ALERT: Minnesota Department of Commerce Enforcement Actions Regarding Affiliated Business Arrangements

Recently the Minnesota Department of Commerce has sent out a large number of enforcement letters to real estate agents regarding alleged RESPA and Minnesota law violations. What are the allegations and what should agents do if they receive such a letter?

While the alleged violations may vary depending on the facts of each case, the basic allegations are:

1. Accepting kickbacks, rebates or other things of value for the referral of a sham affiliated business arrangement;
2. By urging homeowners to purchase a title insurance policy, the agent is soliciting the sale of title insurance without being licensed as a title insurance agent;
3. Failing to act in the best interests of the client;
4. Failing to either completely or accurately disclose the agent's affiliated business arrangement with the joint venture.

The allegations arise out of the creation of a number of affiliated business arrangements by First American Title Insurance Company. Real estate agents acquired an ownership interest in one of the title companies set up by First American as an affiliated business arrangement as that term is used under RESPA. The Department of Commerce website indicates that First American Title Insurance Company of Santa Ana, California agreed to close down their affiliated businesses and pay a $500,000 civil penalty to the State of Minnesota. In entering into the Consent Order with the Department of Commerce, First American denied any liability or wrongdoing.

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Foreclosures, Short Sales and Taxes

From: National Association of REALTORS®

Part 1 of 2

Recent media reports have noted an anticipated wave of foreclosures on homeowners who are unable to make payments associated with some adjustable rate mortgage products. In addition, some markets have experienced more than one quarter of declining home prices. Those news reports have not mentioned the tax problem that sellers in short sales and foreclosures will face if lenders forgive (i.e., do not require payment) some or all of a mortgage debt at the time of disposition. We have begun to receive questions about this problem and are taking action to correct it.

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Cancellation of Mortgage Debt &nash; Q & A

From: National Association of REALTORS®

Part 2 of 2

Current Law: The cancellation of mortgage debt rules apply only to a limited number of taxpayers. The provision is best understood with an example.

Assume a family purchased their home for $100,000, with a mortgage of $95,000. Later, they need to sell the home, and find that the value of homes in their area has declined, and they can sell for only $89,000. At the time of the sale, the outstanding balance on mortgage might be, for example, $92,000. Thus, there will not be enough cash at settlement to repay the lender the full balance of the mortgage. In some limited circumstances, a lender might forgive the amount of the balance that exceeds the purchase price ($3,000 in this example).

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MN-RPAC Survey &nash; What Do You Think?

The Minnesota RPAC Trustees would like to invite you to take a brief survey about the Minnesota REALTORS® Political Action Committee. A portion of the survey is dedicated to determining why you participate or do not participate.

It is important that members who are concerned with MN-RPAC express those concerns so the appropriate adjustments/modifications can be made to the program.

It only takes about 5 minutes and is anonymous.

You can link to the survey at: http://www.mnrealtor.com/applications/RPAC/register.htm

Is Your Child or Grandchild Graduating High School This Spring?

The MNAR Foundation will be granting ten $1,000 scholarships to high school seniors planning to attend a college, university, technical or community college.

Education is an important element of an individual's future success, and the MNAR Foundation believes in assisting REALTOR® families in that critical first year. The winners are drawn on a lottery basis by region. There will be 2 recipients drawn from regions 7 & 8. Regions are broken out by local boards:

• Region 1: Grand Forks Board, Bemidji Board, Fargo-Moorhead Area Association, Lakes Country Association and Lake Region Association
• Region 2: Itasca County Board, Duluth Area Association, Range Board and Greater Lakes Association
• Region 3: West Central Association, Greater Alexandria Area Association and St. Cloud Area Association
• Region 4: Association of Southern Minnesota, Faribault Area Association and Southeast Minnesota Association
• Region 5: North Metro Association
• Region 6: Southern Twin Cities Association
• Region 7: St. Paul Area Association
• Region 8: Minneapolis Area Association and Commercial Association

To submit a student, please fill out the application. Applications must be received by April 4.

Update to the Contingency Addendum and Request for Removal of Contingency Forms

The Minnesota Association of REALTORS® Forms Committee has made a significant change in the MNAR Contingency Addendum. The Committee has decided to eliminate the buyer's option to provide "written proof of buyer's ability to consummate the transaction without the sale of buyer's property". As a result the only way to remove the contingency is by the buyer providing a valid Purchase Agreement contingent only upon financing and with a closing date no later than the closing date in the Purchase Agreement between the seller and buyer.

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Upcoming Education Opportunities

April 11th &nash; Seller Representative Specialist
(approved for 15 hours of CE)

April 19th &nash; Reducing Risk in a Challenging Market
(7.5 hours of CE approval PENDING)

April 25th &nash; Broker Management Conference
(7.75 hours of CE approval PENDING)

May 2nd &nash; Education Extravaganza, Maplewood
(approved for 7.5 hours of CE)