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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.
Thanks everyone for your input and it seems like there is more than one scenerio going on. first the inflated BPO/Appraisal. What is the difference? The market value comes from the same information bank that we ALL use. the MLS. Unless you grossly misrepresented the property ( and I have seen that), you as a BPO Broker have nothing to worry about. I personally do my own reports from start to finish. If something goes wrong it is me that makes the correction, however I have seen a BPO company change my report after the fact. When that happens, I no longer do business with them. There are some bad BPO companies out there and hopefully they will be identified sooner rather than later.
Wow!! I had know idea that was happening, (I.E) BPO, company changing the BPO valuation, to fit their client’s needs, that is a definitely no, no, The inflated values is how partially how we got the housing bubble started, The Appraisers are being scrutinize as is,definately not trying to have that reoccurrence
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