1) If it is a bank foreclosure asking you to qualify through their bank, They are requiring this because:

A) They want one of their people to check you out to make sure you are really qualified.  Sadly, a large percentage of  pre qualification or pre approval letters are not worth the paper they are typed on.  Some lenders do not even run credit before they say you are pre approved! 

B) They want an opportunity to get your loan business.  Banks make money off of each loan they close.

C) If the bank approves you and you go with another lender and the loan “blows up” you can go back to the bank and they can close the loan for you.  Remember they already approved you.

2) It it is a foreclosure asking you to get a 2nd approval through their preferred lender.  This means that the foreclosing entity and lender are not in the same company.

A) They want a lender they trust to go through your file to make sure you have the ability to close the purchase because of reasons mentioned in 1A

B) They make absolutely no additional money if you use their preferred lender.  They do get peace of mind which can be priceless.

C) They know if their preferred lender does the loan it will close.  If you use another lender and it “blows up.” you can go back to the preferred lender to close the deal and rescue the deal.

D)  Certain financing is available on certain types of foreclosures.  Very few lenders take the time to learn “niche” loans which is another reason you will see a preferred lender.  The preferred lender knows how to do the unique financing.

Note:Due to the complicated nature of financing these days we are seeing preferred lenders on both short sales  and regular sales now too.

Lenders’ perspective:  I am fine with the 2nd approval process.  I am happy to call the other loan agent and see what they need and get it over to them as quickly as possible.  It is the nature of our business right now. Also, they are providing a complimentary service for my client. They are providing options.   I am always suspect of lenders that dislike this process.  It is really not that much extra work. It makes me wonder why they do not want their clients to have additional options.

Expect:
1) An emotional yet controlled recovery: 
The emotional aspect:  If you read the business section you can see the view on the recovery swing rapidly from day to day.  On Monday we are recovering and on Tuesday the market is being hailed as the next big depression.  On Wednesday everything is sunshine and rainbows and on Thursday we are doomed.  There is a lack on consistency in mood.  This is what we call an emotional recovery.  Every speck of data is sending the media and emotional investors to the extreme on each side. It is manic depressive to say the least.

You can take advantage of this by investing when they say it is the end of the world.  It is amazing some of the deals on solid companies that have been offered up in the last 36 months due to doomsday news. It is a great time to start saving for retirement or increasing your retirement savings.   Rates also will go up and down with the news. Quick cheat sheet below
Great Depression = lower rates    Recovery= higher rates

The Control Factor:  This recovery is being controlled and pushed along by the government and the “powers that be.”  Look at the housing issue.  Our country cannot afford to let the foreclosures all hit the market at once. There are just too many.  This happened in 2008 and it devastated home values and threw the economy into the dump.  Since the 2008 free for all, there has been a much more controlled release of foreclosures.  Between the attempts at modifying, moratoriums and behind the scenes deals we have been seeing foreclosures come out in a low controlled movement.  Expect this to continue. The flood of 2008 will not happen again. It will be the trickle of 2011,2012,2013 and 2014.  I say no to the double dip.

2) The Year of the Short sale:
Short sales are speeding up a little bit which is great but what is even greater is that in the past few months we have seen more and more buyers  actually wanting to buy a short sale.  In the past people were hesitant due to all the unknowns involved.  However, short sales in many cases are now priced more aggressively than foreclosures, there is more short sale inventory and lenders are more willing to approve them. Also, there is new legislation in CA that makes it more attractive for homeowners to short sale their homes.

3) Lending to loosen a bit:  We are starting to see the beginning of slightly looser lending. Debt ratios are not loosening up but some of the documentation is. Stated is still a far way from coming back although there are some hard money sources offering stated income as long as there are assets.  We are starting to see more products coming into the market and more investors wanting to do local deals that are unique.  A big part of our 2011 plan is trying to say yes twice as much as we say no.  
4) Modifications to remain problematic:  The way in which modifications are being handled is so poor that I have absolutely no hope that it will be fixed by the end of 2011.  For example, I was reviewing a friends credit report who was going through a modification and even  though they had made their modification payment every month on time their credit history showed 7 lates due to partial payments (the modification payment).  Their score had dropped from 780 to 540.  They did everything right and their credit was hit harder than if they had done a short sale.  Bank of America is being sued by a few states over their modification processs and their have been countless stories of modifications gone bad.  The bottom line is that the servicers make more money by foreclosing or a short sale than they do by modifying. Until this is changed expect modifications to remain useless for the masses.

5) Foreclosures are here to stay:  There will not be a flood but the trickle will continue.  There will continue to be some great foreclosure deals.

For buyers and investors 2011 will be a year filled with opportunity.  For everyone hoping they can gain equity to refinance their house we are still a few years off. I do still hope that a no equity refinance will be introduced but I am not holding my breath.