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.

Don’t Delay Your Postlicensing Education

Provisional brokers need to be more prompt than ever in taking their required postlicensing education. With the sharp decline in license applicants over the past two years, there are substantially fewer provisional brokers needing these courses than in the past. This means that the demand for the courses is much lower and sponsors are not only scheduling fewer course offerings but also are frequently having to cancel scheduled courses due to a lack of sufficient enrollment. Consequently, provisional brokers who wait to take a needed course until 90 days or less prior to their deadline are either having difficulty finding a course or having to travel farther to get a course. If you are a provisional broker, you should arrange to take the course you need at least six months ahead of your deadline. Remember that if you fail to take a required course by the end of the first or second year after licensure, your license will be made inactive, and if you don’t take all required courses by the end of the third year, your license will be canceled.

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

Dates to Remember

Commissionaires Turn 21

In 1989, Executive Director Fisher asked for volunteers among Real Estate Commission staff members to form a choral group to be named the “Commissionaires” to perform primarily during the holiday season at nursing homes and senior centers around Raleigh.

Fisher, who will retire April 1, recalls that in the beginning, when Commission staff was half its present size, choristers totaled hardly more than half a dozen. Today,  the number totals more than 20.

The group’s first director was Education/Examination Officer Anita R. Burt, who taught and directed choral music at Meredith College prior to joining the Commission. These duties are now under the baton of Miriam J. Baer, Legal Services Assistant Director and Legal Counsel.

The Commissionaires have brightened the holiday season for audiences in the past two years at the Veteran’s Administration Hospital in Durham, the historic State Capitol building, and the Mayview Convalescent Center in Raleigh. In 2007, they helped commemorate the Commission’s 50th Anniversary observance and in 2005 the dedication of the Commission office building.

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

Commission Creates Financial Fraud Unit

With the number of mortgage fraud investigations rapidly escalating, the Commission created a new Financial Fraud Unit to investigate these cases and to work with state and federal law enforcement agencies to bring appropriate cases for criminal prosecution.

Janet B. Thoren, the Commission’s Chief Deputy Legal Counsel and a Special Assistant United States Attorney, will supervise the unit. Michael Gray, the Commission’s former Chief Auditor/Investigator, has been designated as the Chief Financial Fraud Investigator.  As an investigator with the Commission for the past 14 years, Mr. Gray focused almost exclusively on mortgage fraud cases since 2000. In addition, the Commission has employed D. Scott Schiller in the position of Financial Fraud Investigator. Mr. Schiller, a former Special Agent with the Internal Revenue Service Criminal Investigation Division, has an extensive background in criminal investigation and mortgage fraud.

The Financial Fraud Unit is responsible for investigating mortgage fraud cases involving real estate licensees and working with federal and state agencies to promote the criminal prosecution of those involved in mortgage fraud.

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

Borrower Beware

Many borrowers fudge a little when applying for a loan. The truth is, any lying on a real estate loan application is mortgage fraud.

Speaking about mortgage fraud, U.S. Attorney General Eric Holder said “these crimes have devastated and driven away many who were once willing to invest in our economy. They’ve robbed people of their homes and their economic security. They’ve depleted bank accounts and pension funds. In some places, they’ve dried up philanthropic giving and shuttered charities. They’ve placed unfair challenges before cash-strapped governments, local police departments, small businesses, and American workers and consumers.”

Given the steep rise in foreclosures and bank failures from bad loans, and the resulting economic decline, licensees should know now that even “little white lies” constitute mortgage fraud.

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

Benjamin Cone, III, Elected Commission Vice Chairman

Benjamin Cone, III, of Charlotte has been elected Vice Chairman of the North Carolina Real Estate Commission, it was announced by Phillip T. Fisher, Executive Director.

A member of the Commission since 2007, Cone is Managing Director of Milestone Partners, LLC, in Charlotte.

He has held management positions in the textile and commercial furniture industries.

Cone is a graduate of the University of North Carolina with a Bachelor of Arts in Economics and North Carolina State University with a Bachelor of Science in Textile Management, Magna Cum Laude.

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

Bart T. Bryson

The Commission regrets the passing of Bart T. Bryson of Hendersonville, a member of the Commission from 1979 to 1985 and a former Chairman.

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

Pay Now Or Pay Later

By Emmet R. Wood, Director, Audits and Investigations

A year ago, we introduced an additional way of auditing Trust Accounts – the “Inspections by Letter” Program. Announced in the January 2009 Auditor’s Corner, the program supplemented our ongoing method of “spot” audits, conducted during unannounced, on-site visits.

To review briefly, our letters to brokers-in-charge requested specific types of records:

Once your records were received, a staff auditor examined them and, if any clarification was needed, contacted you. We then mailed a report explaining the compliance (or noncompliance) of your trust account records with the Commission’s rules and Trust Account Guidelines.

After working our way through all the mail it generated, we discovered some interesting things from the “Inspections by Letter” program:

• Merely attending our Basic Trust Account Course does not mean you’re going to get it right!

You have to apply the principles taught in the course. For example, the course teaches BICs that after reconciling the trust account bank statement to the trust account journal, a trial balance of the ledger cards should be prepared. BICs with the most serious violations had not prepared trial balances.

• Merely hiring a bookkeeper is not enough!

This is especially true – and too often the case – when the BIC was not requiring the bookkeeper to prepare a trial balance. If you do not fully understand this process, you may find it helpful to review the Basic Trust Account Course materials and to read the May 2008 Auditor’s Corner on “Examining Your Bookkeeper’s Trust Account Trial Balance”.

• Merely purchasing Commission compliant software and attending a class on how to use it does not guarantee compliance!

Although you buy the software and attend the vendor’s training class, when you return to the office you fail to record the trust account transactions correctly. To make matters worse, no effort is made to contact the computer software support personnel for assistance in using the software. In addition, because you don’t fully understand the software and you distrust the reports it issues, you may waste time maintaining books as you did before acquiring the software – thus developing redundant sets of books.

• Merely do it right the first time!

Generally, if trust account bookkeeping is not done properly and the brokerage firm’s trust account records are audited by the Commission, it will be necessary for the BIC to correct the situation by paying an outside accounting consultant to reconstruct the records. This is usually more expensive than hiring the right bookkeeper from the beginning, plus the BIC could face the embarrassment of disciplinary action. So, you could pay now or pay later.

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