Illegal Lending Practices?

By
Real Estate Agent with Prestige Properties

I need some help from my fellow agents.  I know there are regulations preventing builders from offering incentives to buyers for using their lender versus another lender but what about bank owned properties?  Is there any law or regulation that addresses this issue?

An example:  Lender ABC forecloses on a property and then puts it up for sale.  My buyer looks at the property and decides to make an offer.  ABC sends me the addendum and it it clearly states that if my buyer uses ABC as their lender then ABC will pay 3% in closing costs and also offer a home warranty.  If my client uses another lender then ABC will not pay for a warranty and will pay zero closing costs (no exceptions).

I am pretty sure this is not legal but I do not know where to locate the information to back up my assumptions.  I also may be wrong.  The new regulations may only apply to new home builders.  If anybody can clear this up for me or point me in the right direction I would appreciate it.

 

Comments (3)

Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Todd, I have no idea.  However, I'm going to watch your article and the comments that come in.  One thing jumped out at me:  They won't pay any concessions if the buyer doesn't use their bank?  That's outrageous.  The bottom line is still the bottom line.

I wish I knew which agency you could call to ask about this.

Jul 07, 2009 11:10 AM
Reba Haas
Team Reba of RE/MAX Metro Eastside www.TeamReba.com - Bellevue, WA
Team Reba, CDPE

I don't believe that what they're offering is illegal. People may not like it, but I don't think you'll find anything specific about it. Perhaps someone will show me to be incorrect.

There is a local lender here in the Seattle WA area who is a "preferred lender" of bank REO's and they fought hard to win that contract. ALL interested buyers are required to go through their pre-approval process regardless of which lender they eventually use, part of the requirement is to make sure that the buyer truly has been vetted out in their financial picture. There are still about 5% of deals failing due to financing so I can see why the banks would want to improve their chances.

Builders locally are also getting good deals offered by their construction loan contacts that you can't get elsewhere. A lot of that has to do with banks wanting to take non-performing assets and turning them around into performing loans.

Jul 07, 2009 11:11 AM
Todd Pierceall
Prestige Properties - Gastonia, NC

Reba,

I understand requiring the qualification, many lenders do this when they foreclose.  It is the incentive part that I am not sure about.  It is one thing to say "we have to make sure you qualify" and another to say "we will give you special perks to use our company and only our company".  I am still wondering about it all but thank you for your input, it is very helpful.

Jul 07, 2009 03:13 PM