Michael Waldron, a partner at financial law firm Ballard Spahr, asked a conference room of roughly 60 REO brokers if they were familiar with the terms in the $25 billion robo-signing settlement.
Two hands went up.
Waldron looked at the other servicing members of an REO Expo regulatory affairs panel for a long moment, then turned back.
"This will involve everyone. Make no mistake about it. You will begin to feel the effects of this settlement," Waldron warned. "If you're involved in this process in anyway, there will be examinations."
The five major servicers Bank of America ($7.58 0.08%) [2], JPMorgan Chase ($34.32 0.02%) [3], Wells Fargo ($31.76 0.18%) [4], Citigroup ($27.91 0.24%) [5] and Ally Financial settled charges of past foreclosure abuses and mishandled documentation with the 49 state attorneys general and federal prosecutors in March.
Servicers are adjusting to a slew of new requirements, including for third-party oversight. These provisions will hold the banks accountable for fees they pay to firms who handle everything from documentation to asset management and REO. Servicers will have to justify why they are paying someone and for what.
"Servicer shall not pay volume-based or other incentives to employees or third-party providers or trustees that encourage undue haste or lack of due diligence over quality," according to language in the settlement guidelines [6].
This can apply, Waldron said, to REO agents and brokers who handle the listings, and take fees for things like broker-priced opinions, trash-outs, inspections and other services.
In some instances, agents take the money and either don't do the work or do not do it well enough. The AGs are specifically looking to crack down on BPOs, because poor valuations on foreclosed properties harm values for surrounding homes.
"If it goes bad for the servicer," Waldron said, "it's only going to go downhill."
Jim Taylor, who handles REO management for Wells Fargo was also on the panel. He agreed with Waldron and warned agents to sure up their businesses personally.
"If you're required to do something like an inspection, and you had someone else do it, you're at risk," he said. "Anyone who touches an REO transaction will be affected."
Some agents complained to the panel that the settlement came about because of the servicer's problems, not theirs. Still, some of the consequences will still land on the shoulders of these real estate agents, the panel said.
"It's not a deflection. It's a reality," Waldron said.
@JonAPrior [8]
Replies
I know of an REO Broker who lost an account because he billed to rekey 3 doors when the house only had 2. I think this may help push some of the "Fraud" out the door. Now, if they can only do something about the "Short Sale Fraud".
Bogus invoices, no property inspections, non-licensed people doing the work for $10/hr (sometimes less), while licensed Realtor(r) is taking vacations out of state and collecting commissions. Oh but I did forget, the licensed agent is talking with the Asset Manager stating "things are great".
Sad sad sad
Brokerages and agents who work their business as a business, and have clean & auditable records, should have a much easier time with the "scrutiny". Those who do nothing but collect the money and have all types of friends and family do their work (i.e., non-licensed!!) may want to truly think about what this means.
Amen to that, Pam!
All the more reason to do an outstanding, hands on, highly detailed job, extremely transparent job.
Hey Mike,
Thanks for the repost, I don't think any agents......99% of them, have a clue as to how the AG settlement is going to affect them, I didn't. I started reading more and more about it and visiting other blogs and forums and I think it's going to be much far reaching than any of us can imagine for one simple reason....politics.
The settlement opens the door for incredible political influence but, that is typically true with any new regulation / settlements however, given this political, economic and housing climate I have a scary feeling, we could see a lot of politicians looking for scape goats or re-election on the back of those big bad banks and Realtors.
Hello ,Jesse and to all of the others reply’s and comments on the repost I'm beginning to think all of this is stemming from another article put out by Housingwire on June 14,2012 about
The Inspector General of the Federal Housing Finance Agency will conduct a wide-scale audit of Fannie Mae and Freddie Mac REO management practices,
But with legislative actions, servicing problems and other delays, the foreclosure timelines lengthened across the country, driving up costs for each REO department. According to the FHFA IG, Fannie and Freddie spent more than $8.5 billion managing their REO inventories since 2007. The height came in 2010, when the GSEs spent more than $2.3 billion that year alone
Full link for that article:http://www.housingwire.com/news/inspector-general-audit-fannie-fred...
All of this trickling is down
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