Educators & Regulators Meet In Austin Discussing New Regulations And Market Conditions.

August 24, several educators and regulators from Texas and surrounding states met at the OMNI Hotel. What is unique about these meetings is that the information comes from some of the most knowledgeable sources in real estate.

Here are just some of the tidbits from the meeting.

There has been a drop in the number of agents who renew after their first year.

September 2005 - June 2006 73.3% renewed their license.
September 2006 - June 2007 68.7% renewed their license.

Two possible reasons were discussed.

1. The increase to the 60 core hour renewal requirement. This might dissuade those who are leaving the business from keeping their license in either active or inactive status.

2. If new agents were not given a reasonable expectation of what the job requires. I've seen several ads that give new agents misleading impression of earning potential. One ad is "Earn $150,000 a year in real estate". Another was an education provider advertising that getting a license and taking their class can make you rich. Many agents enter this profession with images of an easy path to wealth and prosperity.

However there is a positive trend. The renewal rate for the second years is around 75%.

Mortgage Fraud

We all know this is going on but you may not know to what extent. It is reported that real estate is responsible for 23% of America's GNP. The Federal Government and State Governments are taking this very seriously. In all major cities there are FBI agents dedicated to mortgage fraud. Starting very soon there will be a new Government Task Force dedicated to finding mortgage fraud. Looks like the statute of limitations on mortgage fraud will be increased to 10 years.

One new requirement falls on the borrower.

************************

NOTICE OF PENALTIES FOR MAKING FALSE OR MISLEADING STATEMENT

Effective September 1, 2007 and pursuant to Section 1. Subchapter B, Chapter 343, Section 343.105 of the Texas Finance Code, each mortgage lender, mortgage banker or licensed mortgage broker/loan officer shall provide to each applicant for a home loan this written notice at closing for full verification and execution by each loan applicant.

WARNING:
Intentionally or knowingly making a materially false or misleading statement to obtain property or credit, including a mortgage loan, is a violation of Section 32.32, of the Texas Penal Code, and, depending on the amount of the loan or value of the property, is punishable by imprisonment for a term of 2 years to 99 years and a fine not to exceed $10,000.

If a person determines or reasonably suspects that fraudulent activity has been committed or is about to be committed, the law requires that person to report the information to an authorized governmental agency.

Texas Department of Savings and Mortgage Lending
2601 North Lamar Blvd., Ste. 201
Austin, Texas 78705
Toll Free Consumer Hotline: (877) 276-5550
Main Number: (512) 475-1350
Email: smlinfo@sml.state.tx.us Website: http://www.sml.state.tx.us/

I/we, the undersigned home loan applicant(s), represent that I/we have received, read, and understand this notice of penalties for making a materially false or misleading written statement to obtain a home loan.

I/we represent that all statements and representations contained in my/our written home loan application, including statements or representations regarding my/our identity, employment, annual income, and intent to occupy the residential real property secured by the home loan, are true and correct as of the date of loan closing.

_____________________________________ ____________
Applicant .......................................................................... Date
_____________________________________ ____________
Co-Applicant(s) ............................................................... Date
Fraudulent activity has been defined as any act that constitutes a violation of a penal law and is part of an attempt or scheme to defraud any person. If a person determines or reasonably suspects that fraudulent activity has been committed or is about to be committed, the person shall report the information to an authorized governmental agency, namely:

The Texas Attorney General,

A local or state law enforcement agency of this state or a federal law enforcement agency, or

A U.S. Prosecuting attorney or prosecuting attorney of a county or judicial district of this state, or one or more of the following agencies:

The Texas Department of Savings and Mortgage Lending (TDSML),

The Texas Department of Public Safety (DPS),

The Texas Department of Insurance (TDI),

The Office of Consumer Credit Commissioner (OCCC),

The Texas Real Estate Commission (TREC),

The Texas Credit Union Department (TCUD),

The Texas Department of Banking (DOB), or

The Texas Appraiser Licensing and Certification Board (TALCB).Effective September 1, 2007 and pursuant to Section 1. Subchapter B, Chapter 343, Section 343.105 of the Texas Finance Code, each mortgage lender, mortgage banker or licensed mortgage broker/loan officer shall provide to each applicant for a home loan this written notice at closing for full verification and execution by each loan applicant.

***********************

This is intended for people doing stated income loans who state an income to get the loan not what they actually earn. Can you see how that last paragraph will apply to agents? So if the agent knows the borrower is not telling the truth the agent is required to "RAT OUT" the borrower. To answer the question "HOW WILL THEY EVER FIND OUT?". Simple it will be in the secondary market review or if the loan goes into default. You can check out more changes at:

http://www.sml.state.tx.us/Website%20Proposal%20for%2080th%20Legislature%20Activity.htm

There is also a provision similar to the drug laws. We all know if the drug dealer gets caught the governments will seize their assets. Well looks like the same rules will apply regarding mortgage fraud.

One twist on identity theft is a rash of identity theft of appraisers. This is where flippers get the identity of a certified appraiser to create bogus appraisals to inflate the values.

Short Sales

Remember when a lender forgives a portion of the loan to do a Short Sale don't be surprised when that 1099 shows up as taxable income for the portion the bank forgave.

This was the most surprising of all.

TREC has between 140,000 and 150,000 licensees that they regulate. In fiscal year 2006 there were 5,391 complaints. Of those 2,020 were from the public. The rest were administrative complaints for things like not completing MCE, hot checks paid to the TREC etc. Of those 2,020 complaints from outside TREC only 12.1% were ruled that a valid violation of TREC rules or laws was committed. Run those numbers real fast and it looks like overall Texas has a majority of licensees following the rules. However there were several complaints that did not violate the law but were filed because the consumer felt the agent did not meet their expectations. A 1998 study published in the REEA Journal supported by a similar study out of Ohio establishes the contention that States with stringent pre-licensing education requirements have fewer consumer complaints filed with the licensing agency.

Not the happiest news but information you need to know in your real estate practice.

********************************

SCEG speakers included:

Dr. Wayne Thorburn, Jerry Rutledge, Chuck Jacobus, John Stovall, Joe McClary, Carmel Streater and Connie Miller.

All information is deemed to be correct but is not guaranteed. Posts are for eduction purposes only and are not intended to replace professional advice.

Is The Sky Falling?

It seems that every time I turn on the news there is bad news about real estate. However, there should be an * about Texas. As of now Texas and Central Texas in particular seems to be bucking the bad news trend. Yes there is a change in the market but not on the level reported on the national news.

Even if there is a down turn locally I doubt it will be anything like the 1980's. Let's take a trip down memory lane and look at what was going on in Austin, Texas in the mid to late 1980's.

• Interest rates went as high as 20% plus.
• Foreclosures were in the thousands each month on a regular basis.
• Armed Federal Marshals were doing SWAT like raids on Saving and Loan offices.
• Financial Institutions executive officers were being taken out of their offices in handcuffs.
• Lenders could not lock in interest rates because by the time the borrower signed the loan application and the lender dialed the number to lock the rate, the interest rates had already jumped.
• If you took a listing for less than a year it was too short.
• HUD was selling homes for $10,000 with a 30 year loan and a 3% down payment.
• Entire streets of duplexes were being sold in a block.
• Investment property was being sold where the lender would count anticipated rents towards qualifying for the loan.

It was real estate Armageddon.

So when you hear the news put it in perspective. Also ask yourself this question. If the real estate market changed today what do I need to do so I can take advantage of the change?

A good agent knows they need to plan for future changes in the market.

All information is deemed to be correct but is not guaranteed. Posts are for eduction purposes only and are not intended to replace professional advice.

New Laws Starting September 1, 2007

At the last Texas Real Estate Commission meeting Monday 8/6/07 several TREC rules were passed to comply with the new statute.

Here are some of the changes effective September 1, 2007.If you take an online MCE course you cannot complete the course in less than 24 hours. So if you wait until the last day of your renewal and you only need 1 more hour of MCE you will not be able to get credit for 24 hours after you have started the ONLINE course. It is my understanding that this 24-hour rule only applies to ONLINE classes not classroom or correspondence MCE courses.

TREC took action to replace the Real Estate Inspectors Committee with a new advisory group established in the statute. There were several discussions on the new requirement for Inspectors to carry E&O coverage. Some inspectors asked for guidance on what the E&O needed to cover.

In the past TREC could not order a licensee to issue a refund. As of September 1, 2007 that will change.

If you have a complaint filed against you and hearing is held it will no longer be with a TREC administrative hearings officer. Cases will now be assigned the State Office of Administrative Hearings.

If you do a late renewal be prepared to pay higher fees. The late fees depends on how long you have let your license go inactive.

Some of these rules were passed on an emergency measure. This will allow TREC to have rules in place 9/1/07 but also allow them to create more permanent rules later.

Some of the new laws do not become effective until January 1, 2008.

If you apply for a broker's license on or after 1/1/08 you will need 30 CORE hours in a Real Estate Brokerage courses. This course will have a TREC number in the 700's. Such as our Real Estate Brokerage 0712 course. The total number of hours did not increase. This Brokerage course will be part of the required 270 CORE hours.

Fingerprinting and more extensive criminal background checks will be required for new applicants and current licensee renewals.

TREC also took action to approve a new TREC Seller's Disclosure. This is NOT a mandatory Promulgated TREC form. It can be used by any agent or seller who may not have access to a TAR or local board's Seller Disclosure form.

All information is deemed to be correct but is not guaranteed. Posts are for eduction purposes only and are not intended to replace professional advice.