Title 18 USC; § 1014
Whoever knowingly makes any false statement or [appraisal] report, or willfully over-values any land, property or security for the purpose of influencing in any way the actions of [ any financial institution, partial list below ] in connection with a mortgage loan shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
This law has been used against many real estate appraisers in Federal and State criminal cases. The point here is simple, appraisers must do their job correctly or face 30 years in prison. If you want to see a list of some of the appraisers that have been indicted and are now in prison, view our "List of Indictments" or "Appraisal Fraud" pages.
Complete text of the law noted below
Whoever knowingly makes any false statement or report, or willfully over-values any land, property or security, for the purpose of influencing in any way the action of:
shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
Phew..... they didn’t miss anything here... and if they did, a lender is likely listed somewhere else in the law.
[Codified to 18 U.S.C. 1014]
[Source: Section 1[1014] of the Act of June 25, 1948 (Pub. L. No. 772; 62 Stat. 752), effective September 1, 1948, as amended by section 21 of the Act of May 24, 1949 (Pub. L. No. 72; 63 Stat. 92), effective May 24, 1949; section 109 of title I of the Act of July 26, 1956 (Pub. L. No. 809; 70 Stat. 667), effective January 1, 1957; section 705 of title VII of the Act of August 21, 1958 (Pub. L. No. 85--699; 72 Stat. 699), effective August 21, 1958; section 104(h) of title I of the Act of August 18, 1959 (Pub. L. No. 86--168; 73 Stat. 387), effective December 31, 1959; section 3(t) of the Act. of October 4, 1961 (Pub. L. No. 87--353; 75 Stat. 774), effective October 4, 1961; section 5 of the Act of July 2, 1964 (Pub. L. No. 88--353; 78 Stat. 269), effective July 2, 1964; section 7 of the Act of October 19, 1970 (Pub. L. No. 91--468; 84 Stat. 1017), effective October 19, 1970; section 915 of title IX of the Act of December 31, 1970 (Pub. L. No. 91--609; 84 Stat. 1815), effective December 31, 1970; section 4(b) of the Act of October 12, 1982 (Pub. L. No. 97--297; 96 Stat. 1318), effective October 12, 1982; section 961(h) and 962(a)(8)(B) of title IX of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat. 500 and 502, respectively) effective August 9, 1989; and section 2303(e) of title XXIII of the Act of November 28, 1990 (Pub. L. No. 101--624; 104 Stat. 3981), effective November 28, 1990; section 1603 of title XVI and sections 2504(g), 2595(a)(5), and 2597 of title XXV of the Act of November 29, 1990 (Pub. L. No. 101--647; 104 Stat. 4861, 4907, and 4910, respectively), effective November 29, 1990; sections 330002(d), and 330008(8) of title XXXIII of the Act of September 13, 1994 (Pub. L. No. 103--322; 108 Stat. 2140, and 2143, respectively), effective September 13, 1994; sections 602(b) and 607(d), of title VI of the Act of October 11, 1996 (Pub. L. No. 104--294, 110 Stat. 3503 and 3511), effective October 11, 1996]
Information supplied by US Attorneys in the, Western District of Washington and Western District of Oregon and former HUD investigator
]]>The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
(1) buyer and seller are typically motivated;
(2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest;
(3) a reasonable time is allowed for exposure in the open market;
(4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and
(5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.
Note item #5, "the price [stated by the appraiser is] unaffected by special or creative financing or concessions."
The market value conclusion must include an appropriate discount for any concessions or contributions. An appraiser failing to state the value of a subject property according to this definition is a violation of appraisal rules (USPAP), state and federal laws and likely produces a fraudulent (criminal) appraisal report.
(provided to us by Richard Hagar SRA)
]]>DataTrac: Link
DataQuick: Link
Case Shiller data nicely presented by the NY Times: LInk
CoreLogic: Link
National Association of Home Builders: Link
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Submitted by Lisa Marsh, Director of Unemployment Insurance Tax & Wage Operations, Employment Security Department
It is often difficult to determine whether a worker is an employee or an independent contractor. The Employment Security Department applies an easy test that applies to all businesses. A person is an independent contractor if he or she passes one of the following tests.
Test one
You are an independent contractor if all three of the following criteria are true:
Test two
If you fail the first test, then you must meet all six of the following criteria to be considered an independent contractor.
If you are unsure whether you or your workers qualify as independent contractors, contact your nearest Employment Security Department tax office. Locations are posted online at www.dto.go2ui.com.
Update October 2007:
News from the Business Journal regarding Employment Security Department and employee vs. independent contractor. More than 1,600 loan originators have to be reclassified from I.C. to Employee. The state of Washington has issued more than $382,000 in fines, so far, this year. This news story is very informative. Link to news: Here
Tip #1:
By Washington and Oregon State law, the loan originator is licensed under a "Mortgage Broker" and is under their direct supervision. In other words the Broker is responsible for the actions of the loan originator. Now....... reread items #1 & 2
Tip #2:
Taxes and the definition of employee is set by the federal government. So someone saying State X says this or that, is nice but the IRS is the entity that makes the final ruling. So just consider yourself an employee and then make the appropriate decisions.
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Download a PDF version of the OIG report: Here
Update 11-2007
States of Washington, Oregon, Arizona and others have the same opinion of "Net Branching." For more details on the illegal practice follow this link: Here
In an effort to protect consumers and crack down on mortgage brokers, lenders, and other entities involved in arranging mortgage loans, multiple lawsuits have been filed against ten companies for undue influence on an appraiser.
The complaints state that these companies have committed unconscionable acts or practices in violation of the Consumer Sales Practices Act by knowingly compensating, instructing, inducing, coercing, or intimidating appraisers for the purpose of improperly influencing the independent process.
Attorney General Dann said, “I won’t allow this unethical exertion of power over appraisers who face this choice of doing the right thing or losing business entirely to continue.”
Appraisal inflation occurs when the appraisal value of a home is far higher than the true market value of the property. This can happen when the broker or lender pressure the appraiser to “puff up” a property value based upon the desired loan amount, or the figure needed to “make the deal work” as opposed to the actual value of the property to be purchased or refinanced.
This undue influence results in the consumer owing more money on their mortgage than their house is actually worth, which prevents the consumer from refinancing the house when their loan interest rate increases or mortgage rates drop. The homeowner is then trapped in a loan they cannot refinance and a house with a sale value less than the outstanding balance of the loan.
The Attorney General is asking the courts for a declaratory judgment stating that each act alleged in the complaint is a violation of the Consumer Sales Practices Act and a permanent injunction from engaging in the alleged behavior.
Dann is also asking these firms be fined a civil penalty of $25,000 each and reimburse all consumers who were damaged by the Defendant’s unfair, deceptive, and unconscionable acts.
Examples of the bad appraisal requests: Download Here
Complete List Of Targets
If you have an example of a bad appraisal request, please let us know your email address and we will contact you to obtain a copy.
The attached warning from the FBI is so simple, even a real estate professional in denial should get it..... should....
Download their notice: Here
]]>We've noticed numerous Web sites that promise to "improve your credit score"... if only you will pay them. The bad are saying they can "transfer" or "add" an existing credit line, established by someone else, over to your possession and help improve your credit score. Of course there is a fee $500 to $3,000 depending on who you contact.
Lets get this one straight: Your credit score is your score based on the amount of credit lenders have extended to you, and your actions based on how you've paid your past bills. "Transferring" someone else's credit information over to you is an attempt to mislead someone who wants to know about you. If a lender is mislead about your information, we think there is a big federal problem with this. There are already laws and regulations in place that describe this as "misleading", "misrepresentation", "fraudulent" In our humble opinion; One of the applicable laws would be the
Federal Trade Commission Act; Section 5 which reads [in part]:
Practices may be found to be deceptive … if the following three factors are present:
Now excuse a countryboy here.. but....... taking someone else's seasoned credit account and transferring it to another person.... well... it sounds misleading and appears to hit all of the 3.5 items noted above. So in our opinion, I would not utilize these services if they offer to transfer someone else's credit line to your.
A legitimite service will help or show you how to improve your score without using magic and misdirection.
For more information read this: News Story
Office of United States Attorney - Arizona Office has a case: News Release
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If you use a downpayment assistance program (DPA), your world has changed. May 2006
Washington DC / IRS - Organizations that provide seller-funded down-payment assistance to home buyers do not qualify as tax-exempt charities.Down-payment-assistance programs provide cash assistance to homebuyers who cannot afford to make the minimum down payment or pay the closing costs involved in obtaining a mortgage. Such programs can qualify as tax-exempt charitable and educational organizations under Internal Revenue Code section 501(c)(3) when properly structured and operated. In Revenue Ruling 2006-27, the IRS provides a detailed discussion of the guidelines – including two examples that meet – and one that fails to meet – the tests for exemption.
The ruling makes it clear that seller-funded programs are not charities because they do not meet the requirements of section 501(c)(3). Increasingly, the IRS has found that organizations claiming to be charities are being used to funnel down-payment assistance from sellers to buyers through self-serving, circular-financing arrangements. In a typical scheme, there is a direct correlation between the amount of the down-payment assistance provided to the buyer and the payment received from the seller. Moreover, the seller pays the organization only if the sale closes, and the organization usually charges an additional fee for its services.
IRS Press Release: Here
IRS Ruling: PDF Download Here
Check the status of a DPA program: Here
HUD also agrees with the IRS and declares non-profits unable to contribute the downpayment: Download Report to Congress Here
Hud letter to lenders:
TO: ALL APPROVED MORTGAGEES
Federal Housing Administration (FHA) approved mortgagees that seek FHA mortgage insurance on loans secured by single family houses, on which downpayment assistance has been provided to the borrower in the form of gifts, are required to determine that the gifts are from sources acceptable to FHA.
Paragraph 2-10 C of handbook HUD-4155.1 REV-5 provides that the donor of any such gift must be the borrower’s relative, the borrower’s employer or labor union, a charitable organization, a governmental agency or public entity that has a program to provide homeownership assistance to low- and moderate-income families or first-time homebuyers, or a close friend with a clearly defined and documented interest in the borrower. For FHA, charitable organizations are those nonprofits that are exempt from income taxation under section 501(a) of the Internal Revenue Service Code (IRC) of 1986 pursuant to section 501(c)(3) of the IRC.
This Mortgagee Letter advises mortgagees about how to determine whether a gift from a charitable organization can be used for all, or part, of the borrower’s downpayment when the organization providing the gift for the downpayment loses or gives up its federal tax-exempt status. Provided that the homebuyer has entered into a contract of sale (including any amendments to purchase price) on, or before, the date the IRS officially announces that the charitable organization’s tax-exempt status is terminated, FHA will recognize the gift—if made to the homebuyer and properly documented—as an acceptable source of the downpayment. FHA believes this policy avoids harm to any homebuyer who, in good faith, has entered into a contract of sale in anticipation of receiving a gift for the downpayment from such a charitable organization.
The mortgagee [lender] is responsible for ensuring that an entity is a charitable organization as defined above. One resource available to mortgagees for obtaining this information is the Internal Revenue Service (IRS) Publication 78, Cumulative List of Organizations described in Section 170(c) of the Internal Revenue Code of 1986, which contains a list of organizations eligible to receive tax-deductible charitable contributions. The IRS has an online version of this list that can help mortgagees and others conduct a search of these organizations. The online version can be found at: http://apps.irs.gov/app/pub78, using the following instructions to obtain the latest update.
These programs, when offered by entities other than charities, are considered a scam and a blight on areas where they are used. If you would like to read a series of articles on how these programs have crushed the economies of entire cities, please read visit: Columbus Dispatch
Personal comment: It appears that cities with a high usage of the Nehemiah program, also have a corresponding high rate of mortgage fraud and foreclosures.
]]>The inclusion of the items listed above, in a purchase and sale agreement, appears to result in the title insurance company issuing a policy for an amount greater than the value of real estate.
This results in a misleading written statement to the insurance company and could be considered insurance fraud.
If the buyer/seller insure a property for more than its worth, due to the inclusion of non-real estate items, the company may have the ability to deny claims.
If the agent and escrow agent fail to notify the parties of the over-insurance, could there be a claim for negligent misrepresentation?
This information is based on recent conversations with an insurance commissioner and a title insurance attorney. I'll research further and provide details shortly.
(By: Richard Hagar SRA)
Update 3-8-07
Based on discussions with several title insurance attorneys and a representative from the insurance commissioners office:
No more maybe about it, by increasing the sales price of real estate and folding in costs that are not "Real Estate" the issuers of title and home owners insurance policies have been mislead and the coverage amounts are for more than the value of the property..... commonly called insurance fraud, specifically called over-insurance. Numerous cases exist that fully describe and state the conclusion and the penalty. Higher insurance premiums, and anyone attempting to collect based on the higher sales/insurance value, would have a problem.
California's Insurance Fraud Division: Link
Coalition Against Insurance Fraud: Link
There is a difference between disclosure on a sales agreement and full disclosure to all interested parties..... and insurance companies are interested parties.
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