As of today, if you have a septic system in Iowa, you will need to pump it and have it inspected before you sell the property. There are a few exceptions, but if it is a regular old sale of residential real estate, you are going to need a "time of transfer inspection." And not just any inspector can do these inspections. It has to be a "certified time of transfer inspector who has been certified by the Iowa Department of Natural Resources.
It appears there are fewer than 250 inspectors for the entire state of Iowa. With 99 counties, that's only about 2.5 inspectors per county.
The county recorders will not record your deed without an inspection report from these special certified inspectors attached to your groundwater hazard statement.
Should be lots of fun for a while.
Wednesday, July 1, 2009
Friday, June 19, 2009
Something local
Mary Pat Harper, formerly Mary Pat Harper was indicted in the U.S. District Court for five counts of wire fraud. Look through my previous posts and see if I do not deserve an award for not saying, "I told you so."
Ms. Harper was a real estate agent in the Quad City area. Her license is "expired" according to licensediniowa.gov. Ms. Harper represented two individuals who purchased numerous properties in the Americana Park subdivision in northwest Davenport. Here is how the scheme worked: The two purchasers would agree to buy a house for a certain price, say for example, $110,000. Ms. Harper, who apparently prepared the purchase agreements, would attach an addendum which stated that the buyers would receive $10,000 back from the seller at closing. Essentially, the seller would be receiving $100,000 for the property ($110,000 minus the $10,000 the seller would give to the buyer at closing). Ms. Harper would fax the purchase agreement to the mortgage broker, but somehow the addendum would not be attached by the time it got to the actual lender. Because of this omission, the lender would be under the impression that the purchase price was $110,000 with no credit back to the buyer. The $10,000 would not appear on the settlement statement, so the lender would have no way of knowing that the buyers were not actually paying the full $110,000 for the property.
She did this at least five times. Then the buyers stopped making their payments. Then the properties were foreclosed. Then likely you and I bailed someone out, the properties sat empty and deteriorated, and property values went down.
So, buyers, sellers, real estate agents, real estate brokers, closing agents, appraisers, and especially attorneys take note: If it is not on the settlement statement, it does not happen. If you do prepare or sign a settlement statement that does not accurately reflect all receipts and disbursements, look for nice folks in dark suits and black SUVs to stop by your office. Soon.
See, I never said, "I told you so."
Thank you FBI and U.S. Attorneys! Keep up the good work.
Ms. Harper was a real estate agent in the Quad City area. Her license is "expired" according to licensediniowa.gov. Ms. Harper represented two individuals who purchased numerous properties in the Americana Park subdivision in northwest Davenport. Here is how the scheme worked: The two purchasers would agree to buy a house for a certain price, say for example, $110,000. Ms. Harper, who apparently prepared the purchase agreements, would attach an addendum which stated that the buyers would receive $10,000 back from the seller at closing. Essentially, the seller would be receiving $100,000 for the property ($110,000 minus the $10,000 the seller would give to the buyer at closing). Ms. Harper would fax the purchase agreement to the mortgage broker, but somehow the addendum would not be attached by the time it got to the actual lender. Because of this omission, the lender would be under the impression that the purchase price was $110,000 with no credit back to the buyer. The $10,000 would not appear on the settlement statement, so the lender would have no way of knowing that the buyers were not actually paying the full $110,000 for the property.
She did this at least five times. Then the buyers stopped making their payments. Then the properties were foreclosed. Then likely you and I bailed someone out, the properties sat empty and deteriorated, and property values went down.
So, buyers, sellers, real estate agents, real estate brokers, closing agents, appraisers, and especially attorneys take note: If it is not on the settlement statement, it does not happen. If you do prepare or sign a settlement statement that does not accurately reflect all receipts and disbursements, look for nice folks in dark suits and black SUVs to stop by your office. Soon.
See, I never said, "I told you so."
Thank you FBI and U.S. Attorneys! Keep up the good work.
Friday, May 1, 2009
Notary jail!
Not quite, but close. An appellate court in Illinois has clarified that employers are responsible for the acts of their notary employees, and the court seems to be saying that employers are obligated to train their employees adequately. It is certainly a good idea to make sure your notary employees are properly trained (we do), but it is not specifically required by statute. This is an important case if you have any notaries on your staff who notarize documents "on the clock."
The case was rather fact-intensive (seventy-two pages worth), but for a very short version: The case involved a Kinko's employee who either notarized a document without adequate verification of identity, allowed someone else to use his notary stamp, or notarized a document without the signer present. Based on this defective notarization, a $100,000+ fraud was perpetrated.
Kinko's provided training, but the trainer was not a notary or attorney, the materials he prepared were not prepared or reviewed by a notary or attorney, and he did not test the employees in any way. Based on his training, the notary was under the impression that all he needed to do was match the signature on any sort of identification provided by the signer to the signature on the document he was notarizing. He did nothing to otherwise verify the identity of individuals whose signatures he notarized. He left his notary stamp somewhat unsecured, and his story is that he left his notary stamp with Kinko's when he moved on to another location.
Sure there are a lot of jokes about notary jail, and notary school, and notary police, implying that being a notary is a simple and and ministerial function. In reality, a notary is a public official, and as such has important duties to others who rely on the documents he or she acknowledges.
We would be happy to provide assistance or training to any employer which has notaries on its staff. It could save you $100,000+.
The case was rather fact-intensive (seventy-two pages worth), but for a very short version: The case involved a Kinko's employee who either notarized a document without adequate verification of identity, allowed someone else to use his notary stamp, or notarized a document without the signer present. Based on this defective notarization, a $100,000+ fraud was perpetrated.
Kinko's provided training, but the trainer was not a notary or attorney, the materials he prepared were not prepared or reviewed by a notary or attorney, and he did not test the employees in any way. Based on his training, the notary was under the impression that all he needed to do was match the signature on any sort of identification provided by the signer to the signature on the document he was notarizing. He did nothing to otherwise verify the identity of individuals whose signatures he notarized. He left his notary stamp somewhat unsecured, and his story is that he left his notary stamp with Kinko's when he moved on to another location.
Sure there are a lot of jokes about notary jail, and notary school, and notary police, implying that being a notary is a simple and and ministerial function. In reality, a notary is a public official, and as such has important duties to others who rely on the documents he or she acknowledges.
We would be happy to provide assistance or training to any employer which has notaries on its staff. It could save you $100,000+.
Thursday, April 23, 2009
Illinois Corporate Compliance
A new scam! Apparently these folks took a page from Illinois Deed Provider's playbook. Illinois Corporate Compliance contacts corporations to inform them that for a fee of $150, they will file your corporate minutes with the State.
You do not need to file your corporate minutes with the State in Illinois. And as far as I know, even if you wanted to file your minutes with the State, you could not do so. There is no reason to do this, and there is no fee from the State to file minutes. You do need to file your annual report along with a fee, but that fee goes directly to the Illinois Secretary of State.
It IS very important for Illinois corporations to prepare their annual minutes, but they need to go in your minute book, not filed with the State. This can be difficult to remember to do unless you have an attorney prepare them for you every year. Most of our corporate clients have us act as their registered agent, so each year, when the annual report is due, we make sure their "corporate house" is in order by preparing minutes, and assisting with filing the annual report.
Always be on the lookout for private companies trying to pretend to be part of the government.
You do not need to file your corporate minutes with the State in Illinois. And as far as I know, even if you wanted to file your minutes with the State, you could not do so. There is no reason to do this, and there is no fee from the State to file minutes. You do need to file your annual report along with a fee, but that fee goes directly to the Illinois Secretary of State.
It IS very important for Illinois corporations to prepare their annual minutes, but they need to go in your minute book, not filed with the State. This can be difficult to remember to do unless you have an attorney prepare them for you every year. Most of our corporate clients have us act as their registered agent, so each year, when the annual report is due, we make sure their "corporate house" is in order by preparing minutes, and assisting with filing the annual report.
Always be on the lookout for private companies trying to pretend to be part of the government.
Wednesday, March 25, 2009
Lien filing service?
Huh? Lien filing service? How is this happening? Apparently contractors are paying firms (NOT law firms) to file mechanic's liens for them. The Illinois Attorney General is getting after one of these firms:
According to the Attorney General’s complaint, Contractor’s Lien Services (CLS) and its founder, Steve Boucher, analyze, prepare and file mechanic’s liens on property on behalf of general contractors and subcontractors. CLS allegedly misrepresents to contractors that it has valid cause for filing mechanics liens against homeowners when, most often, those contractors do not actually have valid claims under state laws. CLS also allegedly files liens without the knowledge of some contractors and, in other instances, CLS files liens against homeowners when contractors have not performed work at the properties in question.
After filing foreclosure liens, CLS allegedly files foreclosure actions against consumers who don’t pay off the debts. Some contractors claim that CLS collects money on behalf of contractors but then fails to redistribute the collected debts to them.
The press release does not refer to any unauthorized practice of law claims, which seems like a slam dunk. While filing a mechanic's lien is easy-peasy, the mechanic's lien law is rather complex. Filing it amounts to filling out a simple form and giving the recorder's office $40 or $50. There is no need to pay someone to do that. Knowing when to file one and in what circumstances is where the knowlege and expertise comes into play. If this CLS was giving this kind of advice, they were 1) giving wrong advice, and 2) engaging in the unauthorized practice of law. Either way, all they are allowed by law to do is file a form you complete at the recorder's office. If they were charging more than fifty cents, the contractors were paying too much, since all you need to do is mail it with your filing fee check to the recorder.
File a lien when you should not, and you could be looking at your lien being invalid at best, or defending a slander of title lawsuit at worst. I have no idea how much this CLS outfit charged contractors, but mechanic's lien law is not the place to skimp. Hire an attorney who knows mechanic's lien law.
The press release goes on to describe how many homeowners were duped into paying off liens which were wholly invalid, sometimes when they did not even have any work done by the contractors whose names were on the liens. Just because someone files a lien against your home does not necessarily mean you owe them money or that you need to pay them. If you believe there is a valid reason you do not owe the money they claim (whether it is because the contractor did not do all the work claimed, did it badly, did not do it at all, you already paid them, the lien was filed too late, etc., etc., etc.), talk to an attorney before you pony up the cash.
According to the Attorney General’s complaint, Contractor’s Lien Services (CLS) and its founder, Steve Boucher, analyze, prepare and file mechanic’s liens on property on behalf of general contractors and subcontractors. CLS allegedly misrepresents to contractors that it has valid cause for filing mechanics liens against homeowners when, most often, those contractors do not actually have valid claims under state laws. CLS also allegedly files liens without the knowledge of some contractors and, in other instances, CLS files liens against homeowners when contractors have not performed work at the properties in question.
After filing foreclosure liens, CLS allegedly files foreclosure actions against consumers who don’t pay off the debts. Some contractors claim that CLS collects money on behalf of contractors but then fails to redistribute the collected debts to them.
The press release does not refer to any unauthorized practice of law claims, which seems like a slam dunk. While filing a mechanic's lien is easy-peasy, the mechanic's lien law is rather complex. Filing it amounts to filling out a simple form and giving the recorder's office $40 or $50. There is no need to pay someone to do that. Knowing when to file one and in what circumstances is where the knowlege and expertise comes into play. If this CLS was giving this kind of advice, they were 1) giving wrong advice, and 2) engaging in the unauthorized practice of law. Either way, all they are allowed by law to do is file a form you complete at the recorder's office. If they were charging more than fifty cents, the contractors were paying too much, since all you need to do is mail it with your filing fee check to the recorder.
File a lien when you should not, and you could be looking at your lien being invalid at best, or defending a slander of title lawsuit at worst. I have no idea how much this CLS outfit charged contractors, but mechanic's lien law is not the place to skimp. Hire an attorney who knows mechanic's lien law.
The press release goes on to describe how many homeowners were duped into paying off liens which were wholly invalid, sometimes when they did not even have any work done by the contractors whose names were on the liens. Just because someone files a lien against your home does not necessarily mean you owe them money or that you need to pay them. If you believe there is a valid reason you do not owe the money they claim (whether it is because the contractor did not do all the work claimed, did it badly, did not do it at all, you already paid them, the lien was filed too late, etc., etc., etc.), talk to an attorney before you pony up the cash.
Wednesday, March 4, 2009
Interesting stats
I have been tracking lender's bid vs. sale price for FHA loans in Iowa for a little while, and the numbers are interesting.
The calculation:
The sale price to a new buyer after the sheriff's sale divided by the amount bid by the lender at the sheriff's sale as a percentage.
The data:
The amount bid by the lender at the sheriff's sale is essentially the money the lender has lost, between the principal balance of the loan, accrued interest, taxes and insurance paid by the lender, and costs of the foreclosure. The sale price to a new buyer is the actual price paid by someone who is buying the property after the foreclosure has gone through and the property has gone back on the market.
The results:
The price paid by the new buyer is a little more than half of what the lender bid at the sheriff's sale. For seventy-six properties analyzed, the drop is 48.28%. There were some amazing outlyers:
$58,000 bid - $8,000 sales price
$44,000 bid - $5,000 sales price
$45,000 bid - $3,000 sales price
$80,000 bid - $21,000 sales price
$115,000 bid - $42,000 sales price
The average number of days between the sheriff's sale and the date of the accepted contract is 291--sneaking up on a year. This does not include the time it takes to foreclose, which can be an additional two to twelve months.
Granted, this is a relatively small sample (however, the standard deviation is 0.1656, so the difference is certainly statistically significant), but what is the cause of incredible loss of value? Three possibilities come to mind:
The calculation:
The sale price to a new buyer after the sheriff's sale divided by the amount bid by the lender at the sheriff's sale as a percentage.
The data:
The amount bid by the lender at the sheriff's sale is essentially the money the lender has lost, between the principal balance of the loan, accrued interest, taxes and insurance paid by the lender, and costs of the foreclosure. The sale price to a new buyer is the actual price paid by someone who is buying the property after the foreclosure has gone through and the property has gone back on the market.
The results:
The price paid by the new buyer is a little more than half of what the lender bid at the sheriff's sale. For seventy-six properties analyzed, the drop is 48.28%. There were some amazing outlyers:
$58,000 bid - $8,000 sales price
$44,000 bid - $5,000 sales price
$45,000 bid - $3,000 sales price
$80,000 bid - $21,000 sales price
$115,000 bid - $42,000 sales price
The average number of days between the sheriff's sale and the date of the accepted contract is 291--sneaking up on a year. This does not include the time it takes to foreclose, which can be an additional two to twelve months.
Granted, this is a relatively small sample (however, the standard deviation is 0.1656, so the difference is certainly statistically significant), but what is the cause of incredible loss of value? Three possibilities come to mind:
- The lenders loaned way more than the property was worth;
- The foreclosure process takes too long, and allows the properties to remain vacant for such long period of time that they significantly deteriorate;
- Something about the property being vacant and/or foreclosed somehow stigmatizes the property, and makes many buyers avoid them.
Any other ideas, or better yet, suggestions?
Friday, January 30, 2009
Another attempt
I had to stave off another attempt to commit fraud via a HUD-1 Settlement Statement a few weeks ago. This time I alienated what is apparently the First Centrally located State Bank which is located in Iowa--if you catch my drift.
This was an FHA loan. There was a provision requiring the seller to pay $3,000 of the buyer's closing costs. Prior to closing we received a preliminary HUD-1 from the short-sleeved-dress-shirt-wearing closing agent which accurately showed the $3K as a credit from the seller to the buyer. When we arrived at closing, the seller paid closing cost credit had been reduced to $700. Since this was an FHA loan, the buyer was required to put in 3% of his own money (the closing was in 2008). If he had been given the whole $3K, he would not have met this requirement, so the lender reduced the seller paid closing cost credit.
The buyer reasonably asked how he was going to receive the remainder of his $3K in closing costs. We volunteered that we had no objection to paying the full $3K, but it would have to be shown on the settlement statement. The loan officer jumped in and told me that the seller had to write a check the the buyer for the $2,300 because it was in the purchase agreement. Apparently she was the buyer's attorney too!
Even though this was a state bank, and the loan officer was the one recommending we cut a check under the table, they were acting as a broker, so I am certain the end lender would not accept this. I told her that this was fraud, plain and simple, and I read to her the language from the settlement statement and from the the Certification of Seller in an FHA-Insured Loan Transaction, which says:
I certify that I have not and will not pay or reimburse the borrower(s) for any part of the cash downpayment.
That is when she really got mad. Actually turned red, wouldn't let me get a word in edgewise, tried to stare me down with an evil glare; that sort of mad. I gathered from her reaction that this was not her first "just write a check under the table that will solve everything the lender will never know" rodeo. Mr. Pocket Protector closing agent was not much help either, smugly repeating, "Oh, I'm sure there's something you can do to work this out." When I asked for suggestions, he was not very forthcoming.
I suggested that the purchase price and/or loan amount could be changed to ensure the buyer contributed his required 3%. They would have none of that.
Do you think I went too far when I told the loan officer that it was attitudes and actions like hers that have ruined this country? I thought maybe I had, but honestly, it really didn't seem to bother her.
This was an FHA loan. There was a provision requiring the seller to pay $3,000 of the buyer's closing costs. Prior to closing we received a preliminary HUD-1 from the short-sleeved-dress-shirt-wearing closing agent which accurately showed the $3K as a credit from the seller to the buyer. When we arrived at closing, the seller paid closing cost credit had been reduced to $700. Since this was an FHA loan, the buyer was required to put in 3% of his own money (the closing was in 2008). If he had been given the whole $3K, he would not have met this requirement, so the lender reduced the seller paid closing cost credit.
The buyer reasonably asked how he was going to receive the remainder of his $3K in closing costs. We volunteered that we had no objection to paying the full $3K, but it would have to be shown on the settlement statement. The loan officer jumped in and told me that the seller had to write a check the the buyer for the $2,300 because it was in the purchase agreement. Apparently she was the buyer's attorney too!
Even though this was a state bank, and the loan officer was the one recommending we cut a check under the table, they were acting as a broker, so I am certain the end lender would not accept this. I told her that this was fraud, plain and simple, and I read to her the language from the settlement statement and from the the Certification of Seller in an FHA-Insured Loan Transaction, which says:
I certify that I have not and will not pay or reimburse the borrower(s) for any part of the cash downpayment.
That is when she really got mad. Actually turned red, wouldn't let me get a word in edgewise, tried to stare me down with an evil glare; that sort of mad. I gathered from her reaction that this was not her first "just write a check under the table that will solve everything the lender will never know" rodeo. Mr. Pocket Protector closing agent was not much help either, smugly repeating, "Oh, I'm sure there's something you can do to work this out." When I asked for suggestions, he was not very forthcoming.
I suggested that the purchase price and/or loan amount could be changed to ensure the buyer contributed his required 3%. They would have none of that.
Do you think I went too far when I told the loan officer that it was attitudes and actions like hers that have ruined this country? I thought maybe I had, but honestly, it really didn't seem to bother her.
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