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Date: Dec. 22, 2007
Tags: None
I recently read a blog which seemed to excite real estate agents and cause loan officers, especially those who work for lenders, to say "huh?" The author titled his post "DO NOT ACCEPT PRE APPROVAL LETTERS!!!!" And that's a cut and paste so the emphasis is his.
The premise of the article is that loan officers just plug in a name and date and print off a pre-approval like some mass production facility churning out worthless documents. Now in all consideration of this blogger he is a loan officer at a mortgage broker and may have some first hand knowledge of this practice. On the opposing view I am Director of Operations for a direct lender and have a completely different take. My issue with the blog is it confused real estate agents and they took the low road--the wrong viewpoint.
The writer suggests that agents do not accept a pre-approval letter. What, then, should they ask for? An underwriting approval.
NOT GOING TO HAPPEN. First of all the author works for a broker that has a contract underwriter for a lender in their office who works for just one lender most likely. That underwriter is probably very slow right now and has time to thumb through a file and provide a thumbs up or thumbs down on the borrower. There can never be an approval until there is a full package. Chances of getting a real underwriter to look at a file without full documentation and liking the person who submitted it? Very slim.
Take a brief look at my blog on Active Rain at a post about one hour in the morning of the life of an underwriter and you'll understand why there is almost no chance they are going to stop for even an hour and verify documents, income, assets, job, etc., to give an underwriting approval on a borrower.
Unfortunately this loan officer's post did more damage than good because he gives a false impression to real estate agents that they may request, or even demand, an underwriting approval before they accept an offer. Worse yet he may have lead agents to believe that underwriting is a simple, quick operation. Nothing could be farther from the truth. Yes, an underwriter can review the documents sent in from the borrower but verifications can often take days.
Ultimately the thing an agent needs to do if they want to play hardball on pre-qual letters is to do exactly as most prequalification letters say and call the issuing party with additional questions. Have you reviewed the applicants income and asset documents? Have you verified their employment? Have you received verification from the depository institutions about the documents provided by the borrower? Have you completed the mortgage payment verification for the current months payments?
No agent with a taste of reality is going to do all of that. This means the author of the blog which raised my ire needs to turn his fingers back at himself and make sure he is sending pre-qualification letters as good as mine.
My parting shot is this, if you are a real estate agent and you receive an offer it is not up to you to determine whether or not to accept an offer--it's the seller's prerogative. If you were representing me and an offer came in with a pre-qualification letter and you did not accept the offer and never spoke to me about it you and I would have a bone to pick!
Ken Cook is Director of Operations at Novation Mortgage in Georgia. Novation Mortgage specializes in real estate investment finance, FHA home loans, jumbo mortgages, and small commercial financing to 97%
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