I am a real estate broker...I get offers (mostly short sales) from agents who have clients who can't close. That really sets me off. I ask the pre qual lender if they have verified income and credit assuming they will tell me the truth. They all say they have; but most have not. I find that out after I have submitted the offer to the short sale dept and done all the work. What the heck is up with all the nonsense and wasting my time. How do I retaliate and hold some of these mortgage brokers to task for not being legitimate.
I would really like to nail one of them so the others will stop the nonsense; we actually count on the mortgage broker to be a little legitimate. I thought of making them prequal with my lender, but I hate that when I have to do it myself.

When they have actually done the verifications, then we refer to that letter as a "Pre-Approval".

Of course, we still have some Lenders (or Mortgage Brokers) who write letters that they call Pre-Approvals; but then in the body of the letter they will say that this Pre-Approval is subject to their verifying the information that the future Loan Applicant told them . . . . which means you can go and throw that one into the bin of Pre-Qualification Letters.

My most favorite one was where the Husband neglected to tell his Wife about the Delinquent Alimony and Child Support that was in his history . . . . in fact he had neglected to bother even telling her that he had been married before. So that new Marriage ran upon the rough shoals of Divorce Court (or annulment) because of the difference between Pre-Qualification and Pre-Approval. Lying on a Marriage License Application is usually considered a Felony too; just like lying on a Loan Application.

I'm just glad that this confusion afflicts Brokers and Agents (and even some Lenders) country wide. And when we are confused by the terminology, it's no surprise that the Buyers and Sellers are confused, is it?

I run into it all the time. I would not strickly put "Mortgage Broker" in the limelight on this one. I am a Mortgage Banker so I am somewhat defending my competition.

Most of the Mortgage Banks who have depository accounts do not have enough loan officers to handle the high mortgage demand since most mortgage brokers are gone. So, they do not take the time to make sure everything is solid.

I have realtors complaining about various local banks with loan officers I have met and know are capable. These loan officers are making mistakes that should not happen. Such as a debt to income ratio being too high right before closing and after 2 contract extensions.

Really, the only way to know how seriously you should take a "pre-approval" is to know whether it is a conditional approval--i.e., something generated by an automated underwriting system or human underwriter based on a complete and accurate 1003 loan application. This type of approval is as close as you can get to knowing whether your buyer is qualified. HOWEVER, even conditional approvals will state, "This is not a commitment to lend". You can never know until final underwriting approval that a loan will go through.

We've played "rescue" to 3 so-called approved loans with an un-named biggest box bank this past week. All 3 were given pre-approvals to go find the home of their dreams, only to be told later they didn't qualify.

With everyone's terminology being different, I would put the burden on the listing agent to call and quiz each loan officer with a letter accompanying an offer. Ask them exactly the concerns you mention: did they verify the income (and how), do the assets exist (in place or liquidation required), are the scores acceptable for the loan program and other than the appraisal are there any other issues? And when they say yes, all is good, say great, send me an email or fax to that effect, or you can't recommend the contract to the seller.

I don't think some still get it. People are making life decisions based on these letters, incurring in some cases, thousands of dollars in expenses. "Ooops, I missed that" just doesn't cut it. The changing guidelines are hard enough as it is, but add to the equation someone that isn't taking care of the bare basics, well, they need to be weeded out.

It's all about expectations. If agents prepare sellers for the screening process and requiring a higher standard, you would think buyers and their agents would get the message when their contracts are not accepted, or even presented. Interviewing the loan officers is legal - you are not asking for confidential information to exchange hands. An argument could be made for borrower's expectation of privacy, which could easily be combatted with a release to disclose the peripheral data, but no explicit information need be revealed. (Most new construction contracts already contain such language to disclose to the seller).

It got so bad in our area, there was one particular outfit in town......no contracts were accepted if the letters were written by them. We are back to the offers with escalation clauses or multiple offers. I have advised my buyers to take their credit score disclosure notices and attach it to my letter (they have to do that, not me). In some cases, I have told buyers to attach a redacted bank statement or even W2, if the competition was tough. If your market is slow......it's even more important not to lose time off the market.