REO sales and Pre-Approvals from the REO owner's origination department

Services for Real Estate Pros

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!


Comments (5)

Gary Miljour
American Financial Network, Inc. NMLS#207208 - Southern Pines, NC
Mortgage Originator NMLS Licensed in AZ and NC

Juan- Thanks for the link and I can again agree to disagree with your position.  It sounds like we both have passion in our writings and come from different spectrums of the lending arena.  You know my position. 

Jun 05, 2008 07:20 PM
James Malanowski (DRE #01373117) - Palmdale, CA
REO Broker, Palmdale, Lancaster, Rosamond, CA

The pre-approval process drives me nuts but I totally agree with it.  The main problem is the officers that typically end up on the REO accounts are horrible.  Probably because they couldn't produce on their own so they took the "sweet deal" of a constant flow of potential borrowers with no legwork on their part - at least that's been my experience.  I'm sure there are some good ones out there ... I just wish they'd find their way onto my accounts!


- James

Jun 05, 2008 07:35 PM
Juan Boldizsar
Belleville, IL

Thanks for the comment James.  I totally agree that there are probably quite a few LO's working for originator/servicers who don't know their rear from a hole in the ground.  In any event, when I worked for AHM, these originations were not tremendously profitable.  However, the department for which I worked had the responsibility of getting these pre-approvals taken care of.  So, I just tried to be as efficient as possible with the whole thing.  From the time I took an app, it usually took as little as 48 hours to get a commitment letter.  In my opinion, I don't think it mattered much to the servicing department if we ended up with the loan or if someone else did -- as long they were assured (via our pre-approval) that the sale would ultimately close.

Gary:  Thank you for your comment.  I am glad to see that we each respect each other's passion for our respective writings and opinions.  I appreciate your point of view and most certainly enjoy the debate.  Since your original post was in more generalized forums, I thought it would be interesting to solicit the opinions and ideas of folks who work with REO's day in and day out.  Nice blog, by the way.  I enjoyed reading it.

Jun 05, 2008 08:43 PM
James Malanowski (DRE #01373117) - Palmdale, CA
REO Broker, Palmdale, Lancaster, Rosamond, CA

My AMs don't care who funds the loan as long as someone funds the loan.  The sales guys, of course, want the loan ... I've had some over there waiting for approval (or not) for over 2 weeks sometimes.  It drives me nuts!  I can't prove anything, but I have a feeling they drag their feet on anything they know they won't get.

Many times I just submit the offer anyway and let the AM know what's going on and let them make the decision.  I work for the REO dept and it's my job to get assets off the books - not sell loans.  I do appreciate that the banks want to verify the buyer in the age of "approvals" that may as well be written on toilet paper and ice, but I wish they'd kick their lending groups in the ass and get them moving.


- James

Jun 05, 2008 08:56 PM
Vanessa Calhoun
PalmerHouse Properties & Associates, LLC - Atlanta, GA
Your Greater Atlanta Marketing Guru!!

I have a situation occurring now with Wells Fargo who's insisting that my client secures a Wells Fargo pre-approval even though she has one from Colonial Bank ANOTHER DIRECT LENDER! The problem is that the Wells Fargo representative advised that it would take THREE FREAKING DAYS to generate a pre-approval. The home will not be available in three days and my client would like to submit her offer NOW!!! If they want to sell their own loan products, then they should do what we all do.....LEAD GENERATE!!!

Mar 17, 2009 09:37 AM