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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%) , JPMorgan Chase ($34.32 0.02%) , Wells Fargo ($31.76 0.18%) , Citigroup ($27.91 0.24%)  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 .
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.
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.
Accountability should always be there. I always represent buyers on REO and REO agents make up their own rules! This is why I really think the REO industry needs to learn customer service. It is usually the brokers too that are the local market leaders, that control the bulk of REO that tend to do this. I read that other post about the AG settlement and I think it is time the assests get evenly distributed so we small people can get one and do a much better job. I currently have a buyer offer with a major broker and its hard to get them to answer the phone. My buyer even went on the offensive to ask them for offer status and got into an argument with them!
A side story...besides real estate I have another 40 hr a week job. I just completed a very grueling shortsale with Bank of America as the listing agent. The seller called my broker to say "what a fantastic job I did". That was because I was serious about the transaction. Being "part time" as some would like to think doesnt make me any less professional and I feel makes me even better. If I had REO, the asest manager would only be dealing with ME and not a "staff"! from start to finish! ( I posted a similar comment elsewhere as well.)
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.
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 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!
It is about time to get back to basics. Many agents have never been to properties and make sure the prices are lower than the rest so the home doesn't stay on the market long thus the declining market. The BPO companies aren't any better because if you give them the price the home should sell for they question the honest agents and then of course the honest agents do not get the listings any longer now that there are so many untrained and unscrupuous agents many of the long time agents have decided to get out of the political decline of this once great nation of homeownership. I used to be proud of my profession now I am disgraced by what has happened. And I did at one time handle many REO properties but I refuse to stoop as low as many of the new REO agents I price the homes at MARKET VALUE Good luck and I pray the rest of you can get back to the business of helping homeowners and not pocketing buckets of money no matter the cost.
Reply by Julio A. Shea
I am an REO and BPO broker, and I am all for the close scrutiny.
Maybe this will eliminate those that pay other firms to perform their work for a percentage of the fees and have no idea what the properties look like.
I perform all tasks for the bpos, including taking the pictures, notes at the property, comps and filling out the forms, same for the REOs, I take the pictures, inspect the property, drive by the vicinity to look at the nearby comps,perform the bpo for the subject REO pricing it at Market Value after adjustments, fill out the listing form and upload it to the MLS.
I am also proud that I am NABPOP certified.
Keep it going folks!! great to read all of the comments and reply’s on this interesting topic
You can bet!! performances,compliant,quality of your work will be looked at more and more as it always should be
Thanks very much for re-posting. Good, informative read.
Hopefully the unscrupulous REO agents get reprimanded as they give the rest of us a bad name.
Having said that, the majority of REO agents I know are ethical, hard-working individuals who care about their work and their clients and who take their fiduciary responsibility seriously.
Thanks for the re post Mike! Great information! Just came back from REO Expo and Wells Fargo did mention this to us all as well and very eye opening!