Apr 16, 2012

Tip 15-2012: Freddie Mac Attempts to Force Use of Settlement Attorney

Charlottesville Real Estate Attorney

Tip 15-2012: Freddie Mac Attempts to Force Use of Settlement Attorney 

Prior Tucker's Tips 7-2012 & 8-2012 discussed the practice of REO Banks and quasi government agencies trying to direct the Purchaser to use the REO's own settlement attorney, rather than allow the Purchaser to have their own independent legal representation.  The REO's offer a "free owners title insurance policy" if you use the same settlement attorney or settlement agency the REO is using.  The two tips discussed why this was a bad practice, including how the "free" title could actually be more expensive. 

Now one of these agencies, Freddie Mac, has gone further to keep the Purchaser from being protected by their own legal representation.  As part of the negotiating process, which usually includes negotiating the price and settlement date, Freddie Mac includes in their counter offer a requirement that the Purchaser use their REO's law firm in Virginia Beach.
In other words, if you want to have your offer accepted, the Purchaser has to agree to use the REO's selected settlement agent...."If you want to buy our house, then we will require that you are not represented by the legal counsel of your own choosing." 

Talk about a stacked deck.  Instead of having an independent review of the foreclosure process, Freddie Mac demands the Purchaser use their own law firm which may have conducted the foreclosure and will issue the "free title insurance."

The Purchaser should insist they have their own independent law firm representing them, and that an independent title search and title insurance policy is issued.  If the Purchaser has to accept the REO settlement attorney in order to get Freddie Mac to agree to a contract, then after the Contract and REO Addendum has been signed, immediately ask for an Amendment to the Contract changing the settlement attorney.  Freddie Mac and the REO's law firm will not object to the Purchaser being allowed to ultimately have their own attorney and title insurance.   
Contact me at 434-951-0858 or Tucker@TGBLaw.com if you have questions.  Thanks for allowing us to send you this email.    

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William D. Tucker, III 
Charlottesville 434-973-7474 | Lake Monticello 434-589-3636  
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