Hi,

Most REO lenders require specific lender preapprovals to try and keep the offer process as streamlined as possible. With the level of activity in the market and the high amount of multiple offer situations especially on REOs, the bank sellers in some instances can see multiple preapproval letters from the different buyers and could potentially all be from different lenders (some direct banks, some mortgage brokerages, some credit unions, etc.) Some lenders require obtaining a credit report, income and asset documentation to issue a preapproval, whereas some lenders just ask for a current name and address and will issue a preapproval letter.

Most REO lenders are beginning to accept preapprovals from direct lenders, but there are instances in which the banks will require a preapproval through a specific lender to try and level the playing field as much as possible on the preapproval side of the transaction.

The REO seller will not require you to actually obtain your loan from their required lender but if the listing states that a preapproval must be obtained from a specific lender, then the bank will not even look at the offer until that specific preapproval is submitted.

Moreover, the REO preapproval lender might be offering some incentives in correlation with the listing (i.e.. credit towards closing costs, interest rate buydowns, etc.) therefore it might be worth investigating any potential offerings.

As for identity theft, it is possible in all instances and unfortunately there is not much that can be done besides knowing that the recommended lender is listed on the MLS and recommended by the seller therefore I doubt the REO seller would want any additional liability with recommending someone dishonest or unethical.

I hope this clears up some of your concerns.

Feel free to contact me with any questions.

-Miawand