Complain Process, Trust Accounts Topics in 2010-11 BICAR Course

Commission procedures for handling letters of inquiry/complaints, common mistakes in trust account management, and miscellaneous situations that can lead to sanctions will be covered in the 2010-2011 Broker-in-Charge Annual Review(BICAR) course.

Examples of actual cases will be presented involving licensee failure to respond to Commission inquiries, Commission audit procedures including a broker’s duty to make records available will be outlined, and criminal conviction and disciplinary action reporting requirements also will be discussed.

An overview of basic trust account requirements will include a review of the rules pertaining to trust account maintenance and recordkeeping, as well as such common mistakes as failure to supervise the person keeping records and to perform monthly reconciliations. BICs who are confused about the record keeping or reconciliation process should consider attending the Basic Trust Account Course.

Miscellaneous fact situations drawn from actual disciplinary cases will be presented, followed by questions to stimulate discussion as to what violations may have occurred and how they may have been avoided.

Finally, there will be a brief review of BIC qualification requirements, broker-in-charge eligibility, and how to regain eligibility once lost.

All BICs and former BICs who wish to retain BIC-eligibility must take the BICAR course as their elective each year, beginning the first full license period following initial designation and each license period thereafter.

This article came from the May 2010-Vol41-1 edition of the bulletin.

Compensation Disclosure Advisory Committee to Review Rules

The Commission has approved formation of an Incentive Disclosure Implementation Advisory Committee to examine the Commission’s current compensation disclosure requirements in dual agency transactions.

Eleven voting members will comprise the committee, nine of whom are:

George R. Bell, Winston-Salem; Doneil Croom, Greensboro; Garth K. Dunklin, Charlotte; Kelly Colquette Hanley, Wilmington; J. Malcolm McFaydan, Fayetteville; Monica A. Thibodeau, Duck; Walt Tippett, Raleigh; Grady F. Watkins, Jr. Wilmington; and Harriet Worley, Raleigh.

Commission Chairman Marsha H. Jordan will serve in an ex officio capacity.

The current rule relating to dual agency compensation went into effect October 1, 2008. The primary change was to clarify disclosure requirements relating to third party payments.

This article came from the May 2010-Vol41-1 edition of the bulletin.

All about BIC Eligibility Rules

January 2008 the Commission instituted the concept of “broker-in-charge eligibility.” Once a broker satisfies the initial requirements to qualify as a broker-in-charge, i.e., experience and completion of the 12-hour Broker-in-Charge Course, the broker will become BIC eligible.

A BIC could resign as a BIC, become an associated broker with a firm, and later declare as a BIC again and not be required to take any special BIC education prior to or within 120 days after redesignation, so long as there has been no lapse in BIC eligibility.

A broker maintains BIC eligibility by timely renewing his/her broker license each year and completing both the mandatory Update Course and the Broker-in-Charge Annual Review course (BICAR) by June 10 every year, thereby satisfying the yearly requirement of eight hours of continuing education.

Eligibility is lost if the broker fails to take both the Update and BICAR courses, or if the broker’s license becomes inactive for any reason or expires or is suspended, revoked or surrendered. License status may be affected by disciplinary action, failure to renew on time or to satisfy the annual continuing education requirement, or by an individual choosing to place the license on inactive status.

Eligibility is regained by taking the following steps in the order stated:

1) Do whatever is necessary to return the license to active status, i.e., pay the reinstatement fee and/or cure any CE deficiency;

2) Submit a properly completed Broker-in-Charge Declaration form to the Commission (assuming the broker meets the experience prerequisite, i.e., two years full-time brokerage experience within the preceding five years).Within three to five days the broker should receive a notice confirming re-designation and informing the broker whether the 12-hour Broker-in-Charge Course or the four-hour BICAR course is required; and

3) Complete the specified BIC education within 120 days of redesignation.

Brokers who have lost BIC eligibility and are seeking to be redesignated as a BIC should not take any special BIC education until their licenses are on active status and they have received confirmation of redesignation from the Commission following submission of the BIC Declaration form.

A broker who fails to complete the required special BIC education within 120 days will be removed as a BIC by the Commission and will not be able to be redesignated as a BIC until the 12-hour BIC Course is first completed, even if previously taken within the preceding three years.

This article came from the May 2010-Vol41-1 edition of the bulletin.

2010-11 Update Course Covers Changes to HUD Form, Offer to Purchase Contract

Changes to two of the most commonly used forms in residential real estate will be described and discussed in the 2010-11 Update Course.

The HUD-1 Settlement Statement and accompanying Good Faith Estimate “GFE” form were altered effective January 1, 2010 by the U.S. Department of Housing and Urban Development under authority granted by the Real Estate Settlement Procedures Act (RESPA).

The Offer to Purchase and Contract form used in residential transactions has been revised by the North Carolina Association of REALTORS® and North Carolina Bar Association effective January 1, 2011.

Both forms will be explained, as well as a broker’s obligations as to each. Specific fact situations will be provided to illustrate how to apply the provisions of each new contract form.

The Update Course will also briefly cover any changes in the Real Estate License Law and Commission rules, plus a safety tip. □

The Real Estate Bulletin provided an overview of the changes to the HUD forms and settlement procedures in the January 2010 issue. Additional information along with the new forms can be found at www.hud.gov/respa.

This article came from the May 2010-Vol41-1 edition of the bulletin.

Disciplinary Actions – May 2010-V41-1

OTTO W. ANDERSON (Huntersville) – By Consent, the Commission suspended the broker license of Mr. Anderson for a period of 36 months effective March 1, 2010. The Commission found that Mr. Anderson in 2009 in U.S. District Court pled guilty to and was convicted of the felony criminal offenses of filing a false tax return and transmitting wagering information in violation of federal law and was fined, required to forfeit automobiles, cash and other property, ordered to pay restitution, and placed on probation. The Commission further ordered that its suspension be terminated if, during the suspension period, Mr. Anderson is released from federal probation and submits satisfactory proof of release.

HEATHER N. F. BEASON (Rockingham) – By Consent, the Commission permanently revoked the broker license of Ms. Beason effective February 24, 2010. The Commission found that Ms. Beason performed a sales transaction when not authorized to do so and submitted false closing documents to make it appear that the transaction had closed and the deed of trust had been paid off. The Commission also found that Ms. Beason, while managing the firm’s property management accounts, converted approximately $85,000 in trust monies to her own use and used security deposit funds to conceal the theft.

BONTERRA PROPERTIES OF UNION, INC. (Matthews) – By Consent, the Commission suspended the firm license of Bonterra Properties for a period of 180 days effective March 1, 2010. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Bonterra Properties failed to provide buyers of subdivision property with the required subdivision street disclosure statement.

JIMMY F. BUFF, JR. (Asheville) – By Consent, the Commission reprimanded Mr. Buff effective March 1, 2010. The Commission found that Mr. Buff, as listing agent for a property, represented its square footage at 2,520 square feet even though he was aware that the basement contained several unheated rooms and that the heated square footage was less than 2,000 square feet. The Commission also found that Mr. Buff included a provision in the listing agreement that the seller would provide heat to the basement rooms, but did not disclose the issue to the purchaser or follow up with the seller to make sure the rooms were provided with heat. The Commission noted that Mr. Buff cooperated fully with the Commission’s investigation and reached an agreement with the buyer to pay the buyer approximately $8,000 for the cost of installing heating to the unheated rooms.

DANIEL J. COLOMB (Little River, South Carolina) – The Commission accepted the voluntary surrender of the broker license of Mr. Colomb for a period of five years effective April 19, 2010. The Commission dismissed allegations that Mr.Colomb violated provisions of the Real Estate License Law and Commission rules. Mr. Colomb neither admitted nor denied misconduct.

CHRISTINE K. DAVIS (Raeford) – By Consent, the Commission revoked the broker license of Ms. Davis effective April 19, 2010. The Commission found that Ms. Davis, acting as qualifying broker and broker-in-charge of rental property management business, failed to account to management clients for rental proceeds collected on their behalf or to remit proceeds to them. The Commission also found that Ms. Davis paid certain proceeds to a client by check written from the firm’s trust account and that the check was returned by the bank. Finally, the Commission found that Ms. Davis failed to supply trust account and other records to the Commission upon request.

DAVIS FAMILY PROPERTIES, INC. (Raeford) – By Consent, the Commission revoked the firm license of Davis Family Properties effective April 19, 2010. The Commission found that Davis Family Properties, a rental property management business, failed to account to management clients for rental proceeds collected on their behalf or to remit proceeds to them. The Commission also found that Davis Family Properties paid certain proceeds to a client by check written from the firm’s trust account and that the check was returned by the bank. Finally, the Commission found that Davis Family Properties failed to supply trust account and other records to the Commission upon request.

DEBIEKNOWSHOMES REALTY (Charlotte) – By Consent, the Commission revoked the firm license of DebieKnowsHomes effective May 1, 2010. The Commission found that DebieKnowsHomes, acting as broker and rental agent for the owner of a rental property, received money from a tenant as a security deposit, but failed to maintain the money in a trust account and commingled the deposit money with personal funds. The Commission also found that DebieKnowsHomeswas unable to produce records of its management of the property for inspection by the Commission.

MARCO DELSALTO (Knightdale) – By Consent, the Commission reprimanded Mr. Delsalto effective March 1, 2010. The Commission found that Mr. Delsalto assisted another broker in his firm in acting as a buyer agent for a Spanish-speaking buyer and, although not a member of the MLS, received the lock box code for the property being purchased by the buyer. The Commission also found that Mr. Delsalto, despite the seller’s refusal when recordation of the deed for closing was delayed over a weekend, allowed painters to enter the property and begin work on it before the deed was recorded. Finally, the Commission found that Mr. Delsalto failed to respond to Letters of Inquiry from the Commission.

BRANDON S. FOLEY (Charlotte) – By Consent, the Commission permanently revoked the broker license of Mr. Foley effective January 1, 2010. The Commission found that Mr. Foley participated in a series of transactions in which he entered into agreements that would permit undisclosed payments to buyers outside closings and payments to unlicensed promoters for producing buyers for properties. The Commission noted that many of these transactions resulted in foreclosure.

RODNEY E. GEOHAGAN, JR. (Garner) – By Consent, the Commission suspended the broker license of Mr. Geohagan for a period of two years effective April 1, 2009. One year of the suspension was active with the remainder stayed for a probationary period of one year on certain conditions. The Commission found that Mr. Geohagan participated in a transaction in which the buyer did not have the $13,000 to close and Mr. Geohagan obtained a certified check from a bank and delivered the check to the closing attorney on behalf of the buyer, knowing that the closing statement would show the funds as having come from the borrower when in fact they did not. The Commission also found that Mr. Geohagan wrote the buyer a check for $800 for appliances that was not disclosed to the attorney or lender or shown on the closing statement.

FREEMONT LAMONT HANKERSON (Charlotte) – By Consent, the Commission suspended the broker license of Mr. Hankerson for a period of one year effective May 1, 2010. The Commission found that Mr. Hankerson consented to the voluntary surrender of his Loan Officer license with the North Carolina Commissioner of Banks as the result of Mr. Hankerson applying for a loan and failing to disclose to the lender on this loan application that he was a loan officer with the originating mortgage company. The Commission also found that Mr. Hankerson indicated on the loan application his total annual income from both his real estate and loan officer positions, but listed his only job as that of a real estate agent and overstated his income on the application. The Commission finally found that Mr. Hankerson failed to timely report the disciplinary action as required by Commission rule.

HBC BUILDERS (Oak Ridge) – By Consent, the Commission reprimanded HBC Builders effective July 1, 2010. The Commission found that HBC Builders, through its qualifying broker and broker-in-charge, served as listing agent for a property in 2006 which had a three-bedroom permitted septic system but was advertised as having four bedrooms on the MLS.

JACQUELINE KAYE HARRELL (Kill Devil Hills) – By Consent, the Commission suspended the broker license of Ms. Harrell and any right to reinstate it for a period of one year effective February 24, 2010. The Commission found that Ms. Harrell failed to timely report an October 2006 conviction for Driving While Impaired, Level 4. The Commission also found that Ms. Harrell was convicted in July 2007 of Driving While License Revoked and in March 2009 convicted of Driving While Impaired, Level 1 and failed to respond to Letters of Inquiry from the Commission concerning these matters.

LOUISE C. HEMPHILL (Weddington) – By Consent, the Commission suspended the broker license of Ms. Hemphill for a period of six months effective April 1, 2010. The Commission found that Ms. Hemphill and her husband, who was not licensed, undertook to act as brokers and listing agents for a residential building lot, and that Ms. Hemphill failed to memorialize the listing contract in written form and failed to give her seller clients the Working With Real Estate Agentsbrochure. The Commission also found that her husband, whose license was revoked in 1996, demanded and received a commission from the sellers.

GARY L. HOOKER (Raleigh) – By Consent, the Commission permanently revoked the broker license of Mr. Hooker effective January 1, 2010. The Commission found that Mr. Hooker, acting as broker-in-charge of a real estate brokerage firm, in several transactions failed to enter into written agency agreements with clients, reimbursed the buyers for their expenses in transactions by making payments to the buyers directly and outside the closing, and created and failed to maintain and retain records as required by the Real Estate License Law and Commission rules.

LISA R. HOOKER (Raleigh) – By Consent, the Commission permanently revoked the broker license of Ms. Hooker effective January 1, 2010. The Commission found that Ms. Hooker in several transactions failed to enter into written agency agreements with clients, reimbursed the buyers for their expenses in transactions by making payments to the buyers directly and outside the closing, and created and failed to maintain and retain records as required by the Real Estate License Law and Commission rules.

MICHELE DENISE HUGHES (Surf City) – By Consent, the Commission suspended the broker license of Ms. Hughes for a period of 90 days effective March 1, 2010. Thirty days of the suspension were active with the remainder stayed. The Commission found that Ms. Hughes, acting as a dual agent for purchasers of a residence, should have known that the North Carolina Turnpike Authority proposed to build a highway near the property, but did not know about the project and neglected to disclose it to the purchasers. Ms. Hughes neither admitted nor denied the Commission findings.

JACKIE L. JAMES (Hampstead) – By Consent, the Commission suspended the broker license of Ms. James for a period of 90 days effective March 1, 2010. The Commission then stayed the suspension for a probationary period of 12 months. The Commission found that Ms. James, acting as a dual agent for purchasers of a residence, should have known that the North Carolina Turnpike Authority proposed to build a highway near the property, but neglected to disclose it to the purchasers.

JAMES M. ALEXANDER REALTY, INC. (Charlotte) – By Consent, the Commission revoked the firm license of James T. Alexander Realty effective March 15, 2010. The Commission found that James T. Alexander Realty conducted property management services after the firm’s license became inactive and without a qualifying broker or broker-in-charge.  The Commission also found that James T. Alexander failed to remit approximately $154,000 in rental proceeds to his landlord-clients.

JENNIFER F. JONES (Elizabeth City) – By Consent, the Commission permanently revoked the broker license of Ms. Jones effective February 11, 2010. The Commission found that Ms. Jones, who provided brokerage and property management services, in 2008 failed to return a rental deposit after the prospective tenants determined that they could not move into a mobile home because of rodent infestation and in 2009 failed to remit a security deposit to her landlord-clients after several demands. The Commission also found that Mr. Jones failed to respond to several Commission Letters of Inquiry regarding these complaints.

SCOTT F. KELLY (Matthews) – By Consent, the Commission suspended the broker license of Mr. Kelly for a period of 180 days effective March 1, 2010. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Mr. Kelly and his firm, Bonterra Properties of Union, Inc., failed to provide buyers of subdivision property with the required street disclosure statement.

ALICE J. KOVACH (Stanley) – By Consent, the Commission suspended the broker license of Ms. Kovach for a period of one year effective March 1, 2010. The Commission then stayed the suspension for a probationary period of one year on certain conditions. The Commission found that Ms. Kovach, acting as broker-in-charge of a real estate brokerage firm, listed a property for sale and, although never licensed as an attorney, prepared a Declaration of Restrictions for the property and provided a document purporting to convey an easement to benefit an adjacent lot owner.

KOVACH REAL ESTATE, INC. (Stanley) – By Consent, the Commission suspended the firm license of Kovach Real Estate for a period of one year effective March 1, 2010. The Commission then stayed the suspension for a probationary period of one year on certain conditions. The Commission found that the broker-in-charge of Kovach Real Estate listed a property for sale and, although never licensed as an attorney, prepared a Declaration of Restrictions for the property and provided a document purporting to convey an easement to benefit an adjacent lot owner.

DEBRA DAVIS LAWTHERS (Charlotte) – By Consent, the Commission revoked the broker license of Ms. Lawthers effective May 1, 2010. The Commission found that Ms. Lawthers, acting as broker and rental agent for the owner of a rental property, received money from a tenant as a security deposit, but failed to maintain the money in a trust account and commingled the deposit money with personal funds. The Commission also found that Ms. Lawthers was unable to produce records of her management of the property for inspection by the Commission.

AUDRA H. LATTIMORE (Denver) – By Consent, the Commission suspended the broker license of Ms. Lattimore for a period of six months effective December 21, 2009. One month of the suspension was active with the remainder stayed for a probationary period of one year. The Commission found that Ms. Lattimore leased her personal residence and collected from her tenant a $5,600 security deposit, which she failed to deposit into a trust or escrow account. The Commission also found that Ms. Lattimore, after the termination of the tenancy, re-rented the property to a second tenant and collected a $4,400 security deposit, which she was unable to immediately refund in full at the termination of the tenancy. The Commission noted that Ms. Lattimore has fully repaid the deposit.

WELTON L. LOFTIN (Huntersville) – The Commission suspended the broker license of Mr. Loftin for a period of two years effective May 3, 2010. The Commission then stayed the suspension for a period of two years on certain conditions. The Commission found that Mr. Loftin, acting as a buyer’s agent, represented an individual in an Offer to Purchase and Contract as the owner of the subject property, when, in fact, Mr. Loftin knew the individual was not the owner. The Commission also found that Mr. Loftin presented an offer from a buyer to the sellers of a property and requested that the sellers sign documents showing the contract price to be $650,000 when the actual price paid to the sellers would be $535,000 with the remainder going back to the buyer through a shell company. The Commission finally found that Mr. Loftin purported to represent a seller without having a signed written agency agreement and no dual agency addendum, failed to provide the buyer and seller with a Working With Real Estate Agents brochure at the first substantial contact, and received a commission without having that commission provided for in a signed written agency agreement.

CARISA L. MAJESKY (Charlotte) – By Consent, the Commission revoked the broker license of Ms. Majesky effective April 1, 2010. The Commission found that Ms. Majesky, as broker-in-charge of a real estate brokerage firm, participated in three transactions in which she provided funds that were used as down payments for buyers without disclosure to the lenders in the transactions.

TAMMY ALLEN MANNING (Matthews) – By Consent, the Commission suspended the broker license of Ms. Manning for a period of 180 days effective March 1, 2010. The Commission then stayed the suspension for a probationary period of one year. The Commission found that Ms. Manning and her firm, Bonterra Properties of Union, Inc., failed to provide buyers of a subdivision property with the required street disclosure statement.

MIKE G. MONPETIT (Cary) – By Consent, the Commission reprimanded Mr. Monpetit effective May 1, 2010.  The Commission found that Mr. Monpetit listed a distressed property for $145,000 in November 2007 with listing on the MLS delayed at the seller’s request until January 11, 2008, received an inquiry on January 12 from a real estate agent who expressed interest in the property, and then, with his wife, also a licensee, entered into a contract to purchase the property for $110,000 without informing the seller of another potential offer.

SUSAN ANN MONPETIT (Cary) – By Consent, the Commission reprimanded Ms. Monpetit effective May 1, 2010.  The Commission found that Ms. Monpetit, whose license has been on inactive status since 2006 and who worked as an unlicensed assistant in her husband’s real estate brokerage firm, entered into a contract with her husband to purchase for $110,000 a property listed by her husband at $145,000 without informing the seller of another potential offer from a real estate agent who had earlier expressed interest in the property.

JESSE REECE ODOM (Huntersville) – By Consent, the Commission suspended the broker license of Mr. Odom for a period of one year effective March 1, 2010. The Commission found that Mr. Odom, licensed in 2002, failed to report a conviction in 2007 of Driving While Impaired, Level 1,which was his fifth conviction for impaired driving, the previous four having been disclosed on his original license application.

RALPHELE REELS (Durham) – By Consent, the Commission revoked the broker license of Mr. Reels effective March 1, 2010. The Commission found that Mr. Reels, who was also certified as a home inspector and real estate appraiser, reported in several transactions incorrect information on appraisals submitted to lenders to obtain financing for buyers. The Commission also found that Mr. Reels failed to report disciplinary action taken against him by other licensing boards to the Commission as required.

MAURICE CARLOS ROCHA (Jacksonville) – By Consent, the Commission reprimanded Mr. Rocha effective March 15, 2010. The Commission found that Mr. Rocha failed to disclose four convictions dating from the early 1990’s on his 2007 license application.

ROBERT WILSON SANGER (Wilmington) – By Consent, the Commission reprimanded Mr. Sanger effective March 15, 2010. The Commission found that Mr. Sanger was convicted of Driving While Impaired on February 13, 2007 and Driving While Impaired, Level Two on February 26, 2009 and failed to report either conviction until October 19, 2009, more than 60 days after final judgment.

DEANNA BUTLER SINGLETARY (Rockingham) – The Commission revoked the broker license of Ms. Singletary effective April 1, 2010. The Commission found that Ms. Singletary, broker-in-charge of a sole proprietorship, listed a foreclosure property, the sale of which would earn a selling agent a bonus of $1,800 plus full commission, and subsequently presented an offer to purchase to the seller from buyers whom she had represented in approximately five or six previous transactions, listing herself as seller sub-agent on the contract. The Commission also found that Ms. Singletary received a second substantially higher offer from another real estate broker three days after the first offer and failed to present the offer to the seller although the first offer had not yet been accepted.

SLOANE REALTY (Ocean Isle Beach) – By Consent, the Commission reprimanded Sloane Realty effective May 1, 2010. The Commission found that Sloane Realty reported that its unlicensed bookkeeper embezzled trust account funds totaling $53,973.28; that the firm did not always use designated trust accounts for property owner association funds and failed to implement a trust account record keeping journal in compliance with Commission rules, and that one account had an overage of $1,700. The Commission also found that the firm used a software program to manage accounts that would not produce a journal in compliance with Commission rules. The Commission further found that the firm managed vacation property rentals for which there was no adequate property ledger system; that vacation rental forms did not clearly disclose the use of an interest bearing trust account; that the firm charged fees and deposits not permitted by the Vacation Rental Act, and did not disclose fees earned for the sale of travel and peace of mind insurance. Pursuant to the order, the firm provided evidence that its trust accounts were now being maintained in accordance with Commission rule.

DEBBIE SMITH (Ocean Isle Beach) – By Consent, the Commission reprimanded Ms. Smith effective May 1, 2010. The Commission found that Ms. Smith, as broker-in-charge and qualifying broker of a licensed real estate firm, reported that her unlicensed bookkeeper embezzled trust account funds totaling $53,973.28; that the firm did not always use designated trust accounts for property owner association funds and failed to implement a trust account record keeping journal in compliance with Commission rules, and that one account had an overage of $1,700. The Commission also found that the firm used a software program to manage accounts that would not produce a journal in compliance with Commission rules. The Commission further found that the firm managed vacation property rentals for which there was no adequate property ledger system; that vacation rental forms did not clearly disclose the use of an interest bearing trust account; that the firm charged fees and deposits not permitted by the Vacation Rental Act, and did not disclose fees earned for the sale of travel and peace of mind insurance.

MARCUS S. SPENCER (Durham) – By Consent, the Commission suspended the broker license of Mr. Spencer for a period of two years effective January 13, 2010. Six months of the suspension are active with the remainder stayed until the end of the suspension period. The Commission found that Mr. Spencer reported to the Commission that on July 22, 2009, he had been convicted of Possession of More than ½ oz. but Less Than 1 ½ oz. of a Schedule VI Controlled Substance (Marijuana) and Possession of Drug Paraphernalia in Durham County. The Commission also found that Mr. Spencer was previously convicted of additional criminal offenses in 1993, 1996, and 1998 and failed to disclose the 1993 conviction on his application for licensure and failed to disclose the 1996 and 1998 convictions within 60 days of final judgment as required by Commission rules.

MARY MARTHA MCGUIRE SPENCER (Salisbury) – By Consent, the Commission suspended the broker license of Ms. Spencer for a period of six months effective February 11, 2010. The suspension was stayed for a probationary period of two years on certain conditions. The Commission found that Ms. Spencer, who disclosed four prior convictions on her 2006 license application, was convicted in 2008 of Impaired Driving Level Two and sentenced to 10 days in the custody of the county sheriff, 24 months supervised probation and payment of fines and fees totaling $871.

THE HOME GROUP, INC. (Belmont) – The Commission accepted the voluntary surrender of the firm license of The Home Group for a period of five years effective April 19, 2010. The Commission dismissed allegations that The Home Group violated provisions of the Real Estate License Law and Commission rules. The Home Group neither admitted nor denied misconduct.

TOWN & COUNTRY REALTY, INC. (Cary) – By Consent, the Commission reprimanded Town & Country Realty effective May 1, 2010.  The Commission found that Town & Country Realty listed a distressed property for $145,000 in November 2007 with listing on the MLS delayed at the seller’s request until January 11, 2008, received an inquiry on January 12 from a real estate agent who expressed interest in the property, and then, the firm’s broker-in-charge with his wife, also a licensee, entered into a contract to purchase the property for $110,000 without informing the seller of another potential offer.

UNITED REAL ESTATE AND INVESTMENT GROUP, INC.  (Raleigh) – By Consent, the Commission permanently revoked the firm license of United Real Estate and Investment Group effective January 1, 2010. The Commission found that United Real Estate and Investment Group in several transactions failed to enter into written agency agreements with clients, reimbursed the buyers for their down payments and costs in transactions by making payments to the buyers directly and outside the closing, and created and failed to maintain and retain records as required by the Real Estate License Law and Commission rules.

NICIE JENNIFER WALLS (Durham) – By Consent, the Commission reprimanded Ms. Walls effective April 1, 2010. The Commission found that Ms. Walls falsely represented to the Centralized Showing Service when requesting permission to show a property that she was in front of the property with prospective buyers when, in fact, she was at home. The Commission also found that that Ms. Walls provided prospective buyers with the lockbox combination to the property to enable them to enter without her being present, and when the buyers set off the security alarm she falsely represented to the Centralized Showing Service that she was at the property in order to obtain the security alarm code. The Commission further found that the sellers arrived home to find the prospective buyers there alone and that respondent paid to have the home re-keyed and paid a $500 fine to her local Board of REALTORS^®. Finally, the Commission found that Ms. Walls was conducting business under a name different from that on her license because she failed to notify the Commission of her name change.

BOBBIE L. WEAR (Oak Ridge) – By Consent, the Commission suspended the broker license of Ms. Wear for a period of one year effective July 1, 2010. The Commission then stayed the suspension for probationary period of one year. The Commission found that  in 2006 Ms. Wear, acting as qualifying broker and broker-in-charge of her licensed building/real estate firm, served as listing agent for a property in 2006 which she was aware had a three-bedroom permitted septic system but advertised the house has having four bedrooms on the MLS.

MICHAEL E. WOLLEN (Rock Hill, South Carolina) – By Consent, the Commission revoked the broker license of Mr. Wollen effective March 15, 2010. The Commission found that Mr. Wollen conducted property management services as president of a real estate brokerage firm after the firm’s license became inactive and without a qualifying broker or broker-in-charge and without affiliating with a licensed active firm or declaring himself broker-in-charge. The Commission also found that Mr. Wollen failed to remit approximately $154,000 in rental proceeds to his landlord-client.

GARY M. WOOD (Charlotte) – By Consent, the Commission permanently revoked the broker license of Mr. Wood effective February 11, 2010. The Commission found that Mr. Wood in 2007 participated in a fraudulent scheme in which he sold three homes to buyers in transactions in which he agreed to accept less for the homes than the purchase price stated in the contracts and closing statements. The Commission also found that the difference in price Mr. Wood agreed to accept and the contract price shown on the closing statements and contracts was disbursed to various companies owned by other participants in the scheme by entries on the closing statement that were false. The Commission further found that Mr. Wood pled guilty to one count of Mortgage Fraud Conspiracy in the U.S. District Court, Western District, Charlotte Division, and is currently awaiting sentencing.

This article came from the May 2010-Vol41-1 edition of the bulletin.

Public Hearing Set for Proposed Rule Changes

A public hearing for comments on proposed rule changes will be held at 9:00 a.m., February 10, 2010 in the Conference Room of the Commission’s office.

Following is a summary of proposed Commission rule changes which, if approved, would become effective July 1, 2010:

•  Require retention of trust account and transaction records for a period of five years instead of three as the current rules require.

• Add questions to the Residential Property Disclosure Form for home sellers to disclose whether their properties are located within one mile of the boundary of certain military facilities and to disclose noise, air traffic, vibrations, lights and other impacts from nearby military facilities.

• Allow postponement and completion of continuing education, Broker-in-Charge, and postlicensing courses, and the payment of license renewal fees for brokers and approved instructors who are members of the United States armed forces serving in combat or in presidentially-declared disaster areas.

•  Clarify when and under what circumstances students in the Broker-in-Charge Course and in all continuing education courses may be absent during the scheduled classroom hours and still receive continuing education credit for attending the course.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Executive Director Position

The North Carolina Real Estate Commission has employed Young and Associates to assist the Commission in the search for a new Executive Director. All interested persons should send a resume to leigh@youngandassociates.com. Any questions should be directed to David Young at 828.691.6555.

HUD Revises HUD-1 Settlement Statement, Introduces New “Good Faith Estimate” Form

HUD acts to provide real estate borrowers better information on loan/ closing costs to facilitate “loan shopping” and reduce loan/closing costs.

Under authority granted by the Real Estate Settlement Procedures Act (RESPA), the U.S. Department of Housing and Urban Development (HUD) has issued new rules effective January 1, 2010 designed to facilitate “shopping” for mortgage loans and reduce loan/closing costs for borrowers.  These goals are to be met primarily through the use of a new mandatory Good Faith Estimate “GFE” form that lenders must provide to potential borrowers and a revised HUD-1 Settlement Statement form that settlement agents (closing attorneys in North Carolina) must use at closing.

By eliminating certain abusive practices and providing better information to borrowers, HUD expects its reforms will save borrowers nationally between $6.48 and $8.38 billion annually in loan and settlement costs, or about $518 – $670 per loan.

RESPA’s Purpose and Scope

RESPA was enacted by Congress in 1974 to help protect consumers when borrowing funds and utilizing services to close most residential real estate transactions. The law and HUD’s implementing regulations (“Regulation X”) have for many years

•   Required lenders to give loan applicants a HUD-prescribed settlement costs information booklet and a “good faith estimate” (GFE) of closing costs within three business days following loan application.

• Required settlement agents to use a standardized HUD-1 Settlement Statement form.

•   Required the GFE and HUD-1 statement to disclose any fees paid by a lender to a mortgage broker in connection with a loan.

•   Required servicers of mortgage loans to disclose to loan applicants whether the servicing of their loan may be sold or assigned to another entity during the term of the loan.

• Established limits on the amounts that mortgage lenders (or servicers) may require a borrower to deposit into an escrow account for real estate taxes and insurance.

•   Prohibited lenders, appraisers, attorneys, inspectors, real estate agents and others from paying or receiving any fee, kickback or other “thing of value” to or from any person for referring business incidental to a real estate settlement service.

Problems with Mortgage Lending Practices and Good Faith Estimates

Comprehensive studies by HUD over several years found numerous problems with the mortgage lending practices of some lenders and the good faith estimates they provided to borrowers.  For example, some lenders would

•   Charge non-competitive fees to borrowers who often faced wide variations in closing costs for both loan origination and third-party settlement services.

•   Issue GFEs in a variety of formats that typically contained a long list of confusing individual charges and made it more difficult for consumers to shop for loans and control settlement charges.

• Include estimated closing costs on GFEs that were frequently unreliable or incomplete, with consumers often surprised to find at closing that actual charges were significantly higher than those shown on the GFE.

•   Require potential borrowers to pay a substantial loan application fee before they would issue them a GFE, a practice that discouraged borrowers from shopping around for the best loan rates and fees.

•   In order to increase profits for themselves and subsequent investors, pay fees (called “yield spread premiums”) to mortgage brokers for making loans at an interest rate higher than what borrowers were qualified for, and then pass the fee on to borrowers who were unaware they were being charged an above-market interest rate and excessive loan origination charges.

As a result of its findings, HUD determined that reforms were needed to provide prospective borrowers better information about loan costs to help them shop for the best loan, and to reduce their loan origination and closing costs. These reforms have been undertaken by changing RESPA regulations rather than amending the law. Real estate agents will encounter the most significant reforms in the new mandatory, standardized GFE form and the substantially revised HUD-1 form that lenders and settlement agents have been required to use since January 1.

New Standardized GFE Form and Procedures

Now, prior to issuing the GFE, lenders can charge potential borrowers no more than the cost of a credit report in connection with the loan application.  This is intended to reduce the amount borrowers must pay to receive a GFE and thereby encourage them to shop for the best loan.

Also, for the first time, HUD has mandated the use of a standard three-page GFE form that will hopefully be easier for borrowers to understand, promote lower loan origination and closing costs, and facilitate loan shopping. The new form includes a summary of all key loan terms, a comprehensive loan origination charge that includes all direct costs for obtaining the loan, and a presentation of other settlement charges in a clear standardized format. It also contains a “shopping chart” showing the terms of the proposed loan and providing spaces for borrowers to enter similar terms and costs of other loans if they use it to loan shop, as well as a “tradeoff table” (which lenders may choose not to complete) showing two additional options for a loan in the same amount – one with lower settlement costs and a higher interest rate and monthly payment, and one with a lower interest rate and a lower monthly payment but higher settlement costs.

Following are some new reforms in GFE procedures:

•   If a lender pays a “yield spread premium” to a mortgage broker for an above-market interest rate loan, the full amount of this fee must be credited on the GFE toward the borrower’s loan origination charge.

•   Between the time they issue a GFE and closing, lenders can only change  certain charges within strict limits, and these restrictions are clearly explained on the GFE. For example, quoted loan origination charges cannot increase at closing and quoted charges for services by providers selected by the lender (or by the borrower from the lender’s approved list of providers) cannot increase by more than 10% at closing, but quoted charges for services by borrower-selected providers not on the lenders’s approved list can change by any amount at closing.

•    To increase competition among lenders and service providers and lower third-party fees, lenders may now use average charges for many third-party settlement services and quote these charges on the GFE form.

Revised HUD-1 Form

The HUD-1 settlement statement form is now a three-page form organized to correlate closely to the GFE form. The first two pages are essentially the same as the old form in format and content but there are differences in how some entries are handled, such as fees for “title services” (closing attorney, title insurance, courier fees) and buyer closing costs being paid by the seller. To clarify how the HUD-1 line items correlate to GFE line items, many of the line items for settlement charges on page 2 of the HUD-1 form reference the corresponding line item on the GFE. [Note: As of this writing, some uncertainties remain as to how some charges will be recorded on the HUD-1 form in North Carolina closings, but it is expected that these questions will soon be resolved.]

The new third page of the HUD-1 form shows the loan terms stated in the GFE, and it compares the loan costs and settlement charges shown on the GFE with those on the HUD-1.  The charges that are not permitted to increase (such as the loan origination charge) cannot, of course, be higher on the HUD-1 than on the GFE (but may be lower).  Likewise, the total of the charges that can increase a maximum 10% cannot exceed that limit when compared to the total of such charges on the GFE; however, charges for a particular service may increase by more than 10%. Other charges permitted to change by any amount are also shown so that the borrower can readily identify the changes. An unpermitted increase in a charge (a “tolerance violation”) must be corrected or “cured” by the lender within thirty days. If not corrected prior to closing, the closing attorney must issue a corrected HUD-1 form after the lender cures the tolerance violation by reimbursing the buyer for the overcharge(s).  However, it is expected that lenders and closing attorneys will attempt to resolve any tolerance violations prior to the actual closing and issuance of the HUD-1 form.

Forms and Information

HUD has issued an updated settlement costs booklet titled Shopping for Your Home Loan that provides a comprehensive explanation of the GFE and HUD-1 forms and encourages borrowers to use GFEs from various lenders to shop for the best loan. The GFE form, HUD-1 form and settlement costs booklet, as well as the RESPA rules, form completion guidelines and questions relating to the forms, may be found on the “RESPA-Real Estate Settlement Procedures Act homepage”(www.hud.gov/respa) on the HUD website. You should also be able to acquire the new forms from local lenders and real estate attorneys.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Federal Agencies Gain Assistance From Commission in Fraud Cases

The Real Estate Commission has worked with various federal agencies to assist in the investigation of several mortgage fraud cases recently resolved in the federal criminal system.

On December 14, 2009, William Roosevelt Cloud was sentenced in a Charlotte federal court to 27 years of imprisonment. After a two-week trial, Cloud was convicted of conspiracy to commit mortgage fraud, three counts of mail fraud, 13 counts of bank fraud, one count of money laundering conspiracy, and six counts of money laundering, all related to his role in a large mortgage fraud scheme. Prior to his trial, 19 other participants in the scheme had already pled guilty, including Cloud’s wife.

Federal prosecutors in the Western District showed that Cloud and others purchased and immediately flipped homes in the Charlotte area after artificially inflating the values of the homes. They recruited buyers by promising them they could buy an investment home with no money down, offering to place tenants in the homes, and assuring the buyers that the homes would be resold within a short period for a profit, at which time the buyers would be repaid for participating. Instead, the houses did not sell and went into foreclosure, leaving the buyers with their credit ruined and the lenders with homes for which they had loaned more than the true value of the properties.

In another case, Mary Rose Wright was charged in November, 2009, in federal court in the Eastern District of North Carolina with conspiracy and wire fraud related to a separate mortgage fraud scheme.

Wright submitted an offer to purchase a Raleigh, North Carolina property for $1,650,000.00. She obtained a power of attorney giving her the authority to execute the purchase documents for the property on behalf of the buyer, who was also involved in the scheme.

Wright prepared a false verification of employment, false tax returns, and a false bank statement to assist the buyer in obtaining a loan in the transaction. She also submitted a loan application to the lender that contained false information. The lender made the loan and after closing Wright moved into the property. No mortgage payments were ever made, and the property went into foreclosure.

This article came from the January 2010-Vol40-3 edition of the bulletin.

Executive Director Phillip T. Fisher To Retire After 34 Years of Service

Phillip T. Fisher, Executive Director of the Real Estate Commission, will retire April 1 after 34 years of service, it was announced by Commission Chairman Marsha H. Jordan.

Fisher is the longest-serving administrator of the Commission since its creation as the North Carolina Real Estate Licensing Board in 1957.  Joining the Board in 1975 as Administrative Assistant to Secretary-Treasurer Blanton Little, he then succeeded Little upon his retirement in 1981.

In 1983, the Licensing Board was renamed the Real Estate “Commission” and his title changed to Executive Director. He prides himself on never having missed a Commission meeting in his nearly 29-year career as Secretary-Treasurer and Executive Director.

A Kannapolis native, Fisher graduated from the University of North Carolina at Chapel Hill in 1970.  While serving as a Sergeant in the US Army Reserves, he entered the real estate business as a broker and then vice-president of Fisher Real Estate of Kannapolis, also becoming one of the state’s first real estate instructors.

In his more than three decades with the Commission, he witnessed the expansion of the Commission from five to nine members and a four-fold growth in the number of real estate licensees from approximately 25,000 to nearly 100,000. The Commission also expanded from less than a dozen primarily clerical positions to fifty-four including professionals in law, education, financial auditing, and investigations.

Fisher led the Commission through a period of substantial change in the licensing and regulation of the real estate profession in North Carolina as the marketplace became increasingly more sophisticated and complicated.

To assist licensees in navigating the growing complexity of the business and to protect the interest of consumers, he developed the largest publications program of any real estate licensing regulatory organization in the United States and abroad.

To assist the Commission in shaping policy, he also planned, facilitated the discussions and prepared the reports for numerous advisory committees addressing such issues as agency disclosure, broker-in-charge responsibilities, community association management, incentive disclosure, interstate brokerage cooperation, specialty licensing and vacation rental management.

He was also instrumental in the formulation of the residential square footage guidelines and the formation of what is now The Appraisal Board.

Currently the senior member of the Association of Real Estate License Law Officials (ARELLO), he served as its President in 1991 when he was named by Governor Martin to The Order of the Long Leaf Pine. He is now considered the foremost authority on this awards program and composed in its honor a song, “The Long Leaf Pine”, which has been performed by the North Carolina Symphony.

The Commission congratulates Mr. Fisher on the completion of his long and distinguished service to real estate consumers, practitioners and the citizens of North Carolina and wishes him and his wife, Sandy, much happiness in his well-deserved retirement.

This article came from the January 2010-Vol40-3 edition of the bulletin.