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2011 Utah Real Estate Caravan
1. CARAVAN
2011
Deanna Sabey
Director of Real Estate
1
2. Agency Information
Revamped Division web-site
Color Coded Boxes
Upcoming Events & Notices
Disciplinary Action Look Up
Consumer Resources for
Filing a complaint
Getting information on foreclosure prevention and loan
modifications
Mortgage and real estate education fund information
Statutes and rules
Licensee look-up
2
3. Newsletter
New Flip
format
Topical guide
in 4th Q
Newsletter
for 2010
Legal Corner
3
4. Governor’s call for agencies
to review regulations
GOAL: REDUCE REGULATION
Removed 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
5. 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
6. H.B. 91 (effective 5/10)
APPRAISAL:
Reorganize the existing provisions
Correct inconsistencies
Add Division concurrence for decisions
relating to disciplinary proceedings
Allow appraisers who are also real estate
licensees to produce broker price opinions
6
7. 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.
7
8. 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.
8
10. 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
11. APPRAISAL MANAGEMENT
COMPANIES
Reorganized 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. 11
12. MORTGAGE
Reorganized and
renumbered rules
in a system that
correlates to the
mortgage statute.
12
13. MORTGAGE
R162-2c-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; and
bankruptcies. 13
15. 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.
15
17. DODD FRANK ACT
Has far-reaching ramifications.
2300-page document creates
Consumer Financial Protection Bureau.
17
18. DODD FRANK ACT
MORTGAGE (TILA amendments)
Compensation:
No compensation
based on the
terms of the loan.
No origination
fees from both
the borrower and
lender.
18
19. DODD FRANK ACT
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.
19
20. DODD FRANK ACT
MORTGAGE (TILA amendments)
Minimum Loan Standards:
ability to repay
qualified mortgage safe harbor
20
21. DODD FRANK ACT
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.
21
22. DODD FRANK ACT
MORTGAGE (TILA amendments)
Foreclosure Defense:
consumer can assert violations
of the ability to repay standards
or steering prohibitions as a
defense to foreclosure.
22
23. DODD FRANK ACT
APPRAISAL
Independence:
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.
23
24. DODD FRANK ACT
APPRAISAL
BPOs:
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.
24
25. 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.
25
26. FTC MARS Rule
(Mortgage Assistance Relief Services)
SCOPE:
includes loan
modification
companies and
some real
estate agents.
26
27. 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.
27
28. FTC MARS Rule
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.”
28
29. 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.
29
30. FTC MARS Rule
DISCLOSURES:
3. Offer of mortgage relief services:
1-page written notice from customer’s lender or
servicer explaining material changes
and
Disclosure after offer.
30
31. FTC MARS Rule
DISCLOSURES
IMPORTANT NOTICE
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.
31
32. FTC MARS Rule
DISCLOSURES
If 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.”
32
33. 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.
33
34. 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.
34
35. FTC MARS Rule
RECORD-KEEPING
Ads and promotional materials
Sales records
Communications with customers
Agreements with customers
35
36. FTC MARS Rule
RECORD-KEEPING
Includes a provision requiring provider
to take reasonable steps to ensure
employees and independent
contractors comply with the rule.
36
37. UTAH LAW
Foreclosure Rescue Services and Loan Modification Services
no up-front fees
written agreement
for services
37
38. UTAH LAW
Prohibitions-
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
39. Future Challenges
for the Division
THE MARKET
FEDERAL LAW
TECHNOLOGY
39
42. 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.
42
43. 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
44. Types of Mortgage Fraud
Income - Employment Forged CPA
Disinformation Verification Forms
Illegal Property Flipping Unrecorded and
Artificially Inflated Appraisals Fraudulent Seconds
Straw Buyers Notice of Interest Liens
Occupant – Foreclosure and Equity
Non-Occupant Schemes Skimming
Identity Theft Air Loans
Identity Creation Non-Existent
Properties
Purchase Refinance
Schemes Reverse Mortgages
Stated Income Schemes New Construction
Schemes 44
46. 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. 46
50. 2009 Caravan
Topic: Mortgage Fraud, Loan Modifications.
Provo River Bottoms Properties.
Inflated appraisals.
Manipulated values.
Provo River Bottoms Convictions
Individuals involved.
Licensees involved.
Criminal sentences by federal courts.
50
51. April 03, 2009
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
Ron K. Clarke, 41, Provo, a licensed real estate agent, 41
and Paragon Investments, 41 months. --
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."
51
52. 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.
52
54. CLEAN TRANSACTION
BUYER
SELLER REAL
ESTATE
AGENT
TITLE
LENDER
COMPANY
54
55. IDEAL CASE FOR SCAMMER
FEE STRAW BUYER
SELLER/OWNER FACILITATOR
LIENS LEASE
UNAWARE
OPTION LENDER
TENANT
TITLE COMPANY FLIP END BUYER SHORT SALE 55
57. Midvale Man Pleads Guilty to Mortgage Fraud
May 3rd, 2011
By 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.
57
59. 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.
59
61. 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.
61
62. 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.
62
64. 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.
64
65. 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.
65
67. 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.
67
68. 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.
68
69. 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.
69
70. 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.
70
71. 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.
71
72. 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.
72
74. The scammers calling card…
“Stop "Get a loan "We have special
foreclosure modification!" relationships
now!" with banks that
can speed up the
"Keep Your
approval
Home. We know
process."
your home is
scheduled to be
sold. No
Problem!"
"Over 90% of our
“This is a "100% Money customers get
government Back results."
program, paid by Guarantee."
your tax dollars.” 74
79. 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.
79
80. 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.
80
81. 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.
81
87. Real Estate
Proposed Rule Provides
better protection for
company names.
Closely resembles an
existing name
Misleading
Confusing to the public
87
88. 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.
88
89. Commission Calendar 2011
Mortgage 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 Meeting 89
90. Educators not banking CE
Unsubstantiated Complaints
MY CE HASN’T
BEEN
BANKED!
AAAH!
90
91. Proof of CE Completion
CE 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
91
93. Late Renewal
1 day to 30 days = $50 late fee 18 hours CE
31 days to 6 =$100 late fee +
$15 activation fee 24 hours CE
months
6 months to 1 year =$100 late fee + 42 hours CE
$15 activation fee
93
95. New (and improved) Agents
Education Improvements
Pre-license Education of 120 hours for Sales Agents and
Brokers
Salesperson 120 hour course includes:
16 hours on Contracts
24 hours of Utah Law
40 total hours on contracts and
Utah specific requirements
95
96. New (and improved) Agents
Continuing Education
Continuing Education increase to 18 hours
New Agent Course
Education (including forms and contracts) after
agents are licensed, to receive practical, real
experience vs. textbook realities
96
97. New (and improved) Agents
Exams
Both Sales Agent
and Broker exams
are new in 2011.
Exams now include
settlement
statements and the
REPC.
97
100. RELMS
Renewal 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.
100
101. RELMS
Company Change Process will now be sending e-
mails to all parties throughout the change process.
Broker BRequests Affiliation Change
Agent acknowledges or or accepts
Broker A acknowledges accepts the
change. The change Company B
from Company A to is complete.
the change.
Agent Broker A Broker B
101
102. RELMS
Company Change Process will now be sending e-
mails to all parties throughout the change process.
Uncompleted company transfers “fail” after ten days.
102
105. Appraisal
2010 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
105
106. Appraisal
Trainee Registration
Group 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
106
107. Appraisal
Trainee Registration
Group B – Registered DURING 2008
28 Hours CE and fee required to re-register
Must re-register this year by initial registration
anniversary date
107
108. Appraisal
Trainee Registration
Group C – Registered 1/1/09 ( OR AFTER)
28 Hours CE and fee required to re-register
Must re-register on two-year registration
anniversary
108
109. Appraisal
Segmented Applications submitted before
12/31/2007 had until 12/31/2010 to complete
their experience requirement, pass their exam,
Here are the Results
and subsequently become licensed.
393 Segmented applications submitted to the Division
196 No experience submitted to complete their application
109
110. Appraisal
Segmented Applications
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.
110
112. Appraisal
All applicants for licensure are now required to submit
all appraiser experience (no selectivity in determining
what is placed on experience log)
112