Thursday, February 14th, 2013 at 10:56pm

Bank of America Retracts Onerous Short Sale Listing Requirements

Posted by Ron Ballard

It took a record short time of less than three days for Bank of America to respond to a groundswell of agent objections to retract an updated short sale listing requirement that appeared to require listing agents to lie and to break their MLS board rules.

Whether the February 11 “reminder” was an attempt by Bank of America (which refers to itself as “BANA”) to engage in over-reaching interference in the agent-seller fiduciary relationship or just a poorly worded directive arising out of ignorance is anybody’s guess. All we know at this time is that BANA issued a sensible clarification in less than three days.

The poorly worded “reminder” instructed agents to keep a property’s status as “current and active” on the MLS even after a binding contract for sale was in effect. My blog contained a blazing critique of significant problems with the wording of the directive (see the article immediately below). My article from the morning of February 12 created a high spike in traffic and was re-posted and discussed on many real estate pages, along with concerns raised by other authors on other sites.

My reply to many inquiries was: take it to your Board and to BANA.

Apparently, many brokers, agents and boards did. BANA has effectively retracted the directive with a new email designed to “revise and provide additional clarity” to the prior message. BANA’s retraction is quoted in its entirety at the end of this article.

Going Viral Works

For too long, brokers, agents and professional organizations have catered to BANA’s whims, regardless of how unreasonable they have been. This time I noticed that the pressure of opinion appeared to swell from the bottom up — from the agents in the trenches to the association “leaders.”

BANA’s retraction shows that going “viral” can work to expose their unreasonable demands and return agent-seller relationships to their proper order.

Properties No Longer Required to Remain “Active”

BANA’s Valentine’s Day clarification says, in part, “We recognize that listing status classifications may differ by locale and are subject to local or regional MLS requirements.  Brokers should follow MLS requirements at all times. MLS statuses such as Back Up, Contingent or Pending may be acceptable.”

A key problem with the prior directive is that it did not evidence that BANA recognized different status classifications, nor understand the significance of the term “active” to real estate agents. Banking bureaucrats who have not been involved in marketing real estate should not be the ones writing short sale policies that effectively govern brokers and agents handling short sales. They don’t understand how it works in reality, “in the trenches.”

BANA now admits, “How the property is marketed is a decision determined by the Seller and Listing Agent.”

Reasonable Remarks Allowed

BANA’s February 11 reminder read as if the bank wanted to force properties to be persistently available for showing. It has softened that stance in saying, “caution should be exercised in using terms like ‘cash offers only’ or ‘property is ineligible for financing’.  This kind of verbiage can be considered an attempt to exclude a financed buyer and lead to a delay in processing the short sale.” Isn’t it interestingly self-serving that BANA wants to encourage financed buyers? How else could they make money without new loans? (Everyone knows they have far too many old, nonperforming ones.)

In giving credit to BANA, I think they are now primarily trying to provide guidance on how “the offer received represents an open market transaction.” I do not deny that some agents manipulate MLS availability for improper reasons. The goal of achieving open market transactions is a reasonable one. It’s just how BANA goes about it in practice with which I often disagree.

Maybe the February 11 “reminder” received a belated review by the legal department and loss mitigation was instructed to change its tone. Once articles like mine are in the public domain pointing out the numerous liability risks associated with unrestricted showing rights for buyer’s agents, then BANA is on notice and cannot deny knowledge of the risks of liability.

What’s Next?

In my view, BANA is the most unpredictable loan servicer with respect to short sale processing rules. Who knows what crazy idea they will come up with next?

It’s time for real estate agents, brokers and boards to become proactive with respect to BANA’s policies and procedures that have been detrimental to the housing recovery, reasonable liquidation of upside down properties, and neighborhood stabilization. You have seen how fast BANA can react when it is publicly outed for being dead wrong.

I suggest the viral effectiveness of this week be shifted in a new direction: to the post-approval deletion of files from Equator without notice and without explanation (except upon very vigorous escalation).

In my February 11 article I pointed out BANA’s practice since last summer of deleting approved short sales from Equator without notice to anyone. Usually there is little or no reason for an agent to log into Equator after receiving a short sale approval until the final several days before closing to upload the HUD-1 settlement statement for final review and approval. This is typically about 30-45 days after the short sale has been approved for a specific buyer under a specific contract. After this time, it is usually the listing agent who logs into Equator to the horror of discovering the file and the approval have disappeared without notice.

This practice is horrendously unfair to buyers, sellers, both agents, loan processors, closing officers and everyone else who has been working diligently toward closing in reasonable and good faith reliance upon the short sale approval letter.


Agents, brokers and boards should take the momentum they have seized this week and keep the pressure on to demand a halt to this grotesquely unfair business practice. Demand that it be stopped before it happens to you!

It would be far more reasonable for BANA to conduct its higher level, fine tooth-comb review BEFORE issuing the approval letter, NOT AFTER. Then these unfair, post-approval denials will cease.

At a minimum, BANA should give notice to the listing agent, closing officer, and third party negotiator (if one is on the file) that BANA suspects some kind of irregularity that must be clarified in a reasonably rapid time or else the approval will be withdrawn. This gives a fair and fighting chance to keep the closing on time for buyers who could lose loan locks, sellers who could lose a junior lien holder approval, and the many other people working to make the deal close on the original schedule.

Every time my office has been involved in an escalation of a post-approval retraction, the approval has been reinstated. Whatever the BANA reviewers thought was irregular was easily explained, albeit at the expense of a 30-45 day delay that riled everyone’s plans and imposed additional costs. Hence, BANA’s “hunches” have a poor track record in my experience. Accordingly, requiring BANA to ask questions first makes eminent sense.

I trust this is a “cause” that agents, brokers and boards can agree to jump on rapidly and vocally before they become the next victim of a retracted approval without notice.

As always, join in with the Comments below or look for a conversation at .

BANA’s Valentine’s Day Retraction (in full)

Here is the “clarification” from BANA issued on February 14:

The following information is to revise and provide additional clarity on the Multiple Listing Service (MLS) Requirements message that was sent on Feb. 11, 2013.

  • Listing the property on the MLS is not a new requirement in the short sale process and has always been a component of our fraud review.
  • The listing requirement demonstrates that the property was listed on the open market and the offer received represents an open market transaction.  We recognize that listing status classifications may differ by locale and are subject to local or regional MLS requirements.  Brokers should follow MLS requirements at all times. MLS statuses such as Back Up, Contingent or Pending may be acceptable.  Ensuring that the listing remains on the MLS until an approval letter is issued will help you show that the property was on the open market.
  • How the property is marketed is a decision determined by the Seller and Listing Agent, however, caution should be exercised in using terms like “cash offers only”or “property is ineligible for financing”.  This kind of verbiage can be considered an attempt to exclude a financed buyer and lead to a delay in processing the short sale.  All offers are subject to investor approval and are reviewed on a case by case basis.

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