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
John, I don't agree that REO agents "make up their own rules" at all. There are many things that are required by asset managers before they will even look at your buyer's offer. And just like underwriters on the lending side, they occasionally ask for something additional.
I speak as a current REO broker and a former asset manager. There are many reasons why a slower response may be appropriate. For auditting purposes, the bank I worked for required a minimum of three offers on properties before I could accept an offer under certain circumstances (i.e. considerably lower than list or an offer within a day or so of list). This was so they could demonstrate due diligence in recovering damages through deficency judgements. And since a decision could not be made on the offer, we spent hours and days soliciting offers, all the while managing a work load of 200 properties.
I have worked with many very knowledgable and thorough "PT" agents over the years. Being part time does not make you better than a full time agent, though you may be better than SOME full time agents. But making blanket statements like your statement here does show lack of knowledge of the process from the listing side. And who knows how you would handle 150-200 REO properties alone? Or 50 for that matter! My point is, don't be over critical until you FULLY understand the process.
Dear Len,
I really wonder how one can effectively manage 50 or more properties at a time. I would tend to think that with all the inspections that need to be performed, bpo's needing completion, auxillary services like landscape and upkeep, there is definite overload here and that if a staff is needed, then accountability gets spread out very thin.
I am glad things will be looked at more closely. On BPO's , I am always asked to certify that I actually saw the property and performed the report. Every tranaction is a triumph people will judge you on what you have done.
I had the experience of a REO agent telling me that I need to accept the bank's terms or go elesewhere. What happened to doing what we do...negotiate?
I perhaps never will understand why assest companies want to override the CAR standard forms and put their own language into the pool.
I perhaps never will understand why an offer's phone call not be returned. One West Bank mandates that all offers get a response in 72 hours!
..and if the property is priced in accordance with the market and its physical condition, it will generate its own multiple offers. My shortsale could have sold two or three times over.!
I do however want to thank you for your insight and expertise from your background.
In short if I was working for you as an asset manager, REO would be different and I think you would appreciate it because well...I LOVE REAL ESTATE!
Hey, Len I think also what you can add, is that we are no longer back in the old *(S&L/RTC) days and that we are indeed much more careful making financial/asset base decisions then days where it was a Liquidation Frenzy. LoL!! (I:E)
Everything on sale/ asap!!!
*Saving and Loan, /Resolution Trust Corporation
I for one am very glad that the Attorney General (s) are taking a look at the agents that overbilled for their services or they did not do the services. I have run into a few myself. Now that Realtors are under the microscope is the Attorney General going to dicipline the BPO company that does not pay you for your reports? Evaluation Solutions in Florida or Evaluonline.net is one such company. If they don't like your market value they make up an excuse to reassign the report to someone who will give them bigger numbers. Then they give you a small pittance for the photos, and nothing for the completed report. To add insult to injury you end up waiting months for payment if at all. This is unethical and unprofessional and criminal. AGs where are you?
I do not reccommend doing work for them either....Have not been payed by them from work I did in 2010 and the amount is substantial.
Hello Katy: Have you thought about filing a complaint with the Attorney General in your state for your compensation. That should get their attention, and you should get your money. It is a RESPA violation.
Cynthia: Thanks for the suggestion. I'm seriously considering doing that.
Katy: where this company is concerned, don't stop go, don't collect $200.00. just do it. that is where I am headed if I don't receive my money by weeks end. Good Luck to you.
Was at the REO Expo last week, heard that very same message from Jim Taylor.
(On the plus side) do you think this scrutiny will do anything about the Title Servicers who are charging 37% to the Listing side for REO assignments?
(no, I don't think so either...)
I dont know how they would go about digging to see if a trash out was incompletely done..( after the fact)... or if an inspection was not completed, this would have generated comments from buyers as well as other agents during the sales process....as well, I would think most of the properties are sold and rented or occupied by owners at this point.... who would know now??
Regarding BPOS.... they are all backed by appraisers that end up superceding the importance of our bpo values...
I believe this is just another concoction to try to displace some of the responsibility. What does an reo agent do that is not checked in triplicate by other agents, outside preservation and even appraisers.... nothing is done in total darkness......
Maybe I need to read a little more about this... but based on the above article, I dont see anything to worry about.... but then again... my inspections were completed and time stamped w/ fotos... my trash outs were also completed and verified w/ time stamped fotos plus an appraiser (eventually)... and my bpo's never went unsupported without an appraisal at list time.........maybe some unscrupulous realtor got away w/ billing for what he didnt do... or not doing his own bpos..... or coming in low..... but, I dont see how they would last long enough to do too much damage.....hmmmmm, Thank You for the article, will have to dig my heels a little deaper into that one!!
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