Whose a what? Understanding the Foreclosure Middle Man

Related imageIn every industry, there can sometimes be layers of people between you and the person that you are really doing business with. The foreclosure world is no stranger to that. For most foreclosure sales, you as a buyer will be dealing with an agent typically, who is layers away from the actual owner of the property. For example, let us say you are buying this particular home at 123 Main St. It is listed by Agent A. You make an offer and negotiate and finally have an accepted offer. The listing information might say that ABC Bank owns the property. But then the contract comes. And it reads: ABC Bank, as POA for Echo Funding, Pass-Through Mortgage from Cross Loan Servicing…. Blah, blah, blah. What does all that mean?

Wait, there’s more. The listing agent does not actually work directly with ABC Bank. They are hired by an outsourcer (Sweet Loan Servicing). The outsourcer was hired by ABC Bank to service and manage the property (they call an asset). Are you lost yet?

The point is, there is a lot of layers when REO brokers are dealing with a foreclosed property or asset. Their point of contact is going to be what we call an “Asset Manager” or in some instances a “Sales Specialist”.  These layers can add time to negotiating, contract execution and also closing.

As for the lengthy deeded name on the contract? Well, that’s a result of banks selling off the mortgages in bundles (also called Tapes) to other banks or servicing entities. If you have ever had a mortgage and have been notified at some point during your payment process that the loan has been sold to “So and So Bank”, well…you were possibly part of a Tape sale to another bank. Although not always. If you purchased your loan through a broker that does not service their own loans, the loan could have been sold to another servicer to be serviced for the length of the loan. The person or entities that put up the money for your loan are called investors. You may never know that Joe Smith that works on Wall Street and is your neighbor has a financial stake in your loan. He actually may not know it either. The money is pooled together and given to lending entities to make good faith loans.

The bottom line, an REO broker or listing agent does not speak directly to the top of the food chain when it comes to REO properties. It is rare, unless it is a small bank that foreclosed, that they would have direct contact with the seller or investor of the property.

Feel free to comment or ask questions.