Georgia Real Estate Commission GREC RENEWS Volume 2, Issue 1 January 2006 2006 Dates to Note Tips for Recognizing Mortgage Fraud February 14, 2006 Trust Account Class Metro South Association of REALTORS (770) 477-7579 Georgia is the Number 1 State in Mortgage Fraud. March 8, 2006 Unfortunately, there are common Trust Account Class methods for defrauding lenders. Here are Greater Rome Board basic indicators of possible mortgage of REALTORS (706) 295-1727 fraud: You may be a party to mortgage fraud if: 1. the buyers pay more than the contract GREC Disciplinary price; Sanctions 2. the loan amount is for more than the purchase price; 3. new settlement charges at closing were not noted or explained before INSIDE THIS ISSUE: closing or in the good faith estimate; 4. the information on the original loan application has been altered; Mortgage Fraud 1 5. the buyer was asked to include false information on the loan application or Complaints to GREC 2 purchase contract; 6. anyone is asked to leave certain signature lines blank; 7. one of the required disclosures is missing from the: Focus on a. Good Faith Estimate, Terminology: b. Special Information Booklet, c. Truth-in-lending Statement, or "Mortgages & Security Deeds" d. HUD-1 Settlement Statement; 8. repairs are required under the purchase contract and the work is not complete at closing and the seller gives the buyer (or contractor) money to pay Happy for the repairs and the buyer keeps the money and does not do repairs; New Year 9. a non-disclosed second mortgage is used; from the Georgia Real Estate 10. the buyer/borrower is required to purchase credit insurance (insurance to pay off the loan in the event of death or disability); Commission Suite 1000 11. the buyer sells the property immediately after closing at an inflated International Tower price (flipping); or 229 Peachtree Street Atlanta, GA 30303-1605 12. any of the parties involved (for 1 example; buyer, seller, real estate broker, appraiser, title company employee, attorney) receive a kickback. Those are the more obvious circumstances of possible mortgage fraud. If you are involved in a situation that is suspect, report it to your broker and contact appropriate authorities such as the District Attorney or the Georgia Department of Banking and Finance (GDBF). Since August 2001, GDBF's website provides information on the number of written complaints received on licensees. Go to http://www.state.ga.us/dbf/mortgage. html. The GDBF maintains a complete listing of licensed Mortgage Brokers and Mortgage Lenders and other supervised financial institutions under the heading Regulated Institutions. You can also search for a specific Mortgage Broker or Lender licensed with the Department. To file a complaint with the GDBF, go to http://www.ganet.org/dbf/complaint procedures.html. Written complaints should be mailed or faxed to: Legal and Consumer Affairs Division Georgia Department of Banking and Finance 2990 Brandywine Rd., Suite 200 Atlanta, GA 30341-5565 Fax: (770) 986-1657 Real estate licensees must be vigilante in recognizing the signs of mortgage fraud. Heavy fines and/or imprisonment are the penalties. Continue to promote the ethical and professional standards of the real estate industry by reporting fraud. Georgia Real Estate Commission Suite 1000, International Tower 229 Peachtree Street N.E. Atlanta, GA 30303-1605 Volume 2, Issue 1 January 2006 Focus on Terminology: "Mortgages & Security Deeds" A Security Deed is the most common financing instrument for real estate loans in Georgia. A Security Deed is also known as a Deed to Secure Debt, a Loan Deed, or a Warranty Deed to Secure Debt. Remember: The borrower and the lender are the parties to the Security Deed. The borrower is the grantor, the one conveying the property to secure the debt. The lender is the grantee, the one receiving conveyance of the legal title to secure the debt. The borrower retains equitable title to the property. All words in blue and underlined are hyperlinks to the referenced subject. Just Click on the blue underline to go directly to that website page. You can sign up to receive the GREC RENEWS electronic newsletter each month by visiting the GREC website or CLICK HERE TO SIGN UP RENews Newsletter Comments or Suggestions Click Here GREC A Mortgage only creates a lien on the property and does not transfer title. The mortgagor is the borrower. The mortgagee is the lender. Although technically incorrect, these terms are commonly used to describe the parties to the lien on the real estate that is secured by the Security Deed. In order to be valid, a Security Deed must have a related debt. The Promissory Note is the document in which the borrower contracts to pay the lender the debt. The payor (borrower) and the payee (Lender) are the parties to this contract. Lenders in Georgia want more than a lien (Mortgage) on the property. Lenders prefer a Deed to Secure Debt so that they have absolute conveyance of the title to the property and a Promissory Note attached to it. When the loan is paid off, the lender stamps the original Security Deed as "paid" or "satisfied" or records a Quit Claim Deed on the property releasing whatever interest the lender had in the property. The public records are then clear as to the status of the original lien. Source: Paraphrased from The Georgia Real Estate Guide to License Law, Brokerage, and Related topics, A publication of the Georgia Real Estate Commission under grant form the Real Estate Education, Research and Recovery Fund, First Edition, 1995, All rights Reserved. pp. 40.1-40.4 What Causes a Person to Complain to the Real Estate Commission? The Real Estate Commission must review all formal complaints coming into the Commission's office. Not all complaints result in an investigation. In fact, a small percentage merit formal investigation. Complaints range from minor miscommunications to serious trust account issues. The less serious complaints are often filled with such statements as the following: 1. He wouldn't return my telephone calls. 2. She didn't address us as Mr. And Mrs. 3. He stopped by our house unannounced. 4. I don't know why she waited two days to present our offer. 5. He showed up in a running suit. 6. She talked down to me. 7. He was late for every appointment. 8. She turned me over to someone else for everything. 9. He didn't explain what that meant. 10. She was rude about everything. 11. He wasted our time showing houses that we had no interest in. 12. We never could reach her. 13. He never seemed to care about the problem. Complaints such as these clearly emphasize the fact that real estate brokerage is indeed a service industry. Common courtesy and basic professionalism can go a long way toward influencing the public's perception of the real estate brokerage profession. 2