2011 Utah Real Estate Caravan

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

2

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

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”.

5


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

6


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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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.

8

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.

10

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.

13

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.

16

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


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


Minimum Loan Standards:

ability to repay

qualified mortgage safe harbor

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DODD FRANK ACT


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


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

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

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

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

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

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

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

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

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

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

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

RECORD-KEEPING

Ads and promotional materials

Sales records

Communications with customers

Agreements with customers

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FTC MARS Rule

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

UTAH LAW

no up-front fees

written agreement for services

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Foreclosure Rescue Services and Loan Modification Services

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

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

Depending on who was keeping score.43

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

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

SHORT SALE 55

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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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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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

The Bait-and-Switch

The Accomplice76

Rent-to-Buy Scheme

The Lease Option Specialist77

The Sting

Steal the property and split the “score.”78

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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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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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

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

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


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Exams

Both Sales Agent and Broker exams are new in 2011.

Exams now include settlement statements and the REPC.


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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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Appraisal


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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Appraisal


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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Appraisal

April 15, 2011 – (Approximately), Courtesy renewal postcard sent by the Division to your RELMS public address

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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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2011 Utah Real Estate Caravan

Economy & Finance

Transcript of 2011 Utah Real Estate Caravan