Following Up on Freddie Mac: What Has Happened?

Well it has been 4 months since we last looked in on Freddie Mac and the relationship it has with First American.

At that time we had a lot of response from legislators, both state and federal, asking Freddie Mac for an explanation on this anticompetitive and potentially non RESPA compliant business relationship they have with First American disclosures.

Freddie Mac responded to all of these inquiries by issuing a statement saying they did not have an exclusive relationship with First American disclosures.

Please note, this statement was a direct contradiction of the memo Freddie had previously sent out under the banner of its Homesteps division directing real estate agents that First American disclosure reports were required for Freddie’s REO properties. Freddie went on to say they had sent out RFPs to a number of disclosure companies in California at the beginning of 2009 and no one who met their standards responded except First American.

In talking to a number of other disclosure companies in California I discovered that the only ones which received the initial RFPs from Freddie Mac were several regional disclosure companies who would have not met Freddie’s criteria to become a supplier of disclosure reports. Somehow the disclosure companies which would have qualified never received an RFP.

How convenient for First American.

It seemed that Freddie had decided to relent early this fall due to pressure it received from legislators and reissued the RFP to all the disclosure companies that did not receive one originally.

So we’d assume that everything is being fairly handled, right? Well, maybe not quite.

From what I can tell in my research, it now seems Freddie sent out a much more complex, completely different RFP to First American’s competitors than it originally sent out in the beginning of 2009. On top of that they put a 48-hour deadline on the companies to return the RFP to them in order to be considered for supplying reports. On the surface it would appear that Freddie wanted to resolve this issue quickly and fairly.

Here we are now at the end of the year, and months have gone by since the 48-hour deadline.

The problem?  I am still getting feedback from the disclosure companies who completed and submitted these RFPs saying that they never heard back from Freddie Mac, despite submitting their RFP responses within the 48 hour deadline.

One company told me that their inquires into Freddie Mac about the status of  their RFP were met with a cool response, “Freddie Mac is too busy to deal with the RFPs at this time, maybe later.”

I am sorry to report that despite all the initial responses by Freddie Mac, in fact, nothing has changed.   Freddie Mac and First American are continuing on with their questionable, seemingly exclusive, business relationship and those firms who submitted RFPs are being stalled.

Have you seen anything like this in your marketplace?  Are you being stalled by Freddie Mac?  If so, let me know, I would love to speak with you!

Further Discussions Regarding Recent HUD Changes

Dear Readers,

Thank you so much for all the feedback we received on our recent post  regarding HUD adding NHD reports to the list of official settlement services. I received many good comments and wanted to clarify some points that were raised.

  1. We know that a majority of escrow officers handle the accounting of the NHD reports on the HUD-1 correctly. The problem, according to the NHD companies I have interviewed, is not the 80% of escrow officers who account for these services the right way, but the 20% who do not.  You would be surprised at the number of residential real estate transactions that actually close without an NHD report, resulting in panicked real estate agents calling NHD companies to get reports after the fact to ensure their files are complete. You can imagine the legal problems that could arise from that practice. With the NHD reports required to be on the HUD-1 these types of unfortunate mistakes and many others will be greatly reduced.
  2. It is true that in your average residential real estate transaction the seller pays for the NHD report. It is also the case that the buyer typically receives just their side of the HUD-1 showing what they paid for in the transaction. However the complete HUD-1 is the official record of how all monies, both credits and debits, were handled in the transaction. While there are ways to handle miscellaneous expenditures in a transaction, settlement services by law, should only be accounted for on the HUD-1. This is the reason why NHD reports are required to be on the HUD-1 regardless of the buyer’s interest.

Again, I want to thank all of you for your comments and keep them coming!  I would love to hear from all my readers.  And please continue to follow along with me as I explore different issues facing buyers and sellers in the real estate industry at http://www.re-insider.com.