Top 10 Reasons Why Countrywide is Being Stupid With REO's

Time and time again, I see Countrywide Home Loans (CHL) listing their Real Estate Owned (REO) properties on our local MLS and requiring buyers to get pre-approved with a Countrywide Retail Loan Officer prior to submission of their offer.  In fact, in their required addendums, it is specifically noted:

If the Agreement is contingent on financing, as a sales condition, Buyer must obtain a pre-approval letter from a branch office of Countrywide Home Loans, Inc. (“CHL”) for a mortgage loan in an amount and under terms sufficient for Buyer to perform its obligations under the Agreement, and such letter must accompany the Agreement.  The pre-approval shall include, but is not limited to, the pre-approval letter, a satisfactory credit report, and proof of funds sufficient to meet Buyer’s obligations under the Agreement. Buyer’s submission of proof of pre-approval is a condition precedent to Seller’s acceptance of Buyer’s offer. Seller may require Buyer to obtain, at no cost to Buyer, loan pre-approval as Seller may direct. Notwithstanding any Seller required pre-approval, Buyer is not required to obtain financing from CHL or Seller- Buyer may obtain financing from any source.  As an incentive for the Buyer to obtain financing from CHL, CHL will offer a free appraisal and a free credit report if the Buyer finances and closes the purchase of the Property through financing from CHL.

This is ludicrously stupid for the following reasons (not a complete list):

  1. Most buyers are pre-approved early in the home search process and have already chosen a lender they are comfortable with and are ready to buy NOW.
  2. Most buyers do not want to share private information with a stranger.
  3. Most buyers have no intention of working with the Countrywide Loan Officer.
  4. Countrywide pulls credit, meaning another inquiry on buyer’s credit report.
  5. Countrywide’s lending capabilities (product options) have been dramatically reduced since they are doing mostly/only loans that Fannie Mae or Freddie Mac will buy.
  6. Agents have existing relationships with loan officers that they know, trust, and can count on… they don’t like to have an ultimatium put to them any more than a buyer and don’t like interference in their client relationship.
  7. Agents often have such a long list of potential homes to show that they need to find reasons to eliminate some… this is an obvious candidate for removal.
  8. Countrywide doesn’t care who the approval is from or how solid the buyer is… if they are using financing, they HAVE TO get a pre-approval from Countrywide Retail. Period.
  9. Offering to do a free appraisal on a home that they own is akin to having the fox guard the hen house simply because he’ll do it for free… where’s the buyer’s protection when the seller is the loan originator?
  10. And finally- buyers are not stupid and they know when they’re being jerked around.  With so much inventory on the market, they can choose to tell Countrywide to keep their property and they’ll go find someone else who won’t treat them like a fool.

According to the Countrywide Foreclosure Blog, Countrywide had 14,442 REO homes listed on their site as of 12/5/07 at a total asking price of just over $3 Billion.  With so much inventory, so much competition, such a difficult buyer market, and tough times keeping Countrywide financially afloat, you would think that they would want to do everything they could to get their properties sold!

Recently I have seen several of Countrywide’s properties in the $200,000 range price reduced $30,000 and $40,000 all at once.  Such drastic price reductions have generated interest in the properties but also shows the motivation, and possibly desperation, of Countrywide to get these houses off their books.  If they eliminated their pre-approval requirement, they might see more interest from qualified buyers without having to so drastically reduce prices.

Some people suggest that Countrywide requiring a pre-approval is smart business, that it gives them an opportunity to pick up the buyer’s mortgage.  I would be surprised if they had more than a 20% capture rate on these leads (but I have no knowledgewhat their capture rate is), and the added holding costs for longer sale, disinterested buyers, and further price reductions make me think that this is a losing battle for them. 

Message to Countrywide: eliminate your CHL pre-approval requirement.  You’ll sell more houses, sell them faster, and likely at a higher price.


  1. Loyal Scribe says

    If I were a broker, I’d be thinking a lender I didn’t know would refer my customer to a broker they liked and put me out of the picture! CW would get the mortgage AND a referral fee!

  2. ARW says

    We all know what this is about…a desperate attempt to keep the REO values as high as possible. See, CFC will know how much you can afford and will appraise the house appropriately.

  3. Brian says

    With all due respect I get the feeling you have never sold a home that you owned and HAD to sell. As an owner of must sell inventory the sheer number of idiot “buyers” is staggering. What is even more staggering is the sheer number of AHole agents and lenders who just make stuff up. Please note I’m not calling you an Ahole, I’m pointing out that there are those types out there that ruin it for us good folks. So, as a seller of must sell inventory I want someone I trust and am comfortable with kicking the tires of the buyers so to speak. That way when this trusted lender relationship tells me a buyer is legitimate I’m comfortable and will move forward.

    Getting all upset over a seller trying to weed out the flimsy and crack pot buyers is a smart move and your job as a SELLING agent looking to earn a commission from that seller is play the game. Your points made above in bullet fashion are absolutely laughable, each and every one of those is what you expect a potential buyer to go through when you refer them to your “loan person” so YOU can have the confidence the job will get done yet, a seller wants the same thing and you get all bunched up over it. Come on guy. If you just dusted off the ole selling skills and explained the process from a sellers point of view (one that most potential buyers will most likely have gone through at least once before) and put it in a good light your buyers wouldn’t care one bit. It is just part of the game. If you frame it to your buyers as you did above in this blog post then they get upset over it and then won’t want to purchase a CW REO. That could end up costing you in the long run because maybe, just maybe their dream home is a CW REO and if you won’t show it and you make a big deal out of the prequal from CW a guy like me who doesn’t care one way or the other about CW’s policy and one with superior sales skills will sell that home to your EX Clients and make the commission.

    It is all about playing the game my friend, one that; at the end of the day is necessary from a sellers point of view.

    What should really have your panties in a bunch is the fact that Countrywide takes REO properties that are just plain old messed up and need major repairs and then tries to sell them for retail prices instead of discounting them appropriately to actually have a chance at selling. That is a topic worth venting about.


  4. Brian says

    PS. you must be stretching for content if you link to this laughable post. That or you are just trying to make CW look bad at any cost. They may deserve it but this link and blog post is a joke. From a credibility point of view just lost some points in my book. There are far better things going on in this wacky world of real estate then an Agent upset over a seller wanting to make sure a buyer is legitimate. By the way, this practice of prequalifying buyers from the seller or listing agent’s preferred lender is the policy of just about every REO agent and REO seller out there. I spend hours each day on the MLS and write 40+ offers a month on REO properties and every one of them wants the buyer prequalified by their preferred lender. It is not just Countrywide.

  5. says


    I appreciate your comments but have to disagree with you on many points. In the case where my buyer refused to do the Countrywide pre-approval, it was HE who dug his heels into the ground… I downplayed the significance of it and urged him to do it since the house was clearly the best option for him. He said he was refusing based on the principle of it.

    In the Twin Cities market, Countrywide is the ONLY bank lender I’ve seen require ALL buyers do a pre-approval through them. It sounds like it is different in your market.

    The pre-approval I submitted was with Wells Fargo… not some fly-by-night loan company with zero reputation. It didn’t matter to Countrywide… ALL buyers using financing, regardless of the lender, have to use their in-house people. That’s not for protection from bad lenders/buyers, that’s them trying to hog the trough.

  6. Shawn says

    I, being a broker, had this same issue, but what was so comical, I had an approval through their wholesale division. The borrower was a slam dunk. They still would not accept it. The borrower had to get an approval from their retail branch. This is clearly an opportunity for them to try to snag the loan and make it more profitable for them on the retail side. Also, can’t believe that this isn’t a HUD violation as well. Many realtors I know steers away from CW REO’s because of the hassles they put them and the buyer through.

  7. Suzie says

    Oh Brian, I fear you will find many more that disagree with you than agree. Are you in the industry? Do you work for Countrywide or another lender w/ a large REO portfolio?

    These lenders, most notably Countrywide, have been offering no doc or subprime loans and got caught with their pants around their ankles. So, you think the public would buy an REO and trust them with their mortgage? In case you haven’t caught on, the general public is mad as hell and antics like this just fuels the fire. There are many things one can do to ensure a viable purchaser, but letting the seller in on the buyer’s financials, I predict it is going to backfire on them big time.

  8. Brian says

    Unfortunately the only people who are really worked up about it are the ones who either feel screwed by a lender, even though they made the decision to refi into a junk loan based off the advice of a 22 year old used car sales man turned mortgage hack.

    I don’t work for a bank, I’m a cash buyer. My wife and I have properties and are constantly trying to get more at the right price which is why I write so many offers. As an owner of a home for sale I can tell you that I put in my listing the buyer must have a conversation with my mortgage guy before I will agree to sell to that person. To not do so only opens the seller up to hack real estate agents, lying buyers and lying loan originators. A prequal letter isn’t worth the paper it is written on unless the paper comes from a trustworthy source.

    You should try selling your home in this market and tell me if you think it is easy and if you would trust every tom dick and harry with a prequal who says they are interested.

  9. says


    You said it: “A prequal letter isn’t worth the paper it is written on unless the paper comes from a trustworthy source.” Even in this market, there are still many lenders that have great reputations and are extremely trustworthy.

    There are other things you could do to increase your protection, like increasing the earnest money and making it nonrefundable after inspection.

  10. Suzie says

    Brian, interesting that you would think the only outrage is from those that are in peril. As a recent homeowner (that just sold in April), I am furious with the free passes being handed out….my mortgage was a 30 year fixed and I qualified like the most of the world. Many of my customers, the upper score buyers understand this crisis is impacting their borrowing. Right now, across the board, Freddie and Fannie are issuing loan level pricing adjustments, which is a very long-winded way to say soon your full doc 30 year fixed is going up big-time because of all the losses they are facing. Most home equity lines have pulled back to an 80% max combined loan-to-value. Shortly, mortgage insurers are increasing (if not already) their rates across the boardm, regardless of credit score. Those are only a few of the many changes that have cost everyone money for the sins of others. So, when I say the public is outraged, I am not excluding anyone.

    I am a VP (lol, aren’t we all) for a national bank that is in mortgage orginations full time. My buyers get more than a letter from their mortgage guy, they get a full blown written loan commitment to present to the seller. Letters in my market (metro Wash DC) from independent brokers are not accepted any longer – only local and national banks.

    The issue w/ Countrywide is very similar to the situation w/ major builders with their own mortgage company. Even if it’s on the up and up, the public perception is it’s a tainted situation. Countrywide is just smearing their reputation more within the industry – and I have great compassion for them and their employees. With all of the outrage, by EVERYONE in the industry and as a homeowner, the appearance of any impropriety is the very last thing we need.

    I think whoever compared it to letting the fox guard the henhouse said it best.

  11. Brian says

    As a former VP for a mortgage operation and currently (my wife and I) owners of a referal only based mortgage company I’m well aware of what is going on in the industry. The mortgage industry is the only job I have ever had, since I was 22.

    You are projecting the perception people gleem from the news onto the very specific topic of a property owner wanting to make sure a buyer is qualifed. That is all I’m commenting on. Not the evils of the biz over the last few years.

    A property owner wants to qualify potential buyers and is offering a commission to an independent agent to sell that house to someone. That agent, if they plan on lasting through this downturn, will play the game because that is just they way it goes. See, all the points about credit being run, strangers looking at financials etc. is a mute point that only has weight with less then savy business persons.

    When a borrower submits a loan application to a mortgage company (broker or banker) a minimum of 3 complete strangers see the entire loan package and in most cases two credit reports get run no matter what. We all know 3,4,5 mortgage related credit pulls don’t do squat to a score so that is a mute point. Secondly, if a buyer has a “principal” dispute with the practice that means the buyers agent didn’t go a good enough job of explaining the situation and why that is a reasonable request. If a buyers agent has a problem with a seller requesting that their mortgage person/company/branch whatever “kick the tires” of a potential buyer then that agent is in the wrong line of work for this market and probably won’t make it through the next few years.

    Don’t go getting all macro on me when all I’m talking about are the bullet points made in the original blog post.

  12. says

    As a Realtor, I have seen Countrywide from a client’s standpoint and also from a personal perspective. They were very reasonable with my client in terms of a “Deed in Lieu”. I lost the listing because of it but I was very happy for my client.

    On the flip side, I personally have two mortgages with Countrywide. They weren’t flexible with my escrow account and I just got a check for $10,000 because they wouldn’t let me get the extra money paid for a tax payment any earlier. I could have had the interest in something more lucrative, obviously.

    They’re a bank and there to make money. Who owns them? I’ve not had the time to check them out. I’m too busy selling real estate.

  13. says

    Pre-qual letters are just a way of verifying that the offer is credible. Buyer can get their money anywhere.


    The REO AZ operation is out of control. I have had 5 closings in 2 years, never lost a listing–everyone was a headache–you almost never get the process down to a science. They lie, work behind your back, and try to palm as much non-Realtor work off on you as they can. I am not looking for a second job. Also resent being on the bottom of the food chain for commissions. You get a list letter at 6% and a month later it goes to 5%….

  14. says

    It amazes me that Countrywide do not seem to care if the get their Reo owned inventory off their books. A real lack of common sense. In fact the whole Bank bailout lacks common sense in my opinion.