Thursday, May 17, 2012

More BofA Controversies? Dubious Practices Now Include Possibly Illegal Homebuyer Steering In Connection w/ Sale, Financing Of F'closed Home Inventory

In Portland, Oregon, The Portland Tribune reports:

  • [M]any Portland-area real estate agents and mortgage brokers say it's increasingly common -- and harmful to their clients -- for B of A and other large banks selling foreclosed properties to insist that buyers first get prequalified with their own lending departments. Then, critics say, the banks try to coax bidders into taking out home loans with them.

  • Bank of America does require all bidders on its foreclosed properties to first be prequalified for loans with the bank's lending department, says bank spokeswoman Kris Yamamoto. It's not an uncommon practice in the industry these days, she says.

  • "It's just to determine if someone is eligible to finance the property," says Yamamoto, a senior vice president for corporate communications. If a buyer comes in with a loan prequalification from another lender, she says, "We don't always understand the underwriting guidelines of the other lender."

  • But critics say the big banks' practices can be costly to homebuyers who forego shopping around for the best loan terms. They also could hurt buyers' negotiating positions and delay sales of foreclosed homes at a time when the Portland real estate market is hampered by a glut of distressed properties. And, it's another potential black eye for mega banks, which helped spark the Great Recession and housing slump.
  • David Feathers, president of Avelloe Mortgage in Lake Oswego, says he recently obtained an email that appears to document illegal steering by B of A, from David Churchill, retail sales manager at the bank's Pearl District office.

  • In the email, Churchill notes that B of A's listing agent for a foreclosed property is supposed to include the "assigned loan officer contact info" for the bank with the Regional Multiple Listing Service, where most Portland-area homes are listed for sale. "Then we pick and choose the loans we want to take on," Churchill states. "If the agents don't have a good conversion rate we replace them."

  • That conversion rate presumably measures the proportion of bidders who wind up taking out B of A loans. "That's blatantly illegal," Feathers says. It's saying "if we don't have enough people steering to us, we will fire them."
  • Bof A spokeswoman Yamamoto denies there have been any RESPA violations and says the email is "misleading" and taken out of context from a larger string of emails. However, she declined to provide those other emails or permit the Tribune to interview Churchill. Feathers forwarded the email to the Oregon Department of Justice and to state banking regulators.
  • Bank of America isn't the only Portland-area lender requiring bidders on foreclosed properties to get prequalified through its own lending arm. "Chase does it, as well," Feathers says, but in his experience B of A is being the most aggressive.

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