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How Aggressive and Questionable Tactics of Lender Sellers Torture Buyers & Cost Our Industry

By
Mortgage and Lending with Platinum Home Mortgage Company NMLS #238304

When a bank sells a foreclosed property do they try to replace one bad loan with one good loan?

If the main agenda is to dump the house, is the hidden agenda to seize a golden opportunity to gain a new loan customer (far less risky because the "dumped" price was lower and the qualification standards higher)?

And should we believe our honorable lender sellers when they torture a buyer by forcing him through a second approval process (right at the time he is ALREADY feeling stressed about making an offer)?

They justify it this way: "Preapprovals from other lenders are worthless, we have to check this guy out ourselves before the house goes off the market!"

And if some little minor detail gets in the way, you know....like the buyer feeling bonded to their mortgage broker who spent months getting them ready BEFORE they made the offer, what then?

Bank thinking: Wait. I am the bank. I own the house. Why not just whisper this in the buyer's ear? "Use my financing and I will sweeten the deal. Use his and I won't".

Is this scenario the best thing the real estate industry can dish up for our poor customers?

If you have ever watched a buyer in this situation you have seen one unhappy camper. He is torn between the lure of a better deal or the confidence of sticking with his original mortgage person. Why should he be forced to make this choice?

You have watched him squirm and you know why.

His skin is crawling. He senses something very slimy is going on. And he is right.

I will admit the tactics of these REO mortgage people can be more subtle. Sometimes they offer to pay for appraisals. Sometimes they  offer to throw in the credit report.

And sometimes way less subtle: like continuing to hound the client right up until the week of the closing to "change your mind".

They also know no shame. I have had REO loan officers call asking ME to send them documents from MY file to help them approve MY CLIENT. What is wrong with this picture?

I'm going to help YOU steal my customer? I may have been born at night, but not LAST NIGHT.

In the background, a very confused buyer has no idea what to think, but we know this: the distraction of 2 loan officers fighting over one loan cannot make buying a house a better experience. Only worse.

One has to wonder this: why would ANY loan officer want to do a prequalification if he thought the loan was going to someone else?

What did the banks THINK would happen when they asked their mortgage people to prequalify people making offers on their foreclosed properties? Did they think buyers would come to the table without a preapproval already in hand?

For the record, we mortgage brokers don't lose many clients this way. We are too far ahead in the game. We have the ability to lavish far more attention on each individual buyer.  And frankly, we wouldn't be very good if we didn't already intimately understand bank tactics.

What we lose as an industry is far more serious: We  lose RESPECT.

 

Written by Janet Guilbault, San Francisco Bay Area Mortgage Lending Specialist

 

 

 

 

 

Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I look at a lot of foreclosure listings every day and I'm seeing fewer and fewer of these notes in the REMARKS. 

Perhaps they are getting the message.

 

Mar 25, 2009 04:04 AM
Janet Guilbault
Platinum Home Mortgage Company - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Notes that say "must be approved by lender seller"? Sorry, I guess I did not know this appeared in the listing, tut it makes sense that it would

I have heard that some mortgage brokers have "arrangements" with retail loan officers.

When the client makes an offer on property owned by Bank W, the buddy who works at Bank W is asked to get the client an approval from Bank W. He is given enough of the credit documents to make it happen.

BINGO! Client has the preapproval from the bank but no loan officer chasing after him.

Mar 25, 2009 04:17 AM
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Janet - You're singing to the choir girlfriend.  Most LO's these days are onto this particular racket and as you said, we have warned our clients to beware of the "snake in the grass".

The particularly disturbing trend I'm starting to hear about (at least around here from my clients) are those snakes that insinuate to the buyer that if they go with them, they'll "put in a good word with the REO LA for them".  SERIOUSLY! 

That is the act of desperation if I ever saw.

Mar 25, 2009 01:30 PM
Randy Hooker
Dreamcatcher Realty / Greater Phoenix Area - Gilbert, AZ
Gilbert, Chandler, Mesa, Queen Creek

This is an outstanding post, Janet!  In our market, Wells Fargo and Countrywide are the worst about pulling such shenanigans.  It's irritating, frustrating and IMHO, outrageous!

Mar 25, 2009 08:44 PM
Janet Guilbault
Platinum Home Mortgage Company - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Donne:What finally inspired this was a situation in our office. We were competing against Bank C.

Their mortgage guy told our client he would make sure that they got the $3000 closing credit they wanted.

But ONLY if they decided to finance with Bank C. When I was asked how to handle this, I said:

"Call his bluff. To think the mortgage guy at Bank C has any influence over the asset manager who is actually on another coast is a big stretch"

You said it: desperate.

Mar 26, 2009 02:16 AM
Janet Guilbault
Platinum Home Mortgage Company - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Countrywide, UGH! Randy, I have been up against them more times than you can imagine. Never lost one yet, but my co-worker did. The Countrywide rep finally convinced the client by chipping away at the closing costs until they were $1000 less. She would not give up.

Borrower went with Countrywide a few days before they were going to close.

My fellow mortgage broker was broken hearted. She had a file 4 inches thick, had worked all last year to repair their credit.

It just wrong, you know?

Mar 26, 2009 02:20 AM
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Janet - Just recently, AR member Gary Miljour (Gary Miljour's Blog: Mortgage Lending for Tempe Arizona) posted Potential RESPA Violations and Mortgage Lenders Steering Buyers:, which discusses this same topic.  It was a good post that lent itself to a great comment thread.  In the comments, the members discussed the recent HUD ruling that was posted (RESPA and Builders With Affiliated Lender Relationship-New Changes- ) by AR Member Bill Arce.  The ruling that HUD issued was on "Required Use of Affiliates" and defined "Required Use".  Although the ruling addressed how builders can no longer force borrowers to use their in-house lender in order to get the same incentives as those borrowers that do use the in-house lender, I believe the same ruling can be used in the REO offer situation.

The ruling goes on to state if the builder offers any incentives and/or credits, they must offer those same incentives and credits to every borrower regardless of whether the borrower uses the in-house lender or not.  In other words, if an REO lender offers to waive credit and appraisal fees for those borrowers that use them to purchase a particular property then they must offer them to every borrower who makes an offer on the property.

According to the ruling, the builder can no longer use incentives and credits to prospective borrowers as a means to use their in-house lender.  In other words, REO sellers/banks can not entice prospective buyers with promises of seller credits if the buyer uses the services of the preferred lender.  Furthermore, REO seller/bank lenders can not insist that every prospective buyer who wants to make an offer on the property must prequalify with their lender.  As we all know, if our clients don't prequal with the in-house lender, our client's offers won't be accepted.

This unethical behavior must stop and the best way to get it to stop is to see to it that these bozos that engage in this type of behavior are reported for their actions.  We need to educate our borrowers on their rights and let them know that in order to protect their rights and ultimately, their privacy; they need to report these bozos to the proper authorities.  Our clients need to know that this conduct is unethical and now is probably illegal.

Sorry for the long comment but, once again, you brought up a very good topic and one of my biggest pet peeves right now.

Mar 26, 2009 05:36 AM
Loan Survivor Real Estate Financing Expert
Purchases, First Time Buyers, Pre-Approvals, Refinance - Birmingham, MI

All the more reason we do our best to get an upfront fee from clients before spending hours of time with them!

Mar 28, 2009 08:00 AM
Darin Osenberg
Funky Quail Vintage - Nashville, TN

Hello Janet,

I enjoyed this post.  I have not had this happen to me or our company yet, so it is difficult for me to relate.  However, now that I have read it, it has made me think.   I will probably Re-adjust how I speak to our clients if they are looking at an REO property.  Sounds like by your "tone" you have been attacked or burned by this crappy tactic before.  For that, I am sorry, and COMPLETELY AGREE with you!  Yeah!  See, I am not all bad!  :)  LOL

I would only SUGGEST that you change the way YOU talk to your clients when they put in an offer on an REO.  My suggestion would be to TELL THEM up front , that they will probably be contacted by someone at that bank or lender, offering them what would APPEAR to be a better deal, but in the end, it may not be!  Being up front like that, will "prepare" them for the call.  If they BADGER  your customer, I would contact the person's manager, and complain.  Period.  This is a crappy tactic, and people need to be held accountable for not just illegal practice, but unethical and non professional as well! 

I COMPLETELY DIS AGREE with your commentor Drew S.  Upfront fees is NOT the way to go!  If you have not built value in your services, or instilled confidence in the borrower, then what kind of borrower do you really have??  Then, you are arguing about getting FEES up front?? I have never done that, never will!  It is NOT the answer.  Relationship and value building are!

Nice post!

Darin

Mar 31, 2009 02:57 AM
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Janet -- I agree.  If we want consumers to respect us, not just as individuals within the system, but our respective professions themselves, the processes, systems, and ethics needs to be in a much higher plane.

Apr 01, 2009 03:14 PM