Protect your client while protecting yourself
By Patricia I. Hayhurst
I recently had the honor of being a featured panelist at the 12th International Money Laundering Conference on March 19 in Hollywood, Fla. This is the first year that mortgage fraud was added to the panel of speakers at this important conference. Of the 1,700 attendees comprised of financial and banking institutions and government officials, 70 countries were represented.
Unlike other fields of regulation and law enforcement, the money laundering field generates unique controversies and challenges. Mortgage fraud has become international in scope and now presents new rules in finance and banking that pose great risks for real estate agents in a market that is already uncertain.
New agencies for reporting suspicious activity have been set up nationally. Mortgage lenders are required to file Mortgage Fraud Incident Notices and are overseen by a government entity called the Office of Federal Housing Enterprise Oversight. Early payment defaults (loans late during the first year) will be reported and all parties in the purchase or refinance transaction will be named in the report and investigated.
Now, how are you as the Realtor responsible for someone not making payments? There is something called “willful blindness.” Do you know if your buyer can really make that mortgage payment on that $600,000 condo he was forced to close on…and can also make the $2,800 monthly maintenance fee payment? Can he really do all that with just $3,000 monthly rental income on that investment condo? And, to make matters worse, is he really renting out his new “second home?” Oh, you think, he is doing a SISA (stated income, stated asset) loan; it’s his problem, not yours. Well, not anymore. “Willful blindness” may now affect you, the Realtor.
Figures on mortgage fraud percentages are “pervasive and growing,” says the FBI. Mortgage fraud has a priority now, due to the impact of mortgages on the broader economy. Mortgage-backed securities are sold on Wall Street, and International Banks are buying them. Early payment defaults are indications of fraud that will now fall under money laundering laws and much more scrutiny. Lenders are being required to repurchase those loans sold into the secondary market. You, as the Realtor, are the starting point of investigation, because your remuneration for the transaction is the first to appear at the top of the settlement statement. You have an interest in making the transaction happen.
Take the classes offered by local associations. Know your clients and know your sellers. Document your conversations and do not work with mortgage brokers who you do not know. Good, strong, honest lenders are everywhere, as are honest sellers and buyers, but the proliferation of people who can hurt your good reputation is out there. Do not fall into “willful blindness.” Double check if the insurance is paid. For example, we recently found an insurance agent not forwarding insurance premium checks from the closing to Citizens Property Insurance Corp. Remind your buyers to double check with the insurance carriers. Citizens will confirm receipt of payment within 24 hours with a simple phone call. You can ask for a copy of the appraiser’s license, if you want to. Protect your seller; know who is walking into their home.
Ethics in our business is more important than dollars.
Patricia I. Hayhurst is President and CEO of Hayhurst Mortgage Inc. and Hayhurst Title Services inc. She has more than 20 years of experience in real estate lending.