Bundling - for home buyers it's baffling

In some industries, bundling is a good thing.

Take AT&T, for example. They offer discounts for bundled services that include your home phone, Internet and advanced TV. The company touts its residential bundled services as a plan that "allows you to integrate all of your home services for less." Having it all in one package --the upshot? It provides "savings over traditional telecom services and up to 20 percent savings over ala carte options.”

That and similar scenarios seem to make sense. But I'm hearing about others kinds of bundling going on in the housing industry where title companies and banks are getting a little too chummy for their own good. In other cases, its banks and the asset management companies they deal with. Those are the businesses that sell off foreclosed properties on behalf of banks.

I'm hearing about these kinds of services being bundled exclusively together - services that aren't necessarily supposed to come together in one package and in fact, when they do specifically violate RESPA.

Here's the scenario: A title company comes to a bank and says, "We'll give you a discount if you put all of your title insurance through us - it'll be MUCH cheaper."

Or maybe the REO asset management company guarantees a similar break in price if the bank funnels all of its foreclosed properties to them.
These kinds of deals may well be cheaper for the bank. But they're also illegal under the California insurance codes and other mandates which also include HUD and its RESPA law that regulate these companies. If the inducement is volume discounts, and the discount is passed inside between affiliate service sellers and NOT the buyer – well it’s downright illegal – plain and simple.

I put in a few calls about this to some banks, but never heard back. I also called REO World, which describes itself as "the premier asset management company representing foreclosed properties in the Western & Central United States."

I finally did get a return call from them while I was in line at the grocery store. When the female REO World representative identified herself, I figured I was finally going to get some kind of perspective on this thing. But I was in line and about ready to pay, so I asked her if I could call her back in two minutes. Her response caught me off guard.
"I can save you some time," she said. "We're not interested in making any kind of comment. Our comment is, ‘No Comment.’”

So that was the end of that. It seems that no one wants to talk about this, but I know it's going on. And you can probably draw your own conclusions too. If these transactions are transparent, then why the “no comment” line? Because they aren’t transparent, probably aren’t legal and appear to be insidious.

An April 2007, a report by the U.S. Government Accountability Office said actions are needed to improve oversight of the title industry and better protect consumers.
The report said that investigations by the Department of Housing and Urban Development (HUD) and state insurance regulators have identified instances of alleged illegal activities within the title industry that appeared to take advantage of consumers' vulnerability by compensating Realtors, builders and others for consumer referrals. Combined, the report said, "…these factors raise questions about whether consumers are overpaying for title insurance."

I can understand companies wanting to make money - that's the American Way, after all. But it has to be done legally - and ethically. If you're setting up an arrangement where services are bundled together in an illegal manner, it's just wrong.

And who gets the short end of the stick?

The home buyer and seller. Their real estate agent. The American Public.