Today’s Session  Federal Issues ◦ Amendments to Freddie Mac Short Sale Affidavit ◦ Update on RECs as relates to FHA Loans ◦ Update on Seller Financing  State Issues ◦ BPOs ◦ Septic Issues/Regs ◦ Changes to RE Regs  You Be The Judge  New/Amended RANM Forms BUCKLE UP – I HAVE ONE HOUR Amendments to Freddie Mac Short Sale Affidavit  Purpose of Affidavit: …..to prevent fraud by requiring the buyer, seller, real brokers, escrow/closing agent and any transaction facilitator to make various certifications (including that the short sale is an arm’s length transaction and the buyer will not resell the within 120 days unless there are substantial improvements). Amendments to Freddie Mac Short Sale Affidavit  “ARMS-LENGTH TRANSACTION”: transaction between parties who are independent of one another and unrelated and unaffiliated by family, marriage or commercial enterprise, other than the purchase and sale of the mortgaged premises between the borrower(s) and the purchasers(s) that is the specific subject of the proposed short sale as disclosed to the Servicers.  Affidavit signed under Penalty of Perjury Amendments to Freddie Mac Short Sale Affidavit  Key Changes to New Form – 1/1/12 ◦ The certification is based on “the best of each signatory’s knowledge and belief”. The additional “knowledge” component significantly reduces broker liability ◦ Only negligent or intentional misrepresentation creates responsibility for indemnifying the servicer/FM for loss ◦ Only responsible for your own signature – not others- no joint and several liability Amendments to Freddie Mac Short Sale Affidavit

 Affidavit is not/can not be an addendum to the purchase agreement; Brokers should not sign a document implying they are parties to the sales  AB may sign on behalf of brokerage NM RECS AND FHA LOANS

 Issue: ◦ Otherwise qualified FHA buyer denied FHA loan b/c seller had bought on a REC  FHA Claimed –Violated Flipping Policy ◦ Seller not owner of record ◦ Sale would occur less than 120 days from original sale NM RECS AND FHA LOANS

 RANM Intervened: ◦ Sent memo to HUD asking HUD to reconsider ◦ Seller as Owner under Doctrine of Equitable Conversion ◦ Sale occurred when parties entered into REC under Relation Back Doctrine

 VICTORY! - HUD Agreed SELLER FINANCING

 BACKGROUND: ◦ SAFE Act ◦ NM Mortgage Loan Originators Act ◦ Amendments to TILA made under the Dodd- Frank Act ◦ NAR’s Latest Position – No worries!?!? ◦ CFPB – Director appointed, Richard Codray STATE : BPOs

 Currently Under the Appraisal Act Brokers Can Not Do  for $$$

 Status of Legislation to Change - ????? – Stay Tuned SEPTIC REGULATIONS

 SEPTICS AND THE REC ◦ How NMED treats septics when property is sold on a REC – Everyone’s problem! ◦ RANM met with NMED and explained Doctrine of Equitable Conversion ◦ Another RANM Victory! NMED agreed ◦ Asked RANM to draft some proposed regs SEPTIC REGULATIONS  RANM Proposal: ◦ Clarifies seller must do inspection prior to legal or equitable transfer ◦ Clarifies “owner” under REC is buyer ◦ Clarifies transfer can occur without remediation, but then buyer becomes responsible to NMED ◦ Clarifies who must file for variance or permit application if system fails CHANGES TO BROKER AND SALESMAN ACT EFFECTIVE JULY 1, 2011  Three key changes were enacted by the NM Legislature: 1) End of CE exemption 2) Fingerprinting requirement 3) Unlicensed activity CHANGES TO BROKER AND SALESMAN ACT EFFECTIVE JULY 1, 2011

 End of CE Exemption ◦ Licensees no longer become exempt from continuing ed requirements by being 65 years old, with 20 years experience ◦ UNLESS … The licensee was ALREADY exempt on or before June 30, 2011 CHANGES TO BROKER AND SALESMAN ACT EFFECTIVE JULY 1, 2011

Fingerprinting ◦ Required for new and renewing ◦ REC has established more details in Rules that became effective January 1, 2012 (more in a few minutes) CHANGES TO BROKER AND SALESMAN ACT EFFECTIVE JULY 1, 2011 It is now a 4th degree felony to practice real estate without a real estate broker’s - imprisonment for up to 18 months, and/or fine of up to $5,000 D.A. prosecutes (Don’t miss your renewal!) NMREC Rules Changes Effective January 1, 2012

 Fingerprinting details:  Starts w/January birthdays, renewing in February, 2012  Required for initial AND subsequent renewals  Must pay for fingerprinting two cards, PLUS review by DPS NMREC Rules Changes Effective January 1, 2012

 REC includes 2 fingerprint cards and envelope with renewal application  Take cards and Fingerprint Certification Form ◦ public law enforcement official ◦ private fingerprinting company ◦ the NM DPS ◦ law enforcement agency or private company  state police  county sheriff  municipal, campus and tribal police. NMREC Rules Changes Effective January 1, 2012 In ABQ, metro area, only law enforcement agency that provides fingerprinting service is Rio Rancho Police Department 500 Quantum Road One Block South of Northern Blvd. on State Rd 528 M, W, F from 10:00 – 12:00 $10 Per Card NMREC Rules Changes Effective January 1, 2012 DPS in Santa Fe 4491 Cerrillos Rd. M-F 8:00 to 4:00 pm $9.00 for both cards If DPS does fingerprinting, tell them the cards are for a nationwide criminal background check, ask them to complete the Fingerprint Certification Form and give you a copy and leave the cards with them. NMREC Rules Changes Effective January 1, 2012

PRIVATE COMPANIES $15- $25 FOR TWO CARDS GO TO FINGERPRINTING SECTION ON REC WEBSITE FOR LIST OF PRIVATE COMPANIES http://www.rld.state.nm.us/realestatecommission/index.html CALL FIRST! NMREC Rules Changes Effective January 1, 2012  YOU MUST: ◦ Pay Fee to Entity for fingerprinting ◦ Mail to DPS in enveloped provided by REC – Don’t Fold Envelope!  2 completed fingerprinting cards  a copy of the Fingerprinting Certification Form completed by the fingerprinting company/agency  check or MO for $44 payable to NM DPS COPY THE CERTIFICATION – YOU WILL NEED IT! NMREC Rules Changes Effective January 1, 2012

 DPS will send one card to FBI  FBI will mail report to NMREC (this could take 4 to 6 weeks)  REC is NOT holding up any licenses until receipt of the fingerprinting. All licenses will be issued! But….REC says “don’t wait”! NMREC Rules Changes Effective January 1, 2012

THIS IS WHERE YOU NEED THE COPY!  Send Copy of the completed “Fingerprint Certification” Form to the NMREC with your license renewal application NMREC Rules Changes Effective January 1, 2012

 Fingerprints: ◦ The “frequency” with which you will need to create a fingerprint card is yet to be determined ◦ REC may require that brokers generate the cards only once, but still require submission to DPS with every renewal ◦ This fingerprinting requirement WILL apply to inactive licensees NMREC Rules Changes Effective January 1, 2012

 Broker Duties – NMCA 16.61.19.8 ◦ C. Took out “oral” – Performance of any written agreements made with customer or client ◦ G. Disclosure of potential conflicts of interest that broker may have in the transaction, including, but not limited to: written relationship with others; material interest or relationship in transaction, other brokerage relationships available. NMREC Rules Changes Effective January 1, 2012

 Broker Duties ◦ H. Written disclosure of any adverse material facts actually known by the AB or QB about the property or the transaction or about the financial ability of the parties to the transaction to complete the transaction . Adverse material facts do not include data from a sex offender registry or existence of group homes. NMREC Rules Changes Effective January 1, 2012  QBs  May be a QB for one company, AND an AB for another company  No more “7-Day” rule for appointing a “broker-in-charge” … It is now QB’s discretion to determine when to appoint a “broker-in-charge” … “Broker-in-charge” must be eligible to BE a Qualifying Broker NMREC Rules Changes Effective January 1, 2012  QBs ◦ May pay a commission to an expired or inactive or transferred ( or deceased) Broker IF the transaction went under contract WHILE the Broker was licensed ◦ Must personally sign all referral and co- op agreements NMREC Rules Changes Effective January 1, 2012  ABs ◦ MUST deliver ALL transaction documents to their Qualifying Broker ◦ Must complete the NEW BROKER BUSINESS PRACTICES 30-hour course in their FIRST year of licensure … This had been required in the Associate’s first three year cycle  AND … This is NOW the Qualifying Broker’s duty to make sure it happens NMREC Rules Changes Effective January 1, 2012

 ADVERTISEMENTS ◦ Broker “A” lists Broker “B’s” house for sale … Must the yard sign say “Owner Broker”? NO ◦ And directional – or “lead-in” signs – do NOT have to have the name and phone number of the brokerage firm NMREC Rules Changes Effective January 1, 2012

 When advertising your own property for sale, whether “listed” or not, you do need to disclose that you are licensed ….. (Nothing new here)  But suppose you are advertising your own property for RENT / LEASE?  … NO, you do not HAVE TO disclose that you are licensed NMREC Rules Changes Effective January 1, 2012  Property Management ◦ Upon licensure or renewal, must “declare” intent to do property management ◦ Must have a “PM Trust Account” for just one property ◦ Must provide a final reconciliation to a client within 60 days of termination of PM Agreement ◦ Must keep all records for 6 years NMREC Rules Changes Effective January 1, 2012  Property Management – Short-Te r m ◦ Must get written authorization from owner in PM Agreement to collect/remit NM GRT and Lodger’s Tax ◦ Tenant Agreement must include:  arrival/departure dates and check-in/out time  nightly rental rate  rental and security deposit  fees charged to tenant  accommodation rules and cancellation policy. CASE LAW UPDATE – YOU BE THE JUDGE  Sutton v. Driver, 712 S.E. 2nd 318 (N.C. Ct. App. 2011) ◦ Buyer looking for investment property contacted brokerage. QB referred buyer to AB who was his son-in-law a.k.a. “Salesperson” ◦ Meanwhile, QB as member of LLC was purchasing Land A owned by Salesperson CASE LAW UPDATE – YOU BE THE JUDGE  QB told AB that his neighbors may be interested in selling their Property B  Property B overlooked Land A and had a great ocean view  Salesperson allegedly said “trust owns Land A and it won’t ever be sold”  LLC bought Land A and subdivided. Buyers Property B lost $150,000 in value. CASE LAW UPDATE – YOU BE THE JUDGE  Buyers sued everyone – For Failure to Disclose Material Facts  Trial Court found for Defendants  Buyers appealed  Ct. of Appeals Considered: ◦ Duty to Disclose? ◦ Being bought by separate entity? ◦ “For Sale” sign on Land A? CASE LAW UPDATE – YOU BE THE JUDGE  Ct. of Appeals Held: ◦ Duty to Disclose? ◦ Being bought by separate entity? ◦ “For Sale” sign on Land A? CASE LAW UPDATE – YOU BE THE JUDGE  The Land Man Realty, Inc v. Weichert, Inc. No. 2010-192 (N.Y. Sup. Ct.) ◦ Owner entered into an “oral” listing agreement with Broker A – unspecified time frame ◦ Broker A understood that Owner would be later entering into a written agreement with another Broker B, Owner’s friend ◦ Broker A brought a potential buyer, but no offer made ◦ Owner entered into written agreement with Broker B CASE LAW UPDATE – YOU BE THE JUDGE  Broker A’s Buyer comes back and buys Property  Broker A claims commission – Sues Owner for all and sues Broker B for all, or in the alternative for the co-op in MLS  Owner sues Broker B claiming “should have watched out for me” CASE LAW UPDATE – YOU BE THE JUDGE  Court dismisses Owner’s claims against Broker B  Broker B claims as to Broker A “we have a duty to arbitrate”  Issues before Court: ◦ Send to arbitration? ◦ Broker A’s claim for ALL of commission ◦ Broker A’s claims for co-op commission CASE LAW UPDATE – YOU BE THE JUDGE  Arbitration ◦ Article 17: “Duty to arbitrate all contractual or non-contractual disputes as defined in SOP 17- 4….arising out of their relationship as Realtors.” CASE LAW UPDATE – YOU BE THE JUDGE  Commission ◦ All? ◦ Co-op broker commission offered through the MLS?  MLS agreement says co-op broker commission owed to “procuring cause”. Was Broker B procuring cause………STAY TUNED! CASE LAW UPDATE – YOU BE THE JUDGE  Jack Gaughen LLC d/b/a Jack Gaughen ERA v. Unemployment Comp Board of Review, No. 1884 C.D. 2010 (Pa. Commw.) ◦ AB worked part-time as IC for brokerage ◦ AB received commissions and 1099 ◦ Brokerage terminated ICA with AB - lack of work ◦ AB filed for Unemployment Compensation ◦ UC Board agreed and Brokerage appealed CASE LAW UPDATE – YOU BE THE JUDGE

 Lower Court said “maybe” if certain criteria are met  Statute said “real estate salespersons do not qualify for unemployment benefits if paid a commission”  Court agreed, BUT……Brokerage did not raise this defense when before the Board, so can’t raise it now CASE LAW UPDATE – YOU BE THE JUDGE  Court said: “presumption is that person IS an employee. It’s the Brokerage’s job to rebut presumption”  Brokerage said “did not exercise required control over Salesperson AND only paid commission, so not an employee”  Court said: License law says brokerage is only allowed to pay commission and that brokerage must supervise CASE LAW UPDATE – YOU BE THE JUDGE  COURT HELD: Brokerage did not meet its burden of proof that Salesperson was NOT an independent contractor. Affirmed Board’s decision to award unemployment compensation. RANM FORMS MARCH RELEASE  AMENDED ◦ 1106 Listing Agreement ◦ 1109 Referral Agreement in State ◦ 1304 Referral Agreement Out of State – ◦ 2109 Short Sale Add. to Listing Agreement ◦ 2304 FIRPTA & TAXATION of Foreign Persons Receiving Rental Income from US Property - Attn: Prop. Managers ◦ 2505 Right of First Refusal to Purchase and/or Lease ◦ 2308 Septic Information Sheet RANM FORMS

 NEW ◦ Just released: Personal Guaranty for use with Residential and Commercial Property Management Agreements ◦ March Release: 2103 of Contract – May be used with any contract as provided by contract. Prohibited unless otherwise stated if contract is for personal services. If not for personal services, allowed if not prohibited, BUT, confirm in contract if silent. RANM LEGAL HOTLINE

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