Jun
1
Realtors as Mortgage Fiduciaries-Bad Idea
Posted by Thomas Johnson under For Buyers, For Realty Professionals, For Sellers, General Information
Brian Brady at Bloodhound Blog
Banks will have Bernanke kill this off. The last thing they want is even more fiduciary responsibility to ignore.
All those pension plans they stuffed with MBS’s, CDO’s, SIV’s and all that other alphabet soup are governed by the Employee Retirement Security Act. Those pesky trustees are fiduciaries for the plan participants. This last round they got the rating agencies to slap AAA ratings on this stuff so that the trustee “fiduciaries” could buy it. Any other misgivings on the part of the trustees are handled by center court tickets or nice new sets of Callaway irons. The last thing the bankers want is a bunch of bank tellers putting their stock options at risk by not sending enough loan originations.
Thanks a lot Brian, for shoveling more risk on my buyer side e&o. Plaintiff attorneys already want to make us liable for inspectors and even construction quality, now we have to analyze every loan product to give the buyer a green light? Only if your industry stops insisting that the seller compensate the buyer agent! If you want to shift fiduciary liability to the Realtor, well and good, but the lending industry has to start accepting buyer agent compensation on the HUD. And for this kind of risk, I do not think we are talking about a piddly little 3%. An Obstetrician carries liability for his work at birth for 18 years-to the age of majority for the baby. Realtors will be carrying that liability until the loan is paid off- 40 years in some cases. The buyers will not have the cash to compensate their buyer agent Realtor, so the lender will have to finance my compensation and assumption of fiduciary liability ABOVE the appraisal value. I am thinking 6-10% off the top of my head to insure myself against Wall Street MBA’s latest Mortgage Backed Magical Mystery tranche loans. And that may be low. I will have to run every possible loan through some kind of risk modeling program the same way the pension fund buyer of the loan does. But the key is: these additional costs will have to be built into the loan layered on top of the mortgage profits for the lender. Any guesses how that is going to effect the liquidity of real estate?
I am sure that there will evolve Buyer Agents that will do transactions bare back with no liability coverage, but that is kind of like having unprotected sex in Haiti. Not a good idea for a long career.






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