UPDATE ON DESIGNATING TRANSACTIONS AS “UNDER CONTRACT” AFTER ATTORNEY REVIEW

By NJAR^® Counsel Barry Goodman, Esq.

A recent article in one of the local board’s publications unfortunately provided certain misinformation about the position of New Jersey Real Estate Commission (“Commission”) concerning the use of “under contract” and property remaining as “active” in the MLS. As a result of the article, the Commission was contacted and has clarified these issues.

The Commission’s regulations require that any advertisement, including in an MLS, for a property that appears between the time a sales contract prepared by a real estate licensee emerges from attorney review (or after a contract that is not subject to attorney review is fully executed and delivered to the parties) and the closing of the transaction, must contain the term “under contract” unless the sales contract is cancelled and the seller authorizes the listing broker to make new efforts to market the property. The Commission informally has explained that, if the transaction may be a short sale that is subject to lien holder approval, the advertisement may include “under contract-subject to third-party (or lender) approval” or similar language.

The issue arose because individual MLSs have various designations for the status of transactions, such as “active” and “inactive.” The Commission does not regulate such designations by MLSs. As a result, the Commission has clarified that, as long as the required “under contract” language is in the advertisement, which may include inserting the language in the comment section in an MLS, the transaction may be advertised in the MLS under any designation permitted by the MLS, including as “active.”

 

 

Fannie Mae Announcement Addresses Several NAR Appraisal Concerns

Fannie Mae's Selling Guide Updates and Additional Guidance on Appraisal-Related Policies, Announcement SEL-2010-09, addresses many concerns raised by the NATIONAL ASSOCIATION of REALTORS^® (NAR) regarding the Home Valuation Code of Conduct (HVCC) and the appraisal policies of the government sponsored enterprises (GSE), Fannie Mae and Freddie Mac. The announcement addresses geographic competency, lender changes to the appraisal report, communication under HVCC, and the use of short sales and foreclosures as comparable sales. NAR had previously called on the GSEs to provide additional guidance on these issues. Click here to view the announcement, or get a detailed synopsis of the announcement from NAR.

 

 

HUD Issues Guidance on LGBT Housing Discrimination Complaints

This week, the U.S. Department of Housing and Urban Development (HUD) announced a new policy that provides lesbian, gay, bisexual and transgender (LGBT) individuals and families with further assistance when facing housing discrimination. The new guidance treats gender identity discrimination most often faced by transgender persons as gender discrimination under the Fair Housing Act, and instructs HUD staff to inform individuals filing complaints about state and local agencies that have LGBT-inclusive discrimination laws.

The Federal Housing Administration (FHA) will also instruct its lending community that FHA-insured mortgage loans must be based on the credit-worthiness of borrowers and not on unrelated factors or characteristics such as sexual orientation or gender identity. HUD will also be commissioning the first-ever national study of discrimination against members of the LGBT community in the rental and sale of housing. The Department is currently seeking online public comment from interested parties in how it might design this new study.

 

HUD Issues Guidance on Home Warranty Contracts and RESPA

The General Counsel's office at the Department of Housing and Urban Development (HUD) issued guidance on the appropriate circumstances under which brokers and agents can be compensated on a per transaction basis for selling home warranties. The NATIONAL ASSOCIATION OF REALTORS^® (NAR) and industry partners have been working for more than two years to get HUD to accept legitimacy of these of these arrangements after an earlier interpretive letter raised great concerns for real estate professionals and their partners in the home warranty industry. While HUD has accepted that agents and brokers can be paid on a per transaction basis and that review of transactions should be done on a case by case basis, concerns remain. HUD is accepting comments until July 26, 2010. NAR and its industry partners will be submitting comments and seeking additional clarifications. View the current HUD guidance or submit comments here.

 

Treasury Answers Three HAFA Questions

On May 21, 2010, Fannie Mae, on behalf of the Treasury Department, answered three Home Affordable Foreclosure Alternatives (HAFA) Program questions submitted by the NATIONAL ASSOCIATION OF REALTORS^® (NAR) on behalf of its members. HAFA provides uniform procedures, forms, and deadlines for short sales and deeds-in-lieu of foreclosure. The purpose of HAFA is to help homeowners avoid foreclosure even if they are unable to retain the home with a loan modification under the HAMP program.

In brief, under the HAFA program: (1) buyer agents are not permitted to rebate a portion of their commission to the buyer, (2) sellers who are real estate agents must list their home for sale with another broker, not their own broker, and (3) the incentive allowed for subordinate lien holders (6 percent of any one subordinate lien, up to a total of $6,000 for all subordinate liens) is a hard cap and may not be supplemented from any source.

You can get an overview of HAFA here, or view some helpful Q &As.  You can also view the Freddie Mac bulletin or visit NAR's Short Sale webpage for further information. 

 

FTC Delays Implementation of Red Flag Rules

Under pressure from Congress and others, the Federal Trade Commission (FTC) has again delayed enforcement of its "Red Flag" identity theft rules until the end of 2010.  The red flag rules require financial institutions and creditors to develop and implement written identity theft prevention programs, as part of the Fair and Accurate Credit Transactions (FACT) Act of 2003. 

Mortgage brokers and mortgage lenders that provide credit, or arrange for credit to be provided, are thus required to establish policies and procedures to prevent identity theft. A real estate agent may also be considered a "creditor" if s/he regularly arranges for credit to be extended, e.g. regularly pulls credit reports, suggests potential lenders or helps with the loan applications.

See the NATIONAL ASSOCIATION OF REALTORS^{® '}(NAR) FAQs for further guidance on complying with red flag rules.

 

Individuals Claiming to Be Census Workers Contact Brokers, Agents

Recently, the NATIONAL ASSOCIATION OF REALTORS^®; (NAR) received reports that brokers and agents have been contacted by individuals claiming to be U.S. Census workers requesting information about the owners or occupants of properties that the brokers or agents have listed for sale. In some cases, these reports indicate that the Census workers aggressively sought from brokers or agents such information and may have even advised that the brokers or agents were legally obligated to provide such information about property occupants.

NAR contacted the U.S. Census Bureau to learn more about their practices and the duty, if any, of real estate professionals to provide information about the occupants of properties for which they may be providing real estate services. Section 223 of Title 13 of the United States Code provides that it is unlawful for an "...owner, proprietor, manager, superintendent, or agent of any hotel, apartment house, boarding or lodging house, tenement, or other building, (to) refuse or willfully neglect,...to furnish the names of the occupants of such premises,....”

More simply, this means that:

• Real estate professionals who list residential property for sale or lease are not obligated by law to provide to Census enumerators information about the owners or occupants of such properties;
• Real estate professionals who are contacted by Census enumerators for information about the owners or occupants of property listed for sale or rent should determine what information they may or should provide by considering the extent to which the owner, in the property listing agreement, has authorized them to offer such information;
• Real estate professionals who are contacted by Census enumerators for information about property owners or occupants of listed properties may choose to consult with the owner for direction as to what information, if any, may be provided to the enumerator, and provide to the enumerator only that information the owner authorizes to be made available.

If you have further questions or concerns regarding this topic, visit www.REALTOR.org, or contact your Regional Census Bureau Office. A list of regional offices and their contact information is available at www.census.gov/regions.

 

 

Create a Social Media Usage Policy

You can download a template created by the NATIONAL ASSOCIATION OF REALTORS^®' (NAR) Risk Management Committee to help your firm design a policy for social media usage. The template requires that it be customized to meet the needs of your firm and reflect your best business practices. It is not a document that can be adopted and used without customization. To learn more about the legal and ethical issues that come into play when using social media for business, read the April 2010 issue of New Jersey REALTOR^® magazine.

 

 

FHFA Announces Appraisal Complaint Process, GSEs Will Not Fund IVPI

In a letter to New York Attorney General Andrew Cuomo, the Federal Housing Finance Agency's (FHFA) Interim Director, Ed DeMarco, announced that the Independent Valuation Protection Institute (IVPI) will not be implemented by Fannie Mae and Freddie Mac. The two government sponsored enterprises (GSE) will instead implement a targeted appraisal complaint process for the Home Valuation Code of Conduct (HVCC). The GSEs will act on suspected acts of fraud and violations of HVCC. A standardized form should be available within a few weeks.

In the letter, Mr. DeMarco cites the use of substantial tax payer funds by the GSEs as the primary reason the IVPI will not be implemented. "In light of the billions of dollars in taxpayer funds the Enterprises have drawn since entering conservatorships, I cannot, as conservator, justify the Enterprises funding the Institute. Therefore, as conservator, I have determined that they will not proceed with that portion of the Cooperation Agreements."

The National Association of REALTORS^® (NAR) has long called for the implementation of the IVPI. In April, NAR President Vicki Cox Golder sent a letter to the FHFA calling on them to implement the Institute. FHFA's General Counsel Alfred Pollard responded in a letter saying "FHFA continues to work with Fannie Mae, Freddie Mac and the Attorney General's office on the Institute" and that "FHFA recognizes the value of a formal complaint process as envisioned with the Institute and continues to work towards that end."

 

NAR Directors Pass Sexual-Orientation Protections

The NATIONAL ASSOCIATION OF REALTORS^® (NAR) Board of Directors passed a change to Article 10 of the NAR Code of Ethics barring REALTORS^® from denying equal professional services on the basis of sexual orientation or from discriminating against any person on the basis of sexual orientation. Standard of Practice 10-3 was amended as well to prohibit discrimination on the basis of sexual orientation in any advertisements for selling or renting property. The Code of Ethics change must still go before the NAR Delegate Body for approval at NAR’s annual conference in November.  It is important to note, however, that sexual orientation in already a protected class in that state of New Jersey.