There is growing concern that REO agents do not know enough about the terms of the $25 billion robo-signing settlement – and this could lead to a lot of uncertainty and legal fees.
The five major servicers Bank of America, JPMorgan Chase, Wells Fargo, Citigroup 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 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.
Jim Taylor, who handles REO management for Wells Fargo, 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 have complained 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.
So be prepared.
Are you aware of the new rules? How are you educating yourself?