I just came across a blog post in which the writer did not much like the fact that lenders who both originate and service loans insist on having a potential buyer pre-approved by the lender-servicer's lending side. The blogger's complaint was regarding Countrywide -- a company that I, personally, don't care much for. However, I defended the practice in principle.
The jist of my argument is that there are enough pre-approvals out there that might as well be written in crayon on craft paper and bottom-fishers looking for a "free option" that a servicer is perfectly justified in asking that its origination arm pre-approve the buyer. Most pre-approvals are just fine, don't get me wrong. However, the junk that's still out there never ceases to amaze me. It's a shame that it requires certain safeguards to weed it out, making life more difficult for the people who do quality work.
While I worked on the broker side of the business (where I am now, by the way), I sure didn't like the practice. Later though, I had the opportunity to work for a large originator/servicer where part of my job included doing those pre-approvals. Let's just say that I encountered more than my fair share of buyers who complained about me having to pre-approve them whose original "pre-approval" later "fell through." If we hadn't insisted on pre-approving them our REO department and listing broker would have ended up wasting 30 to 45 days for nothing. After my experience working with that company (American Home Mortgage if anyone's interested), I definitely can appreciate why they insisted on those pre-approvals.
The original blog entry and my comments can be found here.
In any event, since the original blog entry was not posted to this group, I thought I'd ask all of you who work with REO's what you think: Is it a legitimate business practice for a servicer to ask that its origination side pre-approve prospective buyers of its REO's or is it just a sinister pretext for steering business for the origination channel?
Thanks for reading!
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