Be Boundary less!
When I worked for a Fortune 5 corporation we were always encouraged to be boundary less. What that meant was to be aware of the other business units that the corporation owned and promote their services. We were financially rewarded if we could introduce and help close an opportunity that involved a business outside of our own. This made sense and was a very effective strategy to differentiate us from our competitors (that is until our competitors caught on and started doing the same thing!)
So, when I first started reading an article about Bank of America that involved similar behavior it brought up memories from a previous career. But, when I dug a bit deeper, I saw where the stories deviated tremendously!
Kate Berry from American Banker brings us an article about how Bank of America “suggests” that those realtors, that are having difficulties with getting their short sales processed, contact a local retail BOA branch for a little help! Many people label this as steering which is illegal.
To borrow several quotes from the article, “Homebuyers have been scarce this spring selling season, and banks are looking for every opportunity to get their retail staff to close loans. So it’s only logical that Bank of America, the second-largest originator, would want to finance the buyers in distressed sales — and develop relationships with the agents who broker them. According to the National Association of Realtors, distressed transactions made up 40% of all sales of existing homes in March. Short sales alone accounted for 13%.
But Bank of America is also the largest servicer of home loans, with the power to approve or reject many short sales. So some real estate agents, as well as competitors of B of A, are interpreting pitches like the one Seelenbinder has been making as a subtle way of telling agents to send lending business to B of A if they want to get a short sale done for an existing, distressed B of A borrower.
“It’s a clandestine steering to say, ‘Go to our loan officer, and your deal will get done faster,’ ” said Charlie Christensen, a branch manager and senior loan officer at Equitable Mortgage Group in San Rafael, Calif. “The loan officer just has the inside track at B of A, and they’re not going to offer that to an outside lender. It flies in the face of the spirit of the deal.”
I had lunch with a broker last week and brought this article up. He laughed! He said, just 2 weeks earlier, he attended a “work shop” help by a BOA executive. The workshop emphasized the fact that ALL buyers for properties that were owned by BOA, HAD to get approved by a BOA loan officer before moving forward!!!
I thought another passage from the article was quite interesting, “Still, George Kenner, a broker at Keller Williams Realty in San Diego who has 14 short sales pending with B of A, said he was incensed by the suggestion that agents like him go to a retail loan officer to get their short sales resolved. Kenner claims to have made hundreds of calls to B of A, written dozens of letters to the bank’s executives and industry officials, and received no responses to his inquiries.
He too interpreted Seelenbinder’s pitch as “steering” real estate agents to B of A’s own retail branches to get new business while failing to offer a single point of contact for borrowers or agents to resolve short sales.”
Could this behavior contribute to our poor state of the economy? Read the article and judge for yourself!
AMERICAN BANKER ARTICLE:
By Kate Berry
The event was billed as an opportunity for San Diego real estate agents to get some pointers on hard-to-close short sales.
“Learn How to Escalate Your Short Sales from a local branch, Get Your REO Pre-Approval Letters Faster, and much more,” read a flier for the April 14 luncheon sponsored by the local chapter of the National Association of Hispanic Real Estate Professionals.
By “local branch,” the trade group’s flier meant a local branch of Bank of America Corp. And the featured speaker was Alan Seelenbinder, B of A’s vice president of portfolio retention, real estate owned and short sales.
Seelenbinder told the 200 agents in attendance that one of the most common complaints he hears from brokers handling short sales is, ” ‘I lose buyers because it takes so long.’ ” Pointing to a table of B of A loan officers, he said, “If you keep the people involved and you have your buyer working with a loan officer that understands the process, the buyers will stay interested.”
Homebuyers have been scarce this spring selling season, and banks are looking for every opportunity to get their retail staff to close loans. So it’s only logical that Bank of America, the second-largest originator, would want to finance the buyers in distressed sales — and develop relationships with the agents who broker them. According to the National Association of Realtors, distressed transactions made up 40% of all sales of existing homes in March. Short sales alone accounted for 13%.
But Bank of America is also the largest servicer of home loans, with the power to approve or reject many short sales. So some real estate agents, as well as competitors of B of A, are interpreting pitches like the one Seelenbinder has been making as a subtle way of telling agents to send lending business to B of A if they want to get a short sale done for an existing, distressed B of A borrower.
“It’s a clandestine steering to say, ‘Go to our loan officer, and your deal will get done faster,’ ” said Charlie Christensen, a branch manager and senior loan officer at Equitable Mortgage Group in San Rafael, Calif. “The loan officer just has the inside track at B of A, and they’re not going to offer that to an outside lender. It flies in the face of the spirit of the deal.”
Explicit steering would potentially violate the Real Estate Settlement Procedures Act, which forbids promising anything of value in exchange for referring business.
B of A said there is no correlation between a short sale being approved (which is done at a central office) and the buyer obtaining financing from a Bank of America loan officer. The company says it is simply suggesting retail branches as a place that short-sale brokers can turn to if they hit a wall dealing with the short-sale department. The retail loan officers would help them talk to the right people in the central office.
Matt Vernon, B of A’s head of short sales, said the company is “utilizing our mass distribution of loan officers across the country to educate realtors” about the short-sale process. “If they have a good experience, we expect them to have the opportunity to give us business in the future. We would certainly like that opportunity as we would in any mortgage transaction.”
When asked if retail loan officers can clinch a short sale, Vernon said, “They can do absolutely nothing.” Typically, the loan officer would “escalate it to their management and over to the short-sale business,” he said. “We would have no interaction with the specialist in short sales on the loan officer side.”
Sergio Moreira, president of the San Diego chapter of the NAHREP, seconded that view.
“This is just good customer service,” Moreira said. “What they said is, if you have a relationship with a B of A loan officer, go to them and they might help you on that short sale. The word ‘expedite’ means to help. It doesn’t say they’re going to solve the short sale at the branch, and I don’t see how B of A is trying to keep the business.”
Michael Byrd, the owner of SLO Homestore in Grover Beach, Calif., which represents buyers in short sales, said he has advised some clients to go to bank retail branches “just to get help cutting through the bureaucracy.”
“There’s a lot of frustration on the agent side because there’s not a lot we can do to try to expedite things with the short sale,” Byrd said.
The situation would indeed create an opportunity for the loan officer to make a sales pitch for the new loan, he said. But seizing that opportunity is not inherently objectionable, unless getting the short sale closed is a condition of that bank’s getting the loan.
“Business logic says that if there’s a loan to be had, try to get it,” Byrd said. “It’s just a question of whether you cross Respa.”
Banks have long required when selling repossessed properties that a buyer get prequalified with the original lender even if they make it clear that the person does not have to use that bank to get the loan, Byrd said. “In the back of their minds, they’re thinking, ‘By the time the consumer has gone to all this trouble, they’ll just stick with us.’ “
If a broker having a hard time getting a short sale done goes to a branch for help, “technically the loan officer can’t do anything on a short sale other than go to the bank directory and try to get the agent a better contact.”
Still, George Kenner, a broker at Keller Williams Realty in San Diego who has 14 short sales pending with B of A, said he was incensed by the suggestion that agents like him go to a retail loan officer to get their short sales resolved. Kenner claims to have made hundreds of calls to B of A, written dozens of letters to the bank’s executives and industry officials, and received no responses to his inquiries.
He too interpreted Seelenbinder’s pitch as “steering” real estate agents to B of A’s own retail branches to get new business while failing to offer a single point of contact for borrowers or agents to resolve short sales.
“They’re doing everything they can to capture the new loan but nothing to help with the actual short sale,” said Kenner, who posted a video of Seelenbinder’s presentation on his blog. “It’s a silent quid pro quo where there’s no explicit demand for the borrower to get a loan through B of A, but it’s very clear how beneficial a good relationship with B of A is.”
Vernon said that real estate agents have told B of A that they want mortgage loan officers to know the basics of default, loss mitigation and alternatives to foreclosure.
“That’s part of our strategy to differentiate ourselves with the real estate community,” Vernon said. “If it gets to a [short-sale] transaction with specificity, that’s when we have to pull in the experts to talk with the realtor.”