MAR Supports Mortgage Fraud Package

A press conference addressing the issue of mortgage fraud in the state of Michigan was held July 10. Rep. Amos, Rep. Marleau, and Rep. Baxter joined in addressing this issue.

Amos’s bill (request #7003) amends the RICO section of Michigan’s penal code to add “residential mortgage fraud” to the list of violations that fall under the definition of “racketeering”. The bill defines the crime of “residential mortgage fraud” as an act where a party knowingly makes or uses deliberate misrepresentations, misstatements or omissions during the mortgage lending process.

Marleau’s bill amends our sentencing guidelines to reflect the penalty provisions (up to 10 years for a violation of the act and up to 20 years for a “pattern” of fraud) in the Amos bill.

Baxter’s bill (HB 6267) amends the State License Fee Act to allow money in the Real Estate Enforcement Fund to be used for the investigation and enforcement (prosecution), by the Attorney General, of residential mortgage fraud. (The money in this fund is currently restricted for the sole purpose of investigating and prosecuting unlicensed activity.)

Over the past few years mortgage fraud has been on the rise nationwide, particularly in Michigan. This package of bills represents an important step in protecting Michigan homebuyers, lending institutions, and the health of its real estate market.

This package of bills provides Michigan’s law enforcement and attorney general with the tools needed to remove these bad actors from Michigan’s real estate market. MAR will be working with this package of bills as it moves forward.

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HUD's Flipping Rule Revised

Effective July 7, 2006, the Department of Housing and Urban Development has amended its regulations that address the predatory practice of property "flipping" and established certain time restrictions regarding the sale of properties whose purchase is being financed with Federal Housing Administration mortgage insurance. Appraiser transgressions were mentioned among the comments received in response to the December 23, 2004, interim rule on the subject.

One commenter wrote that investors, including real estate agents, should be exempt from time restrictions on resales since “they make legitimate livings purchasing and reconditioning distressed properties.” The commenter wrote that one of the rule's consequences may be continued curtailment of real estate investors in the affordable housing market. Exceptions to the time sale restrictions should be granted on a case-by-case basis when the mortgagee can show that the sales price of the property corresponds with its market value.

HUD responded that “while most investors do operate in a responsible manner, the abuses uncovered that resulted in the issuance of HUD's regulatory prohibition on property flipping were the result of actions by investors, other sellers, real estate agents, appraisers, and others with a vested interest in the sale of real estate.” HUD further stated that “mortgagees have always been required to show that the sales price corresponds to the market value; the problem lies with false appraised values, which are often central to the egregious abuse that the property flipping regulations are designed to prevent.”

In response to an assertion that the HUD rule may unfairly link the time in which a recently acquired property is sold with separate fraudulent acts, HUD said it recognizes that the time resale restrictions are not a total solution to predatory lending but that in its examination of predatory lending practices, “egregious examples of predatory lending included property resales occurring within a short time period and organized by appraisers and lenders as pre-arranged transactions with an unwitting buyer.” The department asserted that “this illustrates that property resales in short time frames often correlate with predatory lending practices. Thus, a 90-day holding period helps assure [sic] that the buyer is not victimized by a seller who acquires a property with the intention of immediately flipping it to the buyer for an amount that could not be realized without the help of the appraiser and others who would profit illicitly from the resale.”

The final rule broadens the exceptions to the time restrictions on sales to include government-sponsored enterprises, state- and federally chartered financial institutions, nonprofit organizations approved to purchase HUD Real Estate-Owned single-family properties at a discount with resale restrictions, local and state governments and their instrumentalities, and, upon announcement by HUD through issuance of a notice, sales of properties in areas designated by the President as federal disaster areas.

For more information, contact: Margaret Burns, Director, Office of Single Family Program Development at HUD. #202-708-2121.

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Are You Registered to Vote?

Given that we are in an election year, now is a great time to review your voter registration status. If you have recently moved, you will what to make sure you know your new voting district. For those members that are not registered voters, use the link below to find out how to become a registered voter. For MAR to be strong at the polls, it is extremely important for it members to be registered voters.

Get information on how to become a registered voter.

Important election dates to remember:
August 8, 2006 Primary Election
November 7, 2006 General Election

Visit the MAR Web site to learn more about 2006 election issues.

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MiCREA Monthly
July 2006

• MAR Supports Mortgage Fraud Package
• HUD's Flipping Rule Revised
• Are You Registered to Vote?