Download - 2011 Utah Real Estate Caravan
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Deanna SabeyDirector of Real Estate
CARAVAN 2011
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Agency InformationRevamped Division web-site
Color Coded BoxesUpcoming Events & NoticesDisciplinary Action Look Up Consumer Resources for
Filing a complaintGetting information on foreclosure prevention and loan modificationsMortgage and real estate education fund informationStatutes and rulesLicensee look-up
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Newsletter
New Flip formatTopical guide in 4th Q Newsletter for 2010Legal Corner
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Governor’s call for agencies to review regulations
GOAL: REDUCE REGULATIONRemoved 10 day reporting of Class C misdemeanors
Did not participate in the NMLS Mortgage Call Report
Removed rule requiring appraisers to certify with the Division to provide testimony in court.
Removed appraiser education committee requirement
FUTURE reductions in regulation are coming! 4
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H.B. 91 (effective 5/10)
No 10 day reporting of class C misdemeanors MORTGAGE and REAL ESTATE:
Commission review of a Division order is de novo.Prohibit up-front fees in loan mods and foreclosure rescue services. REAL ESTATE, define “business opportunity”.
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H.B. 91 (effective 5/10)
APPRAISAL:Reorganize the existing provisions Correct inconsistencies Add Division concurrence for decisions relating to disciplinary proceedingsAllow appraisers who are also real estate licensees to produce broker price opinions
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H.B. 91 (effective 5/10)
APPRAISAL MANAGEMENT:Increase penalty to $5,000 per violation
Limit the automatic revocation provision regarding AMC control person
Revise AMC definition
Give the Division concurrent rulemaking authority with the Appraisal Board.
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H.B. 91 (effective 5/10)
Decisions relating to disciplinary proceedings made through concurrence of the Division and the Appraiser Board.AMC cannot require an appraiser to indemnify the AMC against liability except liability for appraiser errors and omissions.Disciplinary action for a violation of 15 U.S.C. Sec. 1639e(i), customary and reasonable fees provision.
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APPRAISAL RULES
Working on reorganization of rules to mirror the organization and numbering of the appraiser statute.
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APPRAISAL RULES
R162-103:student must attend 100% of scheduled class time.Individual can be awarded up to ½ of CE for teaching, program development, authorship of textbooks, or similar activities.
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APPRAISAL MANAGEMENT COMPANIESReorganized reflecting the AMC statute
R162-2e: AMC must have systems in place to:Verify each appraiser on the panel is licensed or certified;Verify an assignment is completed by the appraiser; Ensure an assignment offer has enough information; Track the client and the appraiser on each assignment.
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MORTGAGE
Reorganized and renumbered rules in a system that correlates to the mortgage statute.
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MORTGAGER162-2c-201 Factors for determining
financial responsibility for licensure through credit report:
outstanding civil judgments;outstanding tax liens;foreclosures;multiple social security numbers attached to the individual's name;child support arrearages; andbankruptcies.
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REAL ESTATE
Reorganized and renumbered old rules into a format that is more user friendly.
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REAL ESTATE
R162-2-2 Plea in abeyance to MM charge involving fraud, misrepresentation, theft, or dishonesty no longer acts as an automatic bar to licensure.
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REAL ESTATE
R162-4-1Licensees will no longer be subject to discipline if they do not personally attend closings.
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DODD FRANK ACT
Has far-reaching ramifications.
2300-page document creates Consumer Financial Protection Bureau.
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MORTGAGE (TILA amendments)
Compensation: No compensation based on the terms of the loan.
No origination fees from both the borrower and lender.
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DODD FRANK ACT
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MORTGAGE (TILA amendments)
Origination Standards: consumers must be offered and receive residential mortgage loans that reflect their ability to repay, that are understandable, and that are not unfair, deceptive, or abusive.
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DODD FRANK ACT
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MORTGAGE (TILA amendments)
Minimum Loan Standards:
ability to repay
qualified mortgage safe harbor
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DODD FRANK ACT
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MORTGAGE (TILA amendments)
Qualified Mortgage:verified income and financial resources, payment schedule includes taxes, insurance, assessments, etc; meet debt-to-income guidelines/regs established by Fed; total points and fees may not exceed 3 % of loan.
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DODD FRANK ACT
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MORTGAGE (TILA amendments)
Foreclosure Defense: consumer can assert violations of the ability to repay standards or steering prohibitions as a defense to foreclosure.
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DODD FRANK ACT
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APPRAISALIndependence:
No improper influence of appraiser. Settlement service provider obligated to report USPAP violations to state agency.Interim Rules promulgated by Federal Reserve. HVCC sunset provision.
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DODD FRANK ACT
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APPRAISALBPOs:
may not be used as the primary basis in determining the value of a piece of property that will be security for a mortgage loan.
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DODD FRANK ACT
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APPRAISAL
AMCs:Subcommittee supervision –requirements for regulation in Interim Rules.Must pay appraisers customary and reasonable fees. Interim rule further discusses how to determine customary and reasonable.
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DODD FRANK ACT
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FTC MARS Rule(Mortgage Assistance Relief Services)
SCOPE: includes loan modification companies and some real estate agents.
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APPLICATION TO REAL ESTATE AGENTS:YES, if you are an agent who promotes your services as a way to help consumers avoid foreclosure. Example: getting a lender’s approval for a short sale.NO, if you are an agent who only provides services to help people in buying or selling homes.
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DISCLOSURES:1. General audience
IMPORTANT NOTICE“(Name of company) is not associated with the government, and our services are not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.”
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FTC MARS Rule
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DISCLOSURES:2. Prospective Customers for Every Communication
IMPORTANT NOTICE“You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender (or servicer). If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us $________ for our services. PLUS General audience disclosure.
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FTC MARS Rule
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DISCLOSURES:3. Offer of mortgage relief services:
1-page written notice from customer’s lender or servicer explaining material changes
andDisclosure after offer.
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FTC MARS Rule
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DISCLOSURES
Before agreeing to this service, consider the following:
This is an offer of mortgage assistance we received from your lender/servicer. You do not have to accept this offer. If you reject the offer, you have no obligation to pay us. If you accept the offer, you will have to pay us $____ (same as previous disclosure) for our services.
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FTC MARS Rule
IMPORTANT NOTICE
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DISCLOSURESIf there is any representation or implication the provider has suggested that the consumer discontinue any mortgage payment,
ADD TO DISCLOSURE:
“If you stop paying your mortgage, you could lose your home and damage your credit rating.”
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FTC MARS Rule
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DISCLOSURE CONFUSION
How do agents comply with disclosure requirements?
NAR has asked FTC for clarification on how agents should implement disclosures.NAR interpretation: Rule applies to ANY real estate professional negotiating, obtaining, or arranging a short sale of a dwelling.
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FTC MARS Rule
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NO UP FRONT FEES
Payment to service provider can only occur after the consumer accepts in writing the lender/servicer’s written offer for modification or short sale approval letter.
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FTC MARS Rule
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RECORD-KEEPING
Ads and promotional materials
Sales records
Communications with customers
Agreements with customers
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FTC MARS Rule
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RECORD-KEEPING
Includes a provision requiring provider to take reasonable steps to ensure employees and independent contractors comply with the rule.
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FTC MARS Rule
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UTAH LAW
no up-front fees
written agreement for services
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Foreclosure Rescue Services and Loan Modification Services
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UTAH LAWProhibitions-
Suggestion that there is a special relationship with the person’s lender or loan servicer;falsely represent or advertise;recommend or participate in a foreclosure rescue when an agent has a business relationship with or financial interest in 3rd party purchaser/transferee;advise that the person should make a mortgage payment to a person other than the person’s loan servicer;tell the person to refrain from contacting the person’s lender, loan servicer, attorney, credit counselor, or housing counselor. 38
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Future Challengesfor the Division
THE MARKET
FEDERAL LAW
TECHNOLOGY
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Thank you!
Questions?
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Dee JohnsonEnforcement Director
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CARAVAN HISTORY
The last 7 caravan topics for Enforcement have been on types and variations of mortgage fraud or real estate fraud.
We have identified more than 20 types of fraud related to real estate.
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2007 Caravan
Topic: Types of Fraud.Mortgage Fraud was our hot issue.Foreclosures were not an issue yet.Short sales were few and far between.Loan modifications were minimal. Utah was No. 2-5 in mortgage fraud
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Types of Mortgage FraudIncome - Employment Disinformation Illegal Property FlippingArtificially Inflated AppraisalsStraw BuyersOccupant –Non-Occupant SchemesIdentity TheftIdentity CreationPurchase Refinance SchemesStated Income Schemes
Forged CPA Verification FormsUnrecorded and Fraudulent SecondsNotice of Interest LiensForeclosure and Equity SkimmingAir LoansNon-Existent PropertiesReverse MortgagesNew Construction Schemes 44
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2008 Caravan
Topic: Inflated Appraisals used in Mortgage Fraud.Properties that were the Parade of Homes were being inflated and flipped.Real Estate licensee were caught in the middle.Misuse of appraisals.Conviction of Appraisers.
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2009 Caravan
Topic: Mortgage Fraud, Loan Modifications.Provo River Bottoms Properties.
Inflated appraisals.Manipulated values.
Provo River Bottoms ConvictionsIndividuals involved.Licensees involved.Criminal sentences by federal courts.
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U.S. District Judge Ted Stewart noted Thursday that the offenders who stole millions of dollars from mortgage companies in a fraud involving the sale of homes in an upscale Provo neighborhood "are men of stature and status, success and privilege."So, the judge said, it was a mystery to him why they took part in a conspiracy to steal as much money as possible by using straw buyers to flip houses in
the River Bottoms area. The consequences for the mortgage companies, which lost $5.5 million, and residents, whose home values and property taxes were affected, have been devastating, Stewart said. "It is not too much of a stretch to say this is part of a larger corruption in our society that led to the economic troubles not only in this country, but in the whole world," he said. One by one, Stewart sentenced five defendants who had functioned in various roles in the scam to prison. All had pleaded guilty to conspiracy or fraud-related counts. Sentenced Thursday were: -- Bradley Grant Kitchen, 42, of Provo, whom prosecutors say orchestrated the conspiracy, to 51 months behind bars. -- David R. Bolick, 52, Sandy, a physician and owner of Home Owners Group
and Paragon Investments, 41 months. -- Ron K. Clarke, 41, Provo, a licensed real estate agent, 41 months. -- Steve Wells Cloward, 41, Orem, a licensed real estate appraiser, 33 months. --Jeffery David Garrett, 44, Provo, an escrow officer, 12 months. Garrett was ordered to pay $100,000 in restitution. The other four are jointly liable for about $5.4 million to America's Wholesale Lender, which is the wholesale mortgage arm of Countrywide Home Mortgage; and American Broker's Conduit, the wholesale mortgage arm of American Home Mortgage. A 2007 federal indictment says the defendants entered false sales prices in the Multiple Listing Service, then used the exaggerated figures to support inflated appraisals of other properties in the affluent River Bottoms area. The defendants used straw buyers to flip five residences in the neighborhood, according to the indictment, and kept the difference between the home loan and the actual value of the properties. The case was the first filed in federal court as part of the Utah Mortgage Fraud Task Force. The group --- made up of local, state and federal law-enforcement officers and state and federal prosecutors -- has brought prosecutions in state courts. Three of the prosecutions were of straw buyers, including KUTV Channel 2 sports anchor Dave Fox, who admitted he made a misrepresentation to obtain a loan for one of the homes. Fox entered a plea in abeyance to communications fraud. The case was dismissed and his record wiped clean after he met certain conditions, including cooperating with prosecutors. The other two straw buyers also entered pleas in abeyance in Utah County. On Thursday, Stewart rejected a request by Garrett's lawyer for a shorter sentence for his client. Attorney David Maddox argued that Garrett had acted as a straw buyer and pointed out that Fox and the other straw buyers had been allowed to make pleas in abeyance. The argument didn't sway Stewart. "Why some were not prosecuted ... I don't know," Stewart said. "I consider the role of straw buyers to be reprehensible." Assistant U.S. Attorney Scott Thorley said Garrett did more than act as a straw buyer. Meanwhile, Clarke specifically directed his attorney not to ask for a sentence that was shorter than the 41 months, recommended under federal sentencing guidelines. "I crossed the line," he told Stewart. "I humbly beg for forgiveness."
April 03, 2009
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2010 Caravan
Topic: Short Sale Fraud and Scams.Short Sale Transactions and Description.Short Sale Scams.Computers and scanners are changing what looks like an original document.Technology and fraud.Documents that look real but are not.
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CLEAN TRANSACTION
SELLERBUYER
REAL ESTATE AGENT
LENDERTITLE COMPANY
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IDEAL CASE FOR SCAMMER
FACILITATORSTRAW BUYER
END BUYER
LENDER
TITLE COMPANY
SELLER/OWNER
UNAWARETENANT
FEE
LEASE OPTION
FLIP
LIENS
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Midvale Man Pleads Guilty to Mortgage FraudMay 3rd, 2011By Dennis Romboy
SALT LAKE CITY — A Midvale man has pleaded guilty in federal court to falsifying documents to drive up home prices as part of a mortgage fraud scheme.
In a plea agreement, Christopher D. Hales, 30, admitted to one count of bank fraud in U.S. District Court last week. He initially faced 10 counts of mail, wire and bank fraud and money laundering. Prosecutors agreed to dismiss nine counts in exchange for the guilty plea.
Judge Ted Stewart will sentence Hales on Aug. 30. Prosecutors recommended Hales spend 90 months in prison.
Hales admitted that he enlisted others in 2005 to file an appraisal falsely valuing a Salt Lake house at $750,000. He then arranged to purchase the home through a straw buyer in order to keep the equity total of $172,000 for himself.
Cedar Hills Mayor Eric Richardson was linked to the other alleged financial scams involving Hales, according to court documents. Richardson has not been charged with a crime.
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Not all foreclosure rescue plans are
Fraudulent
Or
Illegal
DISCLAIMER
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State and Federal Regulation
State statute to deal with foreclosure rescue issues.
Utah Code 61-2f-401.Advanced fees.
Federal Regulations.Federal Trade Commission.Mortgage Assistance Relief Services MARS Rule.
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Foreclosure Process
Owner has home for residence.Owner has existing mortgage.Owner falls behind on payments.Tries to find financial help.Notice of Default is filed by lender or servicer.Owner can not cure late payments.Foreclosure is filed.
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Foreclosure Process
Owner tries to negotiate but can not cure loan.Foreclosure Sale takes place.Lender takes property.Property sold by lender.Transfer title to new owner.
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Foreclosure Process
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Foreclosure Rescue Process
Owner has home as residence.Owner has existing mortgage.Owner falls behind on monthly payments.Owner tries to find financial assistance.Notice of default is filed.Owner finds a real estate licensee.Real estate licensee markets property.
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Foreclosure Rescue Process
A buyer is found, offer written.Offer accepted by Seller.Parties go to the title company.Try to stall foreclosure.Possible short sale.Deed in lieu of foreclosure.Requires permission of the lender.
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Foreclosure Rescue
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Foreclosure Rescue Scam
This is a huge, profitable, fraudulent enterprise.It represents millions of dollars in our state each year.Thousands of people have lost their homes through this process.People you know have been victims.
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What is the Scam
A distressed homeowner looking for help is conned out of their title or money by a person or group who take advantage of the homeowners.
These unscrupulous individuals place the homeowner in a worse position than they were in before the scam.
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What is the Scam
The scammers either take the property or take the money and then disappear.Many times the homeowner could negotiate without the services of others.The scammers charge high fees and then provide no services.
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How the scammers do it
They make unrealistic promises to the homeowner.They guarantee results.The claim phantom government assistance.They charge advance fees and provide no services.
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How the scammers do it
They convince the homeowner to vacate the property.They convince the homeowner to quitclaim title and rent back.The homeowner enter into a lease option agreement with the scammers.They offer the homeowner what looks like and official government program.
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How the scammers do it
They convince the homeowner they can provide a loan modification.They charge the homeowner money to file for bankruptcy to stop the process.The homeowner signs away interest to the property without knowing what is happening.
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Foreclosure Rescue Scam
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The scammers calling card…
“Stop foreclosure now!"
"Get a loan modification!"
"Over 90% of our customers get results."
“This is a government program, paid by your tax dollars.”
"We have special relationships with banks that can speed up the approval process."
"100% Money Back Guarantee."
"Keep Your Home. We know your home is scheduled to be sold. No Problem!"
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The Phony Counselor or The Phantom Helper
The Scam Artist75
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The Bait-and-Switch
The Accomplice76
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Rent-to-Buy Scheme
The Lease Option Specialist77
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The Sting
Steal the property and split the “score.”78
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How to stop the fraud
Employ a reputable real estate licensee.Consult city or county programs.Look for local government assistance.There may be help for free.Be suspicious.Ask for credentials.Verify what is expressed.
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How to stop the fraud
Contact the lender or servicer first.Make payments only to the lender or servicer.Do not pay upfront fees.Know what you are signing.Do not vacate the property.Do not quitclaim your interest in the property.
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How to stop the fraud
Never sign a deed to the property unless it is a legitimate transaction.Report suspicious activity to the proper state or federal agencies.
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Thank you!
Questions?
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CARAVAN 2011
Mark FagergrenLicensing and Education Director
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REAL ESTATE
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Real Estate
Proposed Rule Provides better protection for company names.
Closely resembles an existing nameMisleading Confusing to the public
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CE Credit for Commission Meeting Attendance
Credit for attending a Real Estate Commission or Appraiser Board Meeting.One meeting for credit per two year license period.
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Commission Calendar 2011Mortgage Real Estate Appraiser
May 4 May 18, 19 May 25*
June 1* June 15 June 22
July 6 July 20 July 27*
August 3* August 10 August 24
September 7 September 21 September 28*
October 5* October 19 October 26
November 2 November 16 November 9*
December 7* December 21 December 14
*Phone Meeting89
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Educators not banking CE
Unsubstantiated ComplaintsMY CE HASN’T
BEEN BANKED!
AAAH!
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Proof of CE CompletionCE must be completed by the 15th of the
month in which license renews.Traditional CE Banking
three business day “time lag”
VS.
Live CE Banking$1.50 x 18 hours
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Proof of CE Completion
$42 vs. $6992
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Late Renewal
1 day to 30 days
31 days to 6 months
6 months to 1 year
= $50 late fee
=$100 late fee + $15 activation fee
=$100 late fee + $15 activation fee
18 hours CE
24 hours CE
42 hours CE
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Late Renewal
Late inactive renewal (one to thirty days) requires 18 hours of CE
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Education ImprovementsPre-license Education of 120 hours for Sales Agents and Brokers
Salesperson 120 hour course includes:16 hours on Contracts24 hours of Utah Law
40 total hours on contracts and Utah specific requirements
New (and improved) Agents
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Continuing EducationContinuing Education increase to 18 hours
New Agent CourseEducation (including forms and contracts) afteragents are licensed, to receive practical, real experience vs. textbook realities
New (and improved) Agents
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Exams
Both Sales Agent and Broker exams are new in 2011.
Exams now include settlement statements and the REPC.
New (and improved) Agents
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WEBSITE
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RELMS
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RELMSRenewal System Improvements
CE taken after license renewal date but prior to license expiration will now be banked and usable by licensee at renewal.Notice at the completion of online renewal confirming license renewal (including fee paid). Allowed to print license renewal confirmation.Receipt to the licensee if they included their e-mail address.Renewal on mobile browser.Back button in license renewal module will now return the user back to RELMS.
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RELMSCompany Change Process will now be sending e-mails to all parties throughout the change process.
Agent Requests Affiliation Change from Company A to Company B
Agent Broker A Broker B
Broker A acknowledges or accepts the change.
Broker B acknowledges or accepts the change. The change is complete.
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RELMS
Company Change Process will now be sending e-mails to all parties throughout the change process.
Uncompleted company transfers “fail” after ten days.
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APPRAISAL
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Appraisal
Company Affiliation
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Appraisal2010 Utah Appraiser Examinations
First Time Takers Repeat Test Takers Overall Statistics
Licensed 59% 37% 48%
Certified 49% 49% 49%Residential
Certified 73% 50% 62%General
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Appraisal
Trainee RegistrationGroup A – Registered BEFORE 1/1/08
474 Group A Trainees whose registration was set to expire on 12/31/10
424 Group A Trainees whose registration expired on 12/31/10
50 Group A Trainees who renewed their registration
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Appraisal
Trainee RegistrationGroup B – Registered DURING 2008
28 Hours CE and fee required to re-registerMust re-register this year by initial registration anniversary date
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Appraisal
Trainee RegistrationGroup C – Registered 1/1/09 ( OR AFTER)
28 Hours CE and fee required to re-registerMust re-register on two-year registration anniversary
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AppraisalSegmented Applications submitted before 12/31/2007 had until 12/31/2010 to complete their experience requirement, pass their exam, and subsequently become licensed.
Segmented Applications
Here are the Results
393 Segmented applications submitted to the Division
196 No experience submitted to complete their application
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Segmented Applications
Appraisal
Here are the Results
19 Applications approved for testing who either did not take or pass their exam
Pending rule allows these individuals to not have to re-submit experience for review, if they meet new education requirement and become licensed before 12/31/11.
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Segmented Applications
Appraisal
Here are the Results
168 Segmented applicants received their licenses
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All applicants for licensure are now required to submit all appraiser experience (no selectivity in determining what is placed on experience log)
Appraisal
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Pre-licensing education taken during current two-year licensing period may be used to fulfill 21 elective continuing education hours.
Appraisal
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National Registry Fee increasing. Beginning 1/1/12 the registry fee will increase from $50 ‐ $80, every two years.
Appraisal
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Appraiser CE banking has now been in operation for the past two years.
Appraisal
In the next couple of months, when an appraiser renews their license they will not be able to “add” non‐banked CE courses (that were taken before CE banking was required)
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Avoid falling off National Registry by applying in the month preceding their license expiration:
Appraisal
May 31, 2011 license expires.
April 15, 2011 – Six weeks before license expires, RELMS system renewal module is enabled.
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Avoid falling off National Registry by applying in the month preceding their license expiration:
Appraisal
April 15, 2011 – (Approximately), Courtesy renewal postcard sent by the Division to your RELMS public address
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Avoid falling off National Registry by applying in the month preceding their license expiration:
Appraisal
License renewal in the month preceding license expiration will prevent your license from briefly “falling off” National Registry
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Appraisal Subcommittee Audit
Appraisal
DRE in compliance
“Timeliness” of investigations (one‐year “turn around” criteria)
Mass appraiser experience log – Division verification “random sampling” required
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Appraiser CE audits
Appraisal
Zero discrepancies found since renewal online
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MORTGAGE
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We finished a difficult transition and licensing year into the NMLS System
Mortgage
5/2010 – Transition deadline7/2010 – Certification deadline (education and exam)12/2010 – License renewal deadline2/2011 – Reinstatement deadline
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474 –Mortgage licensees reinstated between 1/1/11 and 2/28/11
Mortgage
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Licensing Numbers 2010 to 2011:
Mortgage
1/1/2010 3/20119,027 MLOs 3,938 MLOs
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Unique Branch Lending Manager (BLM) for each branch
Mortgage
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New Licensee PreLicense Education:
Mortgage
MLO = 40 hour Utah + 20 hour NMLSPLM = 40 hour Utah
Fingerprints
Credit report
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Credit Reporting Review (Financial Responsibility)
Mortgage
Liens, judgments, bankruptcies, foreclosures, child support being reviewed
Circumstances, payments and payment plans
30 suspended for not authorizing Credit Report
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Currently, no requirement for Call Reports
Mortgage
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2012 License Renewal (11/1/11 – 12/31/11)
Mortgage
Only 6 months away!
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8 hours NMLS CE
Mortgage
3 hours – federal law and regulations2 hours – ethics2 hours – non‐traditional mortgage lending products1 hour ‐ elective
No DRE CE for Mortgage license renewal
Initial licensing year – no CE required
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Personal information disclosure – only what is on the NMLS Consumer Access.
No e‐mail addresses.
Mortgage
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Questions?
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Thank you!
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