The following article is copyrighted by and reprinted with the permission of the Association of Real Estate License Law Officials (ARELLO®).
The U.S. Federal Housing Administration (FHA) has announced that, for the first time since 2010, it will not extend its waiver of the “anti-flipping rule”; which means that, effective December 31, 2014, federal regulations will prohibit the use of FHA-insured financing to purchase single family properties that are resold within 90 days of their previous acquisition.
The FHA defines “property flipping” as the practice in which recently acquired properties are resold for a considerable profit at an artificially inflated price, often as the result of a lender’s collusion with an appraiser [or other transaction participants, such as mortgage originators and real estate licensees.]
According to the FHA, most property flipping occurs within a matter of days after acquisition, and usually with only minor cosmetic improvements, if any, to the property.
In an effort to preclude the practice with respect to FHA-insured mortgages, HUD issued a final rule in May 2003 [24 CFR 203.37a] that prohibits the issuance of FHA insurance if the contract of purchase and sale for the property securing the mortgage is executed within 90 days of the prior acquisition by the seller.
Under the rule, re-sales occurring between 91 and 180 days and between 91 days and one year, from acquisition may be eligible for FHA insurance, subject to special valuation documentation requirements. Exemptions from the resale restrictions apply to HUD and other federal agency sales of real estate-owned (REO) properties, sales by approved nonprofit organizations, sales by state- and federally-chartered financial institutions and government-sponsored enterprises (GSEs), and sales of properties in designated federal disaster areas.
In 2010, the FHA waived the 90-day anti-flipping rule in order to encourage investors to renovate foreclosed and abandoned homes, help stabilize real estate prices and support communities with high foreclosure activity.
To qualify for the waiver, transactions had to be “arm’s length” (as defined by the waiver rules) and if the sale price was more than 20 percent above the seller’s acquisition cost, the lender was required to take specific steps to document and justify the increase.
FHA’s waiver of the 90-day rule has been periodically extended through 2014, with strong support from industry groups such as the National Association of REALTORS®.
However, the Office of the Inspector General for the U.S. Department of Housing and Urban development (OIG-HUD) recently issued a report raising concerns about HUD’s oversight of lender compliance with the waiver requirements The OIG report estimated that the situation presented significant risk to the FHA Mutual Mortgage Insurance Fund (MMIF), which supports the insurance program. The OIG recommended that HUD either strengthen tis oversight controls or discontinue the waiver at the end of 2014. FHA apparently has made its choice, announcing in early December that it will not extend the waiver beyond December 31, 2014.
In a November news release, RealtyTrac®, “the nation’s leading source for comprehensive housing data”, released its “Q3 2014 U.S. Home Flipping Report” showing that 26,947 U.S. single family homes were “flipped” (purchases followed by re-sales within 12 months) nationwide in the third quarter of 2014.
The statistic represents 4.0 percent of all U.S. single family home sales and is down from 4.6 percent in the second quarter of 2014 and 5.6 percent in the third quarter of 2013; the lowest level since the second quarter of 2009.
This article came from the October 2015-Vol46-2 edition of the bulletin.
The Commission’s Video Library has added six new videos covering:
Real Estate Safety – common sense safety guidelines for brokers to follow
Trust Account Reconciliation – how to reconcile trust account records to comply with Commission rules
Broker-in-Charge Statement of Eligibility – how to maintain your broker-in-charge eligibility
Complaints – how to file a complaint
AMP Licensing Examinations for Brokers – everything you need to know about testing for a broker license
Continuing Education Requirements – CE requirements in order to maintain a broker license
This article came from the October 2015-Vol46-2 edition of the bulletin.
The North Carolina Real Estate Commission monitors applicant performance on the license examination and regularly reports this information to schools and instructors. In particular, the Commission uses information about the performance of applicants who are taking the licensing examination for the first time in order to assure that quality instruction is being provided in prelicensing courses by schools and instructors. The most recent performance record for each school can be found on the Commission’s website at http://www.ncrec.gov/Pdfs/Schools/LicExamPerfRep.pdf.
The overall examination performance (passing rate) for all first-time candidates taking the comprehensive real estate examination for the license year July 1, 2014 – June 30, 2015 was 60%. The Commission congratulates each of the following schools and instructors for achieving an outstanding examination performance record of 80% or higher during the most recent annual reporting period. The Commission recognizes that to have students perform at such a level on the license examination requires a combination of high quality instruction and high course completion standards.
School
Agent’s Choice School of Real Estate, Charlotte Central Carolina Community College, Sanford Sandhills Community College, Pinehurst Pitt Community College, Greenville American Properties Real Estate School, Jacksonville.
Instructor
Travis Everette Stephen Lawson Jack Marinello Andrew McPherson Arthur Poling Tiffany Stiles Erica Thomas Kathy Woodell Melea Lemon Parker Dunahay Oscar Agurs James Weese Jan Secor Christopher Barnett Judith Elliott Roy Faron Scott Greeson Allan Nanney, Jr. Pamela Trafton Pamela Vesper
This article came from the October 2015-Vol46-2 edition of the bulletin.
Miriam J. Baer, Executive Director of the Real Estate Commission, has been elected as President-Elect of the Association of Real Estate License Law Officials (ARELLO)®.
This article came from the October 2015-Vol46-2 edition of the bulletin.
Cindy S. Chandler, Chairman of the Real Estate Commission, has been named 2015 REALTOR® of the Year by the North Carolina Association of REALTORS®.
This article came from the October 2015-Vol46-2 edition of the bulletin.
By Glenn M. Wylie, Consumer Protection Officer
Summarized from 2015-16 GenUP/BICUP materials)
Major changes are coming October 3, 2015 to the disclosure and settlement forms used in most residential loan transactions. The former Good Faith Estimate will be replaced by the Loan Estimate and two Closing Disclosure forms, one for the buyer and one for the seller, will replace the HUD-1 settlement statement. The timing of the delivery of these forms/disclosures will also be strictly defined and mandated. While a broker’s responsibilities regarding these matters will not change, it is important that residential brokers are informed regarding these new forms and requirements.
The new TILA-RESPA integrated disclosure rules (TRID rules) were required by the Dodd-Frank Act to eliminate duplicate forms lenders were required to provide under TILA and RESPA. The new integrated disclosure forms, the Loan Estimate and the Closing Disclosures, must be used by lenders in transactions involving federally related mortgage loans governed by RESPA as well as loans for personal, family, or household purposes subject to the Truth in Lending Act (TILA). What triggers the new rules is receipt of a loan application on or after October 3, 2015 for a loan made by an institutional lender and/or to be sold in the secondary market that will be secured by a lien against real property owned by the borrower. Essentially, the new rules will affect most residential transactions involving a mortgage.
Beginning October 3rd, lenders must provide a Loan Estimate (or denial) to prospective borrowers within three (3) business days of loan application so long as the borrower has provided the lender the following information: 1) legal name, 2) statement of gross income, 3) Social Security Number, 4) property address, 5) estimate of property value, and 6) amount of mortgage loan requested. The lender may request other information, but may not require documentary support of the information prior to issuing a Loan Estimate.
Of greater importance to brokers are the new Closing Disclosures, one for the borrower/buyer and the other for the seller. The Closing Disclosure is a statement of final loan terms and closing costs.
TRID rules permit a settlement agent to provide the seller with a separate Closing Disclosure or with a copy of the Buyer/Borrowers’ Closing Disclosure as long as it contains all of the seller’s transaction information. If the settlement agent provides the seller with a separate Disclosure, then the settlement agent must also provide a copy of the Seller Closing Disclosure to the borrowers’ lender, but not to the borrower. While the buyer will not necessarily see the Sellers’ Closing Disclosure, the buyer will have a summary of the sellers’ side of the transaction on page 3 of the buyer’s Closing Disclosure, as with the current HUD-1.
A broker’s obligations concerning the accuracy of settlement statements have not substantially changed with the new forms; however, the information will be found in different locations. The Commission is aware that in some cases, brokers may not have access to the form for the other side of the transaction.
The change that may have the most significant impact is the requirement that the lender must ensure that the borrower receives the completed Borrower Closing Disclosure three (3) business days prior to consummation (defined as the point at which the borrower becomes obligated to the loan). If the Closing Disclosure is delivered to the borrower by any method other than personally, the lender generally must add three more business days for delivery, meaning that it must be sent not later than six business days prior to settlement. For Closing Disclosure purposes, “business day” includes Saturdays, excluding only Sundays and ten federal public holidays. If it is mailed or delivered electronically, the borrower is considered to have received the Closing Disclosure three business days after it is delivered or placed in the mail. However, if the lender has evidence that the borrower received the Closing Disclosure earlier than three business days after it is mailed or delivered, it may rely on that evidence and consider it to be received on that date. For example, if the borrower has consented to receive the Disclosure by email and then acknowledges receipt of the Disclosure by email, the three-day clock starts from the date the borrower acknowledged receipt.
THE 3/6-DAY TIMELINE FOR ADVANCE DELIVERY OF THE BORROWER’S CLOSING DISCLOSURE IS MANDATORY AND GENERALLY CANNOT BE WAIVED. While it is the lender’s responsibility to comply with these requirements, brokers must educate their clients and customers about these timelines. Other important facts to know:
1) The 3/6-day advance delivery applies only to the Borrower’s Closing Disclosure. There is no rule requiring advance delivery of the Seller’s Closing Disclosure. Delivery must be to the borrowers personally, not to a broker acting as a buyer agent.
2) The lender, not the settlement agent, will decide whether to issue one or two separate Closing Disclosures and any other settlement statements. If the lender decides to issue two separate Closing Disclosures, a broker acting as a dual agent should only give each party that party’s Disclosure.
3) Only three changes will require a new borrower Closing Disclosure and a new three-day waiting period:
An increase in the APR,
A change in the loan product, or
The addition of a prepayment penalty.
For any other changes, the lender must still provide a corrected Closing Disclosure with the terms or costs that have changed and ensure that the consumer receives it. However, no additional three-business-day waiting period is required.
While this article has covered the important highlights of the new TRID rules, it is only a cursory treatment of the topic. TRID is a primary focus of the 2015-16 Update Course, both General and BICUP. Brokers involved in residential sales transactions are strongly urged to take the applicable Update Course as soon as possible to be informed and prepared for these significant changes in the residential mortgage loan process.
This article came from the October 2015-Vol46-2 edition of the bulletin.
Raymond A. “Buddy” Bass, Jr., of Fayetteville, Chairman of the Commission in 1995 and 2006, and a member from 1993 to 2007.
Larry A. Outlaw, Commission Director of Education and Licensing, from 1979 to 2014.
This article came from the October 2015-Vol46-2 edition of the bulletin.
Governor Pat McCrory has reappointed Robert J. “Bob” Ramseur of Raleigh as a public member of the Commission for a three-year term beginning August 1, 2015.
This article came from the October 2015-Vol46-2 edition of the bulletin.
The 2016 Spring Educators Conference will be held at the Embassy Suites, Raleigh-Durham/ResearchTriangle (exit 287 at Harrison Oaks Blvd.), February 15-16, 2016. Information about online registration is to be available on the Commission’s website.
Commission-approved real estate instructors, school directors, and continuing education sponsors are encouraged to reserve these dates and plan to attend!
This article came from the October 2015-Vol46-2 edition of the bulletin.
Cindy S. Chandler of Charlotte has been elected Chair and George Bell of Winston-Salem, Vice Chair, of the North Carolina Real Estate Commission for the term beginning August 1, 2015, it was announced by Miriam J. Baer, Executive Director.
Chandler, owner of The Chandler Group, a commercial real estate consulting and training firm, has been in real estate for more than 30 years in the areas of investment real estate, syndication, strategic planning, management, marketing and education.
She is a 2011 recipient of the Billie J. Mercer Excellence in Education Award of the Real Estate Commission and is the author of The Insider’s Guide to Commercial Real Estate, published by Dearborn/Kaplan Publishing.
A past regional vice president of the National Association of REALTORS®, Chandler was also Chair of the Mecklenburg County Zoning Board of Adjustment and Charlotte Chapter President of Commercial Real Estate Women (CREW).
Chandler is a past president of the North Carolina Association of REALTORS® and the North Carolina Real Estate Educators Association and a past Vice Chair of the Charlotte-Mecklenburg Planning Commission.
Bell is president of George Bell Productions, Ltd., a real estate education firm serving real estate brokers across North Carolina, and Qualifying Broker and Broker-In-Charge of the Bell First Group, a real estate brokerage firm. He is also a consultant to North Carolina real estate brokerage and law firms.
Bell entered the real estate business in 1978, following graduation from East Carolina University with a BS in Business Administration, with concentrations in real estate and banking.
Bell was the 2010 president of the Winston-Salem Regional Association of REALTORS® and its 2009 REALTOR® of the Year and was inducted into the North Carolina Association of REALTORS® Hall of Fame in 2014.
In 2012, he received the Billie J. Mercer Excellence in Education Award from the North Carolina Real Estate Commission and the Educator of the Year Award from the North Carolina Real Estate Educators Association (NCREEA). He is a past president of both the state and international Real Estate Educator Associations.
This article came from the October 2015-Vol46-2 edition of the bulletin.