when this occurs.  This industry is challenging enough without throwing in ridiculous, human-made obstacles.

Posted by Chris Olsen, Broker Owner Cleveland Ohio Real Estate (Olsen Ziegler Realty) about 9 years ago

Steve - I'm feeling your pain.  I work mostly with low-medium income buyers and most are using local down payment assistance programs.  I always cringe when they have to get pre-approved with some big, national, retail bank in order to submit an offer on that banks REO and not because I thing they're going to steal my client; I've not lost one yet to one of those bank reps.  I cringe because these banks are not approved for the down payment assistance program my client is using.

Most of the down payment assistance programs I use require LO's to go through their specific training in order to originate their loans.  These big, national, retail banks are typically not approved to originate the loans, which means with them pre-approving my clients, my clients won't qualify for the same amount that I can get them approved for.  Does that mean my clients are qualified to buy the home - NO!  All it means is that big, national, retail bank is not qualified to pre-approve my client. 

Posted by Donne Knudsen, CalState Realty Services (Los Angeles & Ventura Counties in CA) about 9 years ago

This is a serious problem in places chock full of bank owned foreclosure listings and where other agents are requiring approval with direct lenders or specific lenders.

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) about 9 years ago

I see that a lot in our MLS . . . "Buyer must qualify with XYZ MORTGAGE" or equivilent.  I have no reason but to think that they are just trying to sell the place, and cover some of their loss by spreading it into a mortgage and interest payments . . . that they've extorted made the buyer obtain in order to purchase the property.  Where is the DOJ when you need them.  And this "consumer protection" stuff -- seem like a lot of hooey.

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) about 9 years ago

If a buyer is strong, a pre-approval from a preferred lender should not be impossible to obtain.  I have had more succeed than fail.  However, certain buyers need more help than others and they are the ones caught in this quakmire.  It would seem to me, that "Preferred lenders"  are installed to recapture some of the bad debt by originating new loans on the foreclosed property.

Buyers with special financing needs are at a clear disadvantage under these guidelines it would seem.

Posted by Allison Stewart, St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904 (St.Cloud Homes ) about 9 years ago

Chris - I agree

Donne - Perfectly stated.

Christine - And those areas need the first time buyers, etc. as much and more than anyone!

Carla - That is one of my thoughts as well. Can't blame them. However I still think it is a form of stearing a client - we can't make them use a particular insurance company, or a particular title company ...

FPR - You summed it up. And first time buyers and such ARE at a disadvantage in cases like this. Certainly makes it harder to get rid of inventory.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

[(Realtor mentioned something saying she can't put "bank owned" anymore on her listings ... that's another topic) FRUSTRATING!!]

Yeah, an MLS or Association that's requiring their listings to show misleading/inaccurate/falsified information SURE IS another topic!

And I agree with your comment above, Steve. To require a consumer to provide their personal information in order to buy a house? How different is that than the insurance/title restrictions that are RESPA violations?

Posted by Candice A. Donofrio, 928-201-4BHC (4242) call/text (Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker) about 9 years ago

Candice - seems awfully similar to me ... :-?

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

I can understand the REO sellers wanting to make sure the buyers are qualified, but the steering of business to these banks is wrong.  I think it should be against the law.

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) about 9 years ago

Gene - I too understand, it just doesn't seem to be handled right.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Steve what is your Tax Credit Prefund Mortgage Program?

Not a program I am aware of.  Of course I am only a title person and not a Lender.

Kevin Stroud

eSettle, llc

Posted by Kevin Stroud (Colony Ttle Group, Ltd.) about 9 years ago

Kevin - Thanks for catching that - I "mislinked" that up above - it should be fixed now. If you still need more info I'd be glad to help - just let me know.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

It is also frustrating that most REO listings require the buyer to pre-qual with there lender. I know that this has been brought up many times before but it is still an issue with me.

Posted by James Lyon (Vista Pacific Realty) about 9 years ago

Here in VA "professional reciprocation" is common practice.  Bank X grants Agent Y REO listings, in exchange for the opportunity to develop a relationship with potential buyers for those listings.  However I observe that only a cursory prequalification needs to be done by the lender recommended by the listing agent - I don't even think credit is pulled unless the buyer wants a relationship with that lender.  I also believe publically suggesting lenders in Remarks is not sanctioned by our local MLS.

Posted by Lisa Moroniak, SFR - Short Sale & Foreclosure Certified (Keller Williams Realty | Northern Virginia | 703.635.0388) about 9 years ago

Talk about opening up a can of worms again.  AR is such a wonderful place for us to communicate all our ideas. As a loan officier and a real estate agent, I agree with almost everything that everyone said in this blog so far.

The whole problem is so complex.  Assuming the buyer can qualify for a loan, it is a shame that they might not be able to actually buy the house they want.  On the other hand, the bank does not trust loan originators and will not accept an offer unless that buyer submits an application to one of their own officers.  Those officers have limited time and resources, since they only are able to look at whether their own bank can give the buyer a loan.  Programs are a lot different from one lender to another and a good loan officer is aware of this and can sometimes still get an approval from somewhere else.  But the bank is protecting themselves and does not care!

Unfortunately, I see no easy solution for this problem.

Posted by Jirius Isaac, Real Estate & loans in Kenmore, WA (Isaac Real Estate &TriStar Mortgage) about 9 years ago

Janet stated in post #20

Steve, this amounts to big bank blackmail. You only get the house if you finance with me. It is thinnly disguised as "we need to make sure the buyer of OUR property is qualified

This is exactly the problem and well stated by Janet. But does not end with just the financing. In my business experience, we were told earlier this year that a broker we had a great relationship with could not commit their appraisal orders to our company. Why you ask? Because they specialized in REO's and a large company who shall remain nameless (started with a C and ended with WIDE, and then really ended with a pennies on the dollar buy out by another big bank) owned a majority of the REO properties. Lo and behold the broker was told by nameless company that since they owned the property, they would only sell it to their client if all other related services were handled by their lovely organization, part of which is an appraisal management company.

In my personal experience, I am shopping for a home now and my Realtor (the excellent Christine Donovan Post#46, Hi Christine!) and I have had this same discussion. Why do I need to give such and such Big Bank an opportunity to decide if I can buy a house if the mortgage broker of my choice and I have already determined that I can?? Even worse now is having to be approved by another local broker who I don't know. What is their experience level? What type of financing do they specialize in? What programs are they aware of and what is their agenda??

I have said repeatedly that this current real estate market is very frustrating for professionals and the general public. Not to mention the lack of professionalism from supposed professionals making it all worse.

--Andrew

Posted by Andrew McGrath (Donovan Group Realty) about 9 years ago

It is so frustrating to see this happen over and over again.  However, recently I did have an exception to the norm, but it is good news-bad news story.  I called 2 different loan officers with the same approved bank trying to get anyone to return my call quickly.  The first one said no way.  The second loan officer with the same approved bank actually knew of a loan that my buyers qualified for, it just wouldn't be with his bank.  He wrote the pre-approval letter which was accepted by the asset management company.  He would then have brokered the loan out if it weren't for my buyer backing out of the house!!  

Posted by Eve Hansen, Long Island Realtor (Thomas J. McCarthy Real Estate, Inc.) about 9 years ago

Goes back to what Gene (#24) said, "This just proves that most times it is the individual loan officer that makes the difference, not the entity they work for."

This is why it becomes so vital for buyers/borrowers to know who they are working with, even if it is a referral.  When someone you know refers you to some they know, trust and respect, interview that person and make sure they are going to be the right person to help you.  Every buyer/borrower is different and just because someone helped someone you know doesn't mean they may be able to help you.

When I get a referral, granted I am happy to see that someone liked and trusted me enough to refer someone they know to me but just because I helped the person who referred you doesn't mean I will automatically be able to help you.

Everyone's situation is different, however, if I can't help you, I will tell you so and if I know someone else who can, I will refer you to them.  I won't d$#k you around and tell you I can help you when I know I can't and I won't tell you no one can help you if I know someone who can.  But that's just me and that's the way I roll.

Posted by Donne Knudsen, CalState Realty Services (Los Angeles & Ventura Counties in CA) about 9 years ago

*** Over the years Ive delighted in taking borrowers who were turned down by Wells, Countrywide, BofA, etcs retail agents. and sending them right back through the SAME companies wholesale side to be approved, LOL ***

 I love this as I do the same thing.  I spoke to a friend at BOA mtg and found out I can offer more through their wholesale division than she can through retail (she was funny-since she use to comment on how they didn't like brokers).  I can take the customers she can't help and do the loans through their wholesale department. 

Especially in today's market, even with the guidelines set by FHA, VA, Fannie & Freddie - it's still up to BANK PARTICIPATION.  Each bank can "add" to the listed requirements and choose which programs that want to offer.    Even the "A paper" loans have different guidelines between the banks. 

That's another reason that working with a quality mortgage broker is important.  We know who's doing what :)  

It's frustrating that customers are getting turned down when they have a valid approval with the lender they picked just because they don't qualify under the selling banks terms. 

As for whether you think the bank is trying to get the loan - of course they are.  That's their job to try and bring the relationship to the bank.  It works by saving the customer time.  I've even had the bank tell the customer that they would be able to cut their closing costs by running it through them directly since they have already gotten them preapproved on their system (it didn't matter that I was also sending the loan through their wholesale division). 

Posted by Tina Willoughby, Mortgage Originator (Equity Resources Inc) about 9 years ago

James - It is an issue with many

Lisa - I guess suggesting lenders in the remarks is like putting "Call me, the listing agent, at 800-555-1212 ... huh?

Jirius - what makes your comment so ironic is that you say "Banks do not trust loan officers" when indeed it is their own loan officers sometimes at fault! You said it right - the bank is protecting themselves, and don't care. THE FLIP SIDE is that if they finance this buyer, and THEY default too, well then they are mjaor losers in that whole situation, possibly losing more than the home was ever worth, putting their overall losses greater than giving the home away for free .... interesting twist.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Andrew - great commentary, thanks for the input. To repeat some of my later comments, I wouldn't even care if the bank asked for a commitent - but they wouldn't even consider it - because they can't do the loan, so they don't want it.

Eve - good to hear you guys even had options though! Hopefully your buyers are still interested and looking.

Donne - True again - I have great referral partners, but there are just times when I don't click with a client, and there are times when they don't click with mine. You can only hope everyone is clear and professional all the time.

Tina - WOW - the Realtor can save them closing costs if their lender is used ... whew, sounds like some extra stearing that I am not so sure is legal. That sounds like a financial benefit to the agent (maybe) - Wow it gets risky when the Realtor and Lender work for the same company. Although I've found MANY of these situations where the agent does not prefer the in-house guys.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Steve,

Isn't this situation a violation of certain lending and settlement rules?

And, aside from that the required pre-approval should, at the very least, require an Affiliated Business Agreement.  (They are making a referral through the listing, right?)

I've yet to understand how the pre-approval requirement you mention is not a RESPA violation.

Posted by Joseph "Cathan" Potter (Coldwell Banker) about 9 years ago

I do think it's wrong they say the buyer must be pre-approved with them first.  I wonder how many buyers they lose that way.  Seems like people just don't want to sell the property in some cases.  My client wants to make a cash offer, but they are saying that the "owner" has been rejecting cash offers that are even just $1,000 below asking price.  Meanwhile the offer they accepted from a buyer (that offered much less than asking price) that may back out of the deal because they may not even be able to afford the offerthey submitted.  Seems the whole system is still kind of flaky if you ask me...

Chanda panda

Posted by Chanda Barrick, in referral (Keller Williams Indy Metro Northeast) about 9 years ago

Steve - I'm sure you can relate to Tina's scenario of approving and closing loans through a banks wholesale division when the retail division couldn't.  I know I can and was doing that up until a few months ago.  However, when the big, national banks started becoming more and more difficult to work with, I stopped using them, even though I had been using them for years and they were my favorite lenders.

Since April, I haven't sent any of my client loans to a big, national bank.  I've found better success at my smaller, local correspondent lending sources.  Still taking 45 days to close but with a lot less drama, stress and insane conditions than the big, national banks were starting to do to me and my clients.

However, I find Chanda's scenario absolutely hilarious but probably not for the reason you think.  You see, around here (SoCA), my FHA buyers are losing offer after offer after offer to lower cash offers.  SERIOUSLY!!!  Just recently, one of my FHA buyers lost an offer on a big, national bank REO to a lower all cash offer and I'm not talking $1,000 lower but rather almost $10,000 lower.  WTF???

Somebody please explain the logic of that to me?  Doesn't the bank want to make the most money they can on the deal?  Why would the take an offer that is going to net them less?  GO FIGURE!!!

Posted by Donne Knudsen, CalState Realty Services (Los Angeles & Ventura Counties in CA) about 9 years ago

I do not think that the banks should be able to do this at all.  It is definetley unethical, and hopefully illegal.  Even assuming that the bank loan officer can approve my client, either they have to spend time for nothing and go through more hoops, or there is a small chance that I could lose the loan if he was not totally committed to me. (I do not worry about this too much.) Assuming they get approved and still do the loan with me (most of the time), it is then a lot of work for my client and the bank loan officer for nothing.  What a waste all around.  It just burns me up!!!! 

Posted by Jirius Isaac, Real Estate & loans in Kenmore, WA (Isaac Real Estate &TriStar Mortgage) about 9 years ago

As an REO agent, I wanted to weigh in on the conversation. When I take a listing, there are certain clauses that I am required to put in the MLS and they vary from bank to bank. I currently do have one listing that the bank wants the buyer to be pre-approved with them before the offer is accepted. Once the offer is accepted, the buyer can get their loan from whoever they want. Before I started listing reo's, I was like many of you and did not like it or understand it. Being on the other side of the fence, I can see the reasoning. You would not believe the number of pre-approval letters that I have received that are not worth the paper that they are written on. So much so that I now call the lenders to verify pre-approvals on my non-reo listings. Nothing more frustrating than to have a property pending and find out days before the closing that the buyer can't get a loan. This has happened to me twice. Both buyers had pre-approval letters but come to find out the lender who supplied the letters hadn't pulled credit or verified anything. If the buyers are qualified then there should be no problems. The buyers that this is a problem for are the ones that are iffy. Quite honestly my duty is to my sellers, reo or not, and in a multiple offer situation I would definitely want my clients to know what the chances are of each buyer cloaing.

I also work with one bank that requires that any wording of reo, bank owned, foreclosure, etc... not be used in the MLS. Our MLS requires me to disclose if it is an reo so I can't comply to their requests but if your local MLS doesn't have this requirement then the agent is being honest and doing what her client has requested. I believe in full disclosure myself but look at it this way, if you have a seller request that something not be placed in the MLS for whatever reason then so long as it doesn't violate state laws or MLS guidelines, you would be obligated to comply with your clients wishes.

With all of that said, I think banking in general is a crazy crazy world right now. It's not just the big banks but all banks seem to be having issues. It is a challenge anymore just to get anyone to the closing table. And I agree with everyone else here that has said it really does depend on the LO. Buyers need a great LO that is going to put in the extra effort to get them closed.

Posted by Kristy Baker (Century 21 Act III Realty) about 9 years ago

Joseph - I am not sure if it violates any guidelines. I just feel that things should be more flexible regarding a validated commitment option when a bank can't offer a specific loan. I understand it is the sellers prerogative to say yes or no, but at times it seems like unfair discrimination. I wondered about the ABA as well.

Chanda - Like I said to Joseph, it is a seller's prerogative. I know most agents direct buyers to their mortgage company, but that is buyer's agents. All-in-all this world of REO's has its own, oft-changing rules. But the way government regulation has been hurting the consumer, I'm not so sure I want them getting involved.

Donne - I can only think they are trying to cut REO's ASAP, losing money if need be. When you are bleeding I guess you stop it any way you can, as fast as possible.

 

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Joseph - I am not sure if it violates any guidelines. I just feel that things should be more flexible regarding a validated commitment option when a bank can't offer a specific loan. I understand it is the sellers prerogative to say yes or no, but at times it seems like unfair discrimination. I wondered about the ABA as well.

Chanda - Like I said to Joseph, it is a seller's prerogative. I know most agents direct buyers to their mortgage company, but that is buyer's agents. All-in-all this world of REO's has its own, oft-changing rules. But the way government regulation has been hurting the consumer, I'm not so sure I want them getting involved.

Donne - I can only think they are trying to cut REO's ASAP, losing money if need be. When you are bleeding I guess you stop it any way you can, as fast as possible.

 

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Jirius - Right, again I am just saying there should be an option to send over a commitment subject to appraisal and title, even attach a non-refundable monetary amount of 1% (for example) to cover banks time of off market exposure.

 

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Kristy - It is good to know that your local MLS has these guidelines. Also I'm not asking that an REO selling bank shouldn't review a buyer's prequalification. They should be allowed to require a commitment upfront. That is very fair. That way the pre-approval "game" isn't an issue. And like I said several times above, let them charge a non-refundable fee that is applied to closing costs or kept if it doesn't close.

I would have to disagree though regarding lending right now. Although it is changing and we all have to jump through more hoops, it isn't (knock on wood) so difficult to get buyers approved. LESS PEOPLE QUALIFY overall, but it isn't hard to get people approved. I've had one client in my recent memory begin the process and later not qualify. But it wasn't the lender turning him down because of anything funky - the buyer wrote off about 30% of his income on his 1040's that his paystubs or W2's did not reflect (he was a salaried employee - but the program he was doing required 3-years 1040's - no way around the write off). But even in this rare case we knew this only being in processing for a few days. He was denied shortly after we started working on it. My point is this - I am no superstar - my underwriter can assure you that, haha, but as many have mentioned above the professional(s) you work with (loan officer(s)) do make the difference, just as working with a "great" versus "mediocre" Realtor or title company make a big difference. Thanks for the comments!! :)

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

I have buyers in similar situations. The lender I work with CAN approve them but the lender required by the listing agent "cannot".  It's a very frustrating situation!

Posted by Jenny Durling, For Los Angeles real estate help 213-215-4758 (L.A. Property Solutions) about 9 years ago

Hey I would write the deal with you as a lender and then process the loan and get it to closing. Keep the home on the market then until you get it thru underwriting. That should show em!  Recently there are more & more posts about this pre-approval by Mr. Big Bank.  I personally think that it's 'steering' the buyer even though they say that is not the case.  Close the deal and 'get er done'.

Posted by Lyn Sims, Schaumburg IL Real Estate (RE/MAX Suburban) about 9 years ago

Man Steve. I hate the whole set up saying that you need to get preapproved from their bank. It is okay if they are making sure that the deal will close. However, those with the "special relationship" with the bank just want the loan too.

Posted by Mark Velasco, Listing Agent-Whittier & Surrounding ciities (Sharpstone Realty, Inc) about 9 years ago

Jenny - Right, and in a market that is predominantly REO's, that can be a real drag.

Lyn - I think that is fair. Lets get it through underwriting, get a commitment, subject to appraisal and title, etc. and lets submit the offer.

Mark - I don't care if they want to check and see that it is a good loan, but just because their bank can't do it I think is discrimination.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

Steve, great post. I've had this situation several times. I work for a very small, unique broker, owned by a non-profit housing developer. In Michigan they call me the MSHDA Queen (MSHDA is our state housing authority), and I have had several buyers approved combining these niche products with other products when people were denied by the huge national lenders. It's good your buyer has you to protect him/her!

Posted by Danell Merren (Providence Home Mortgage/ICCF) about 9 years ago

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