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