A new series of laws are coming into effect on June 12th in Washington State and some are sure to affect the loan originators, agents, buyers and sellers. Read the full text below that came from the Washington Association of Realtors recent Friday Facts, Legal Q&A column, written by Annie Fitzsimmons.
I’m happy to see things like fraud for lying about the loan being for an owner occupied purchase when an investor is actually buying to rent the place or flip it. Team Reba has walked away from a lot of business over the past many years when we’ve heard the plans a prospective client would share with us regarding their loan strategy. I’ve actually said to several people that my business, career, and reputation isn’t worth the extra $5,000 or whatever else they’d make in interest savings. It’s actually been astounding to learn how many people didn’t even realize that doing this was mortgage fraud and a felony.
About 3-6 months ago when I was speaking with a reporter on a different topic of real estate we somehow got diverted into a discussion about this. She was shocked when I shared with her the stories I had about walking away from clients because of this issue. At the time she thought about turning that over to an investigative segment of their news office but I never heard back from her about it. Odd to see it turning up in the legislative session, but not surprising given the number of folks who did this when buying property over the past many years.
I have to say from an agent liability standpoint some of the language is a little scary because while agents are often involved in our client’s financing, there are many buyers that are reluctant to get agents involved in financing issues for fear of feeling pushed or thinking that their agent will try to oversell them if they know the full level of their buying capacity. To these buyers I say, if you don’t trust your agent on this issue, you’re with the wrong agent. These kinds of topics should be discussed up front and the buyer should feel confident that the agent is looking within a range of prices that are comfortable for the client, no matter what the actual pre-approval cap is set at.
Enjoy Annie’s article below!
Criminal Sanctions for Mortgage FraudMuch like there is no way to be a little bit pregnant, there is no lawful way to engage in just a little bit of mortgage fraud. There is no forgiveness for the “little white lie”. Pursuant to SHB 2770, it is a felony to receive a commission or any other funds paid from the proceeds of a buyer’s loan if the recipient of the commission knows that the borrower engaged in any effort to deceive or mislead the lender. Said differently, if the borrower, seller or any other person makes any misrepresentation to the lender during the lending process, that person is guilty of a felony and any person who receives any of the proceeds of the loan is equally guilty if the recipient of the proceeds had knowledge of the misrepresentation. Many may shrug this off knowing they do not engage or participate in mortgage fraud. That would be a mistake. REALTORS® must be aware of this law and the minimal involvement required to result in significant consequences. Think of all the times that you, as an agent, have been aware of any of the following things occurring in one of your transactions: the list price is increased to match the sale price; a financial issue is handled “outside of escrow”; the seller feigns a carryback intending to destroy the note or deed of trust after closing; a buyer claims to purchase owner-occupied when that is not true; an inflated value is assigned to a property by an appraiser; borrowed down payment funds are labeled as gift funds; or a borrower overstates their income or exaggerates their financial condition. While this list is not exhaustive, it represents a variety of ways that an agent could be guilty of a felony if the agent is aware of any of these circumstances in a transaction and takes a commission from the transaction. Likewise, seller will be guilty of the felony if seller is aware of the deception and accepts the sale proceeds. The felony level associated with this mortgage fraud crime is serious. Conviction under this statute would most likely result in jail time. Be aware of this new law and be diligent about policing the affairs of the transactions in which you are involved.
