Distressed Home Listings Offered by Banks with Stipulation

Distressed home listings are now offered by an increasing number of banks with a certain stipulation – that buyers obtain their financing from the selling banks and not from other lenders.

The stipulation has surprised a lot of buyers, raising concerns that the banks’ stipulation violates the U.S. Anti-Tying Law, which prohibits the linking of the approval of a home loan to the purchase of a certain residential property.

However, according to Joseph Vincent of the Washington Department of Financial Institutions, banks are not violating the anti-tying law if they are just requiring prospective buyers of their distressed properties to obtain their loans from them. Vincent further explained that banks only violate the law if they make additional conditions, such as requiring buyers to use property management firms, home inspectors, home remodeling companies that they are affiliated with.

Vincent also added that a bank requiring a home loan applicant to buy a specific real estate property to be able to obtain a property loan from the bank is violating the anti-tying law. He cited a legal case involving Security Bank and Trust Co. in which the bank made it compulsory for a loan applicant to buy from its available real estate properties so he can get a real estate loan from the bank. The customer sued under the anti-tying law and won.

Mortgage broker Tom Lasswell is one broker who is surprised by the new stipulation for distressed home listings. He said that he had a highly-qualified pre-approved buyer for a certain bank-owned property, but the bank advised him that his buyer can only acquire the property if he agrees to obtain his financing from the bank. The bank further warned that it would accept the next purchase offer if it does not receive a positive response within a certain period.

As of the end of 2008, there were around 871,000 bank-owned foreclosed houses throughout the U.S., an increase from 414,000 as of the end of 2007. Over five percent of all active residential mortgages were already delinquent by two months or more.

According to information management firm TransUnion, the percentage of residential delinquencies will increase through the rest of 2009 as more pay-option adjustable rate mortgage borrowers default. The firm said that around $321 billion worth of ARMs are set to adjust to higher rates before 2012, driving the number of bank-owned houses in distressed home listings to over 2 million.

Related Posts:

• The Real Deal with Foreclosures
• Find Foreclosed Home for Sale with Some Sleuthing Work
• The Problems Brought about by Foreclosed Properties in Cincinnati
• Foreclosure Property Listings Push up Reno Affordability
• Buying Foreclosed Homes HUD in California