Bank of America Places 60 Day Deed Restriction On ALL Foreclosures.
Nearly a year and a half ago Bank of America set a procedure into place that caused investors to retract from placing offers on their REOs. Management in the loss mitigation department decided to set deed restrictions on any cash offers they received on properties that were foreclosed on. The deed restriction contained a "no transfer or recording of deed for 30-60 days after the sale and purchase" of the defaulted asset.
This was intended to prevent mortgage fraud caused primarily by straw buyers who boost false appraisals and collect cash at closing while using another borrower to be the actual party closing the transaction. Whether it is realized by BofA's loss mit department or not, the side effect has left the average american investor unable to purchase these assets with the intention to rehab and re-sell. Further to the point, the average investor buyer accounts for 73% of all foreclosures purchased.
Over time, investors discovered loopholes. Primarily, if an investor purchased the property under a deed of trust (as in a mortgage), there would be no deed restriction. Meaning, if there was a recorded mortgage and the offer was presented as "financed", the deed restriction would not apply.
As of a week ago, BofA has decided to modify this deed restriction. Instead of the 30-60 no resale applying only to cash investor offers, it is now mandated across all of their REO inventory. So, no matter if the purchaser is paying cash or buying with a loan, the deed restriction is applied. No matter if the purchaser is an investor or owner occupant, the restriction still applies. If the purchaser has no intention to buy for investment purposes..... the deed restriction still applies.
It will be interesting to see the effect this will have on BofA's defaulted asset inventory. If only 17% of their inventory can be purchased, how many of these assets can they keep on their books? They should fully understand that a majority of their properties cannot be purchased with a mortgage since they are the originators and underwriters of the same notes they deny due to property condition. Good luck, Bank of America. When you come to your senses, I'll be waiting for you to unload massive amounts of inventory from the smart banks who purchase these assets from you and do not place deed restrictions on the sale of the property.