Bank of America is requiring a new third party authorization form (TPA) starting April 14th….
Today’s guest post features excerpts from attorney Ron Ballard’s recent article featured on his blog. Read the original post here�in its entirety.�
“BANA has created an exclusive, full-employment club for local real estate agents, brokers and attorneys to the exclusion of everyone else.”
Real estate agents (and attorneys) soon will be held legally responsible for reading the corporate mind of Bank of America. Fortunately for everyone else, they will not be allowed to even communicate with Bank of America, much less be required to read its mind. Unfortunately, all of this will further harm distressed borrowers and suffering neighborhoods by discouraging short sales and increasing foreclosures.
This all results from a new ?Third Party Authorization? form (TPA) which reportedly is mandatory on all Bank of America short sale files as of April 14, 2012.
It?s also time to add another acronym to your spell checker:� BANA. No, it?s not a miniature version of a yellow tropical fruit. Bank of America N.A. now refers to itself as ?BANA? in the new TPA. The TPA is required for anyone (referred to as a ?designated representative?) to communicate with BANA in connection with short sales.
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New Liability for Mind Reading
The new TPA makes real estate agents, brokers and attorneys (the only people who will be allowed to communicate with BANA, more on that later) personally liable if they ?knowingly misrepresent or omit to state, any material fact in order to induce the Borrower(s), BANA, the lender, the investor or the insurer to agree to the terms of a Short Sale that the Borrower(s),� BANA, the lender the investor of the insurer would not have agreed to had all material facts been known? [exact verbiage carefully transcribed to preserve grammatical and punctuation errors].
Translation: Don’t�?knowingly misrepresent or omit to state, any material fact in order to induce the Borrower(s), BANA, the lender, the investor or the insurer to agree to the terms of a Short Sale that the Borrower(s),� BANA, the lender the investor of the insurer would not have agreed to had all material facts been known?
Exclusive Risk for Agents, Brokers and Attorneys
The new TPA requires the DR to represent that he/she is a licensed real estate agent, real estate broker or attorney (?Licensee?) in good standing in the state in which the Property is located and has all licenses, permits and authorizations to perform the duties undertaken by it.
Translation: Short Sale flippers…bye-bye. Unlicensed processors…bye-bye.
The new Third Party Authorization form has created a special class: far more restricted than required by law or than practical for any real estate transaction. For starters, unless BANA is creating a different authorization form, or is accepting communications without authorization, then title companies, escrow companies and the buyer?s lender?s representatives can no longer communicate with BANA to facilitate short sales.
What disconnected corporate-office type who doesn?t engage in actual short sale transactions come up with that one?
Translation: Clearly BofA is going to revise this process so that title/ escrow can close BofA short sale transactions. We suspect there will be an update on this within the week.
Moreover, several important classes of people will be excluded. For example, borrowers who want their private financial information transmitted through their accountant or bookkeeper must now use an attorney or real estate agent instead. An elderly or disabled person cannot have a family member or caregiver help them communicate with BANA. A member of our armed services serving abroad cannot have a family member or friend authorized communicate for them.
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�They are many situations when a borrower has executed a legitimate, reasonably needed, legally binding power of attorney. (I add all these qualifiers because sometime there are scammers using powers of attorney.) This is a legal authorization required by law to be recognized. Yet, the BANA TPA appears to be above the law in this regard.
Translation: BANA (BofA) is trying to close to the open loops. In other words, flippers and folks who are gaming the short sale process are not welcome. This is good news for the agent (or attorney) who is focused on helping owners avoid foreclosure through the short sale process.
Many States do not require short sale processors to be licensed, particularly if they are not being compensated. BANA overrules these State laws and policy making decisions.
BANA has created an exclusive, full-employment club for local real estate agents, brokers and attorneys to the exclusion of everyone else.
The reality of short sales is that the buyer is most often the most motivated person to get the deal closed. Many sellers are not making house payments, so why should they be in a rush to close the deal and have to move and start paying rent? In California, most will not be subject to a deficiency liability or cancellation of debt income taxes.
Yet, BANA excludes buyers from short sales communications unless they do so through an agent, broker or attorney. Since when is a person prohibited from communicating on their own behalf? All this does is inject additional people who might misstate information or omit facts they do not know when they are not the principal in a transaction.
BANA Continues to Legislate
For the last two years, the major short sale lenders and GSE?s have been creating a system of ?private law? in short sales that overrides State and Federal laws by imposing new requirements, duties and risks in short sale processing. Although these approaches may be laudable efforts to deter or detect perceived ?fraud,? the practical effect is to discourage participation in short sale transactions and push more homes into foreclosure.
Ever increasing loan servicer restrictions run counter to the housing policies established by State and Federal legislatures and agencies to encourage short sales over foreclosures and to strive to more rapidly restore stability to neighborhoods and normalcy to real estate markets.
Translation: The US Treasury Departments MHA programs mostly have it right. If lenders were to actually follow the guidelines of these programs much of the consternation experienced when working with short sales would be greatly reduced.
Masked as an administrative formality, the new Bank of America Third Party Authorization form will likely have more negative impacts counteracting federal housing relief efforts by effectively legislating new liabilities and by restricting existing options for homeowners to use the representatives of their choice.
Translation: The reality is that its too soon to tell how this seemingly minor formage change will effect the short sale process. Its our opinion that BofA (BANA) is on the right track and will evolve this form to accomodate the realities of the short sale transaction. If nothing else, (as today’s guess blogger points out) :�“BANA has created an exclusive, full-employment club for local real estate agents, brokers and attorneys to the exclusion of everyone else.” I am sure we can all agree that fewer chefs in the kitchen is rarely a bad thing.