IX LOAN FRAUD - Experienced Real Estate Agents

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                                   I. INTRODUCTION
       This manual covers the policies and procedures of Funds Available and its
dbaS.. In the manual, Funds Available and its dbas will be jointly referred to as the
       The purpose of the manual is to put forth the Broker’s operational guidelines; to
ensure compliance with legal and regulatory matters; to define internal operating
procedures; and to preemptively address various issues that may arise within the course
and scope of business. The manual is intended to cover all aspects of the relationship
between affiliates (hereinafter “Associate”) and the Broker.
       This manual is to be used as a guide in your day to day operations as an
Associate member of Funds Available. This manual also governs your activities as an
agent of the Broker and you are legally responsible for knowing its contents and
adhering to the policies herein.
       The Broker’s policies and manuals may be revised from time to time. Such
modifications will be communicated via email, fax, or U.S. mail and it is your
responsibility to read and keep up to date on any changes. Failure to read the
communications does not relieve you of your duty to adhere to all policy changes. It is
also your responsibility to discuss with your Manager any items in this manual, or any
future changes, that you do not understand. After reading and reviewing the manual,
you must initial each page of this manual on the line provided to indicate your
understanding and acceptance of the policies and procedures contained herein. Do not
initial any page you do not fully understand, as you are legally responsible for adhering
to the policies contained in this manual.
       Note: For purposes of the definitions in this manual, the term “Associate”
       includes Managers whereas the term “Manager” does not include “Associate”.

The manual is divided in to the following sections:
       I.      Introduction
       II.     Mutual Benefit
       III.    No Authorization to Contract
       IV.     Independent Contractor Status
       V.      Internal Policies
       VI.     Operational Policies
       VII.    Real Estate Transactions
        VIII.   Loan Transactions
        IX.     Loan Fraud
        X.      Regulatory and Code Issues
        XI.     Governing Laws
        XII.    Binding Arbitration
        XIII.   Severence Clause

                               II. MUTUAL BENEFIT
For the working relationship of the Broker and Associate, the following policies will be used
to establish mutual benefit to both parties:
        To recapitulate DRE regulations, in all transactions the Broker shall be the agent of
the client whereas in all transactions the salesperson /loan originator is the agent of the
Broker, with authority to act as described herein.

The Associate and the Broker each agree to engage in business with the utmost manner
of professionalism, thereby promoting positive relations, enhancing the business’
reputation and its profits, and increasing community goodwill.
The Associate agrees to put forth their best efforts all aspects of the business. This duty
includes but is not limited to selling, exchanging, and leasing all real estate and business
opportunities listed with the Broker, and the solicitation of new clients and customers for
future business.
The Associate further agrees to act in a lawful and ethical fashion in all business
matters, thus promoting the professional reputation the Associate, as well as the Broker,
to the mutual benefit of both parties.
The Associate, as agent for the Broker, has a duty to act on the behalf of the Broker.
This duty requires that the Associate use his best efforts to promote and protect the
interests of the Broker as well as the interests of the Associate.
If a conflict of interest arises, the Associate will promptly notify the Broker in writing so
that the Broker can take appropriate steps to rectify the conflict, for the mutual protection
of all parties involved in the transaction.

Associates and Managers are reminded that it is against DRE regulations for real estate
sales people to receive compensation for licensed activities from anyone except the
employing Broker.
Therefore, all payments for referrals or cooperative arrangements with other offices must
be made to the broker for subsequent proportionate payment to the agent. Any
deviation or breach of this DRE requirement, or any illegal referral compensation
agreement carries with it stiff penalties..
Please note, the terms of the Manager/Salesperson contracts are expressly
incorporated herein. Likewise, the terms of this manual are expressly incorporated with
the Manager/Salesperson contracts.


No Associate or Manager or anyone acting in their behalf may sign any contract on
behalf of the Broker. This expressly includes, but is not limited to, contracts, leases
agreements, covenants, private loans, oral promises or any other sort of legally binding
agreement. Further, any agreement entered into by an Associate or Manager cannot
legally bind the Broker in any way absent the Broker’s express written consent. This
expressly does not include contracts, covenants or agreements signed by the Associate
on behalf of the Broker in the course of conducting real estate and loan transactions as
authorized herein.

                      IV. INDEPENDENT CONTRACTOR
        The relationship of the Associate to the Broker is that of an Independent Contractor.
This relationship affords the Associate maximum freedom and flexibility. This relationship is
further established and described in the Manager/Salesperson contract which includes how
listings and compensation will be handled in the event that the Associate or Broker choose
to terminate the affiliation. It must be signed by the Associate and is expressly included
upon affiliation with the Broker.
To meet state and federal requirements, an Associate is an Independent Contractor if:
         1. The Associate holds a valid real estate license.
         2. Substantially all of the sales associate's income or compensation as a real
             estate and loan agent (90% or more) must be directly related to sales or other
             output rather than to the number of hours worked.

         3. A written agreement which specifically states that the Associate will not be
             treated as an employee for federal and state tax purposes with respect to
             services performed as a real estate agent.
Upon affiliation with the Broker, the Associate shall enter into a written Independent
Contractor's agreement with BROKER or Manager on broker’s behalf. setting forth the
duties and responsibilities of both parties. This agreement shall include, but shall not be
limited to, the following:
     1. The terms of compensation for work performed during the time of affiliation with
     2. The terms of compensation for work in progress but not completed prior to
        termination of affiliation with Broker.
     3. The disposition after termination of affiliation of all active listings, buyer agency
        contracts, and pending sales the Associate obtained as an agent of the Broker. (See

Tax Filing Requirements
        Each Associate is responsible for maintaining the necessary personal financial
records for purposes of reporting income for state and federal tax requirements. The
Broker’s obligation is limited to providing a 1099 form as a record of earnings
Workers' Compensation Requirement
        According to California state law, as long as BROKER has a valid independent
contractor agreement with an Associate and adheres to the requirements of the Tax Equity
and Fiscal Responsibility Act of 1982, BROKER is not responsible for paying Workers'
Compensation Insurance.

                              V. Internal Policies
1.      Fair Employment Employer
     The Broker’s policy is that no person shall be discriminated against in either the
     hiring or firing of personnel. To that end, Associates shall not:
       a. Fail or refuse to hire, or discharge any person or otherwise, discriminate
           against an individual with respect to compensation, terms, conditions or
           privileges of employment, because of such individual's race, creed, color,
           religion, sex, age, marital status, sexual preference, or national origin.
       b. Limit, segregate or classify an employee or applicants for employment in
           any way which would deprive or tend to deprive an individual of
           employment opportunities or otherwise adversely affect the status of an
           employee because of race, creed, color, religion, sex, handicap, familial
           status, age marital status or sexual preference or national origin.
       c. The Broker and all Managers shall provide reasonable accommodations to
           qualified individuals with disabilities, unless such accommodation would
           impose an undue hardship on business operations. Qualified individuals
           with disabilities are those who, with or without reasonable accommodation,
           can perform the essential functions of the job.
2. Legal Advice Prohibited Associates may not, whether solicited or unsolicited, give
     any legal advice to any party. Associates may not offer legal opinion, or give advice
     regarding legal rights or obligations of a party. If a party requests legal advice, the
     Associate may refer the party to the default section in the Offer to Purchase form
     and must advise the party to consult with their own attorneys.
             The Associate may not explain the preprinted provisions of the standard
     listing, offer to purchase, or any other approved forms the parties may be asked to
     complete and/or sign. The Associate may only state what the preprinted provisions
     of the standard listing and offer to purchase cover and what any other approved
     forms cover.
             For any questions a client has about the specifics of the preprinted
     provisions of the standard listing and offer to purchase and any other approved
     forms, the Associate must refer the client to an attorney. For any further explanation
     of the preprinted provisions of the standard listing and offer to purchase and any
     other approved forms the Associate must refer the client to an attorney.

           If an Associate is solicited for any sort of legal advice the Associate must
   simply state that they are not qualified to give legal advice and that the client should
   consult an attorney.
3. Tax advice Prohibited: No Associate shall give any tax advice to any party,
   including advice pertaining to deductions, exemptions, and/or tax liabilities resulting
   from the purchase or sale of real estate. If any tax question and/or an explanation
   are requested, the Associate must simply state that they are not qualified to give tax
   advice and that the client should consult an attorney, accountant, or other
   appropriate professional having expertise in the area addressed by the client's or
   customer's question.
4. Trust account: Broker does not maintain a trust account and all earnest money
   deposits must be paid by buyer directly to escrow. Buyer should be asked to provide
   associate with a copy of the check and the receipt from escrow. However actual
   delivery of check to escrow must be by client and not broker
5. Borrower fees are also paid directly to escrow. In no event may Associate maintain
   a trust account or deposit buyer or borrower. It is also against both policy and law
   for the associate to deposit client funds into their personal accounts.
6. Escrow Checks. Associates shall never, without exception, take possession or
   control of an escrow check from a client. The Associate shall instruct the client to
   photocopy the check, and deposit the check into escrow directly, and then instruct
   the client to supply the Associate with a copy of the check and a deposit receipt. An
   Associate may not even deliver a check to escrow for a client. Simply put, an
   Associate is not to touch escrow checks from a client.
7. Payments for services such as inspections, appraisals, hazard reports, termite
   inspections etc. are also to be paid directly by client to the service provider.
8. Records:Maintenance Associates shall keep a record of their communications
   with clients including but not limited to written records of conversations, copies of
   letters, faxes and emails. In the event of a future dispute or problem, these
   records will serve as evidence on the Associate’s behalf. Document Retention:
   All original documents in a transaction will be maintained by Associate for a
   minimum of 3 years and must be turned over to the Broker upon of the
   termination of affiliation between the Broker and the Associate. Such records
   should be kept for three years from the closing date

9. Legal Assistance: If an Associate has a question on which legal opinion seems
   required the Associate’s Manager should contact the Broker immediately. The
   broker will consults with appropriate legal authorities for clarification and provide
   a response. Threat of legal action. If any Associate is threatened with a lawsuit
   the Broker must be informed immediately so that Broker can contact the Errors
   and Omissions policy issuer and so appropriate steps can immediately be
   initiated. Failure to inform broker will relieve the Broker of all legal responsibility
   and Associate will be responsible to indemnify broker for all expenses and losses
   that result.
10. Client Drug and Substance Abuse
   The Associate should also discourage the use of drugs or alcohol by any party
   during a transaction. Upon discovering that a party is under the influence of either
   drugs or alcohol, the Associate should take appropriate action to terminate the day's
   activity and suggest that the Associate and client or customer discuss or complete
   the transaction another time.
11. Automobile Use
     a. In the course of real estate transactions, the Associate must use his
         personal automobile. All operating, maintenance, repair and other related
         automobile expenses will be paid for by the Associate. Associates must
         have automobile insurance as required by California law.
     b. It is against company policy for a sales Associate have clients ride as
         passengers in their car. The Associate will be liable to the Broker for any
         expenses incurred by broker as a result of the violation of this policy. In
         accordance with California law, the Associate must require that all
         passengers wear a seat belt and any infant under the age of four years
         shall be secured in a restraining seat during transportation.
12. Anti-Harassment Policy: Professional behavior is a requirement around your
   fellow Associates, Managers, company employees, staff and customers.
   Harassment, including verbal, physical, visual, religious, and sexual is strictly
   prohibited at all offices affiliated with the Broker. The following is a list of things
   of examples that can be considered harassment; it does not represent an
   exhaustive list of impermissible harassing conduct:       Any racial, ethnic, sexual,
   religious, jokes /slurs /insults.

        a. Any physical contact such as unwelcome touching, groping, grabbing, or
        b. Any visual renderings of sexually suggestive materials or materials negatively
             reflecting an individual's ethnicity, race, ancestry, or sexual preference.
        c. Any unwelcome sexual advances, physical, verbal, and visual of a sexual
             nature that has a purpose or effect of work performance interference,
             intimidation, or hostile/offensive working atmosphere.
        d. Any comments as to a persons age, race, physical characteristics, sexual
             orientation, marital status or disability and similar subjects will be considered
        e. Note: this policy expressly includes crude or offensive jokes or attempts at
             humor, there is simply no excuse for any Associate or Manager to make
             discriminatory or offensive comments, regardless of whether the Associate
             considers it humorous. The Broker will not tolerate any excuses. In the event
             an employee, Associate, or any other staff person feels that he or she has
             been harassed, the incident must be reported immediately to the Division
             Manager or the Broker.
        f.   The anonymity of the accuser, as well as the accused, shall be held in
             confidentiality by the Division Manager and/or Broker. An investigation will
             commence and a written report will be filed. If the allegation involves a
             Manager or the Broker as the accused of such action, an outside investigator
             may be retained. Retaliation against complainants is strictly prohibited. Any
             employee, Associate or staff found guilty of engaging in harassment may be
             subject to disciplinary action up to and including reprimand, counseling,
             suspension, and termination.

                         VI OPERATIONAL POLICIES
1. Commission and Fees.
   Broker fees for transaction is defined in the contract. Brokers fees for Associate’s
   personal transactions will be the same as for any other transaction.
2. Commission Disbursement.
   Associate commissions are paid from escrow. Manager will fill out commission and
   forward to broker along with the contact information for the escrow company. Broker

   will sign the commission disbursement instructions when all documents except the
   HUD-1 have been received by the broker. The HUD-1 must be received by broker
   within three days of closing.
3. Drug, Alcohol, And Substance
   Use: Drug and alcohol use are strictly prohibited while engaged in real estate
   brokerage transactions. Drugs including prescription drugs and shall not be present
   or used during work hours unless medically prescribed and under the supervision of
   the Associate's health care provider. Any situation in which duties cannot be
   properly performed without the assistance of prescribed medication must be reported
   to the Broker. Drug and alcohol use in the workplace is strictly prohibited and may
   be grounds for termination.
4. Changes in Name, Address or Telephone Number
   All changes in name, address, and telephone numbers of any Associate must be
   reported immediately by the Associate to the Division Manager or the Broker who will
   make a record of the changes. Associate must also report these changes to the
   California Department of Real Estate and the local Board/Association of REALTORS
5. Mandatory Reporting to Broker
   All Associates must immediately report to the Broker:
      a. Any party including all customers, having complaints involving real estate
      b. Automobile accidents occurring while the Associate is participating in real estate
           transactions. (See Broker indemnity agreement)
      c. Criminal charges against the Associate, with the exception of traffic offenses.
      d. Civil lawsuits or administrative actions involving real estate brokerage
      e. Party default under an accepted contract.
      f.   Threatened legal or administrative actions involving the parties and/or a real
           estate transaction.
      g. Acts of discrimination committed by Associates or parties to transactions.
      h. Unresolved disputes between Associates, within or outside the office.
      i.   Physical injuries within the office or while in performance of services or duties
      j.   Local Board/Association contacts concerning disciplinary action or other

6. Personal Assistants
       The California Department of Real Estate and the California Real Estate
Commissioner prohibits the Associate or Manager from personally employing licensed
persons to engage in real estate practice. Therefore all licensed assistants will be
considered Associates and governed by this policy manual and the independent contractor
agreement. The Broker will, however honor any commission sharing agreement between
supervising Associate/Manager and the Associates they supervise.
Associates and Managers may hire their own unlicensed assistants at their own expense.
The Associate is then responsible for all tax and legal duties as an employer of the
unlicensed assistant. Unlicensed assistants comply with the following provisions, and
provided that the Associate or Manager assume legal responsibility for ensuring compliance.

8. Unlicensed Assistants
       The California Department of Real Estate and the California Real Estate
Commissioner prohibits the Associate or Manager from personally employing unlicensed
persons to engage in real estate practice. Therefore all licensed assistants will be
considered Associates and governed by this policy manual and the independent contractor
agreement. The Broker will, honor any commission sharing agreement between supervising
Associate and the Associates they supervise.
       Associates and Managers may hire unlicensed assistants at their own expense. The
Associate or Manager and not the Broker is responsible for all tax and legal duties as an
employer of the unlicensed assistant. Unlicensed assistants must comply with the following
provisions, and the Associate or Manager employing the unlicensed assistant assumes full
legal responsibility for ensuring compliance.

Unlicensed assistants MAY:
       a. Answer the phone, forward calls and give information contained on the listing
            agreement as limited by the Broker.
       b. Fill out and submit listings and changes to any multiple listing service.
       c. Follow up on loan commitments after a contract has been negotiated and
            generally secure and prepare status reports on the loan progress.
       d. Assemble documents for closing.
       e. Secure public information from courthouses, utility districts, etc.
       f.   Have keys made for company listings.

       g. Write ads for approval of licensee and Broker, and place classified advertising.
       h. Receive, record, and deposit earnest money, security deposits and advance
            rents under the direct supervision of Broker.
       i.   Type contract forms for approval by licensee and Broker.
       j.   Monitor licenses and personnel files.
       k. Compute commission checks.
       l.   Place signs on property.
       m. Order repairs as directed by the licensee.
       n. Prepare flyers and promotional information for approval by licensee and Broker
       o. Deliver documents and pick up keys.
       p. Place routine telephone calls on late rent payments.
       q. Schedule appointments for licensee to show listed property.
       r.   Gather information for a comparative market analysis (MLS Sites).
       s. Hand out objective, written information on a listing or rental.
       t.   Give a key to a prospect, or unlock property.
       u. Disclose the current sales status of a listed property.
Unlicensed assistants MAY NOT:
       a. Solicit by telephone or in person to potential listing clients or purchasers
       b. Show properties for sale and/or lease to prospective purchasers
       c. Host public open houses, host licensee open houses, home show booths or fairs
       d. Answer any questions concerning properties listed with the firm except only that
            information contained on the listing agreement.
       e. Discuss listings, offers, contracts, or other similar matters with persons not
            affiliated with Broker
       f.   Be paid on the basis of real estate activity; such as percentage of commission, or
            any amount based on listings, sales, etc.
       g. Act as a "go between" with a seller and buyer such as when an offer is being
       h. Negotiate or agree to any commission split or referral fee on behalf of a
            licensee or Broker
9. Confidentiality
       All records of the Broker, as well as conversations between Associates, between the
Broker and Associates, and between Associates and parties to the transaction, are
considered confidential. No information obtained while working for the Broker shall be used

to the detriment of the Broker. Should confidential information be used by an Associate or
former Associate against the Broker, the Broker has the right to take legal action against the
Associate for any damages suffered and to enjoin the associate from continuing such a
practice. This detrimental action includes but is not limited to, diverting income from the
          All Associates shall also be obligated to honor the confidential information of any
client or non-client party to any transaction, as designated in writing on an Agency
Disclosure form or other document. All documents stating a party's confidential information
shall be kept by the Division Manager in a special locked file to guard against any
unauthorized sharing of this information. Access to this information shall be limited to the
Associate working with the party whose information is to be accessed.
10. Contacting the Broker
          Any questions or concerns that arise for an Associate during the course of any
transaction should be first directed to their supervising Manage.         If the Manager cannot
address the Associates question or concern, the Manager should then contact the
Broker. If an emergency situation arises where the Associate cannot reach any
Manager the Associate may contact the Broker directly with their question or concern.
          The Broker will generally be available during business hours to discuss real estate
and loan matters. If both the Manager and the Broker cannot be reached, the Associate
should not act until he or she is able to contact the Manager or the Broker. However, if the
emergency pertains to the wording of a contract, a protective clause to the effect that "this
contract is subject to the review and approval of legal counsel within (an agreed upon time
frame) of acceptance of this offer" should be inserted in the contract.
11. Signs, stationary and email addresses and addresses
          a. Associates may purchase their signs, stationary and other supplies wherever
             they wish. Each office is permitted to develop its own signs, logos and
             emblems as long as such designs meet the requirements in the advertising

All forms used in residential real estate transactions will be the appropriate CAR forms
as available through Winforms. These forms will be available to the Associate upon
joining the California Associate of Realtors.

In Real Estate Transactions:
   1. The Associate generally represents either the Seller or the Buyer. The
       Associate’s first responsibility is to act in the best interest of the represented
       party. The Associate has a fiduciary responsibility to the employing party. The
       Associate will therefore at all times be careful and cognizant of any information
       they share with the other party to the transaction, so as to not harm the interest
       of the employing Seller or Buyer.
   2. However, at the same time the Associate has a duty of honesty running to the
       other party. The Associate must disclose all material information that will affect
       the other party’s decision as to whether they will proceed with the sale.
       Examples of unacceptable behavior are:
           a. Not disclosing significant defects in the property to the buyer.
           b. Telling the Seller the Buyer will be putting down a higher down payment
               than they will in fact be investing.
   3. Disclosures: Broker’s policy requires that Associate make all CAR and DRE
       required disclosures. The complete list of required disclosures is in Appendix A
       and is incorporated here by reference and summarized in the Real Estate
       Transaction Checklist in Appendix B.
   4. Providing careful, complete and honest information provided on the appropriate
       CAR forms will help avert many of these problems. It is therefore, the Broker’s
       policy that these forms must be filled using complete, accurate and up to date
       information and that the other party must be informed of any change in the
       information provided immediately after the Associate becomes aware of it.
   5. An additional point about the Transfer Disclosure Statement (TDS). It is the
       Broker’s policy that agent will be diligent in examining and disclosing all factors
       that may affect the value or desirability of the property. Any statement such as

   “Nothing to disclose” or evidence of cursory examination will be grounds for
   rejection of the file.
6. Purchase Agreement: It is the Broker’s policy that both Buyers and Sellers will
   be provided with a copy of the appropriate purchase agreement, with standard
   contingencies filled in, on first contact. This is important so the potential clients’
   have time to read it any obtain clarification from a legal authority of their choice if
   desired. It also greatly reduces the chances of the deal going sour later.
7. Ownership of Contract: As previously discussed, it is the Broker that is the agent
   of the Seller or Buyer. All Associate commissions are earned at closing.
   Therefore, if the association between the Associate and the Broker is terminated
   the listing contract stays with the Broker unless released. Purchase transactions
   in progress also stay with the Broker for the same reason. Since all commissions
   are earned only upon closing it is the Associate that services the contract at
   closing who earns the commission.
8. Both buyers and Sellers will be given copies of every document they sign at time
   of signing.
9. Personal Interest Provision: If a Sales Associate with the Broker is representing
   himself/herself, or a family member, or relative in a transaction, the Associate will
   complete the "Personal Interest Disclosure & Consent" form, securing the
   signatures and consent of all parties to the transaction, giving a signed copy of
   the form to other parties, and keeping a signed copy for the Associate's files on
   the transaction.
10. Documentation: All documents will be submitted to Manager or broker approved
   transaction coordinator as per the Transaction checklist in Appendix B. All fees
   charged by the transaction coordinator will be paid by Associate.

1. Presentation to all owners: Listing presentations must be made to all owners on
   the title of the policy at the same time. An owner who is absent at the time of the
   presentation can later claim to be unaware of the terms of representations and
   the Broker and Associated could possibly be denied commission.
2. Listing agreements: Listing agreements must be signed by all owners. CAR form
   RLA should be used for the listing agreement. The Associate must have the
   Sellers also sign the agency disclosure, (AD-1) and the dual agency disclosure,

   (DA) signed at the same time. The Seller must also be provided with Seller’s
   Advisory form SA-11 at the same time.
3. Disclosures: All Sellers disclosures and transfer disclosures (forms SDS and
   TDS) should be completed at the time the listing agreement is signed.
4. MLS: The Broker’s goal is to maximize exposure of the Sellers property so as to
   obtain the best possible offers. It is the Broker’s policy that all listings will be
   offered on the Multiple Listing Service to cooperative brokers. If the Seller
   expressly does not wish to have the property listed on the MLS they must
   indicate so on CAR form SEL.
5. Co-operative brokers: Commission offered to cooperative brokers will be 50% of
   total commission or at least 2% the sale price whichever is greater.
6. Cancellation of Listing: Associates shall not have the authority to cancel or
   amend a listing contract or provide for an early termination without the written
   consent of the Broker or the Associate’s manager. In the event, the Seller
   desires to cancel a listing contract the Associate must notify the Manager. Such
   desire to cancel may be expressed in verbal or written form. Such requests will
   always be honored. The Manager will contact the Seller to find out why the
   Seller wishes to cancel. If cancellation is due substandard performance on the
   part of the Associate, Manager will attempt to save the listing and assign it to a
   different Associate. The entire commission then belongs to the new Associate.
7. Listing protection: Whenever a listing contract expires or is cancelled Associate
   shall deliver to the Seller a list of buyers who have attended individual showings
   or who have seriously discussed purchase terms with the Associate. This list
   must be personally delivered or mailed to the Seller no later than three days after
   the expiration or cancellation date.
8. If the Associate later becomes aware that the property is listed with another
   broker, the Associate shall deliver to the other broker a complete list of names of
   all buyers who attended individual showings, seriously discussed purchase terms
   with Associates or the Seller, or who submitted offers during the term of
   Associate's listing.
9. Property security: It is the Associate’s responsibility to exert as much effort and
   influence as possible to ensure that listed properties are secure. When using
   lockboxes with security codes the Associate will require a faxed copy of the
   cooperative agent’s business card before revealing the code.

   1. All prospective buyers will be given a copy of the purchase agreement on first
   2. At the time of signing the offer the buyers must also sign the agency disclosure
       (AD -1) and dual agency disclosure (DA). The Buyer is to be provided with the
       Buyers Inspection Advisory (BIA) when they sign the contract. The buyer should
       sign a receipt for the BIA.
   3. Associates are required to diligently monitor contingencies to ensure buyer has
       the information in a timely fashion.
   4. Inspections, and other related services: The Broker shall not be liable to the
       Associate for any expense incurred by the Associate unless approved in writing
       and in advance. All inspections and related services, such as well and septic
       inspections, surveys, etc., are to be ordered in the name of, billed to, and paid by
       the Seller or Buyer; billings shall never be made to the Broker.

                         VIII. LOAN TRANSACTIONS
The Broker has arranged wholesale accounts with approximately 70 residential prime
and sub-prime lenders, as well as various commercial lenders and reverse mortgages
for the Associates to originate loans. Associates will be provided with names of lenders,
account executive names and contact information to price loans.. In case of difficulty
contacting lender managers should call broker to resolve the difficulty.
   1. Under California Law it is the loan originators legal duty to ensure that the loan is
       in the best interest of the borrower.
   2. Associates working as loan originators will need to set up an account with a
       Broker approved credit report providing company. Verbal authorization to run the
       credit of any client must be received prior to running credit and a written
       authorization must be obtained within 3 days of running credit.
   3. Credit reports charges must be billed directly to the Associate and may be
       passed on as a hard cost to the borrower.
   4. By law it is required that the borrowers authorization, Good Faith Estimate and
       California mortgage Loan Disclosure Statement, Truth in Lending, Fair Lending
       and other disclosures be be dated and signed within 3 days of running the credit
       of a client. (See transaction check list)

   5. Many lenders require a commission payment agreement before they will disburse
       commissions. A sample agreement is in Appendix B along with the transaction
       check list. The commission agreement must be signed for all transactions along
       with disclosures
   6. Loan originators are required to use a company approved loan processor for their
       first six loans. The processing fee can be passed on as a hard cost to borrowers,
       and can be listed on the good faith estimate.
   7. Loan originators will be required to acquire their own, properly licensed copy of
       the Encompass loan origination software: . Loan originators are also expected to
       under go the training programs offered by the software vendors.
   8. A DRE license is required to quote interest rates and sign disclosures.
   9. Lenders guidelines should be followed in submitting loans. These guidelines can
       be obtained from the account executive. Submission cover sheets can be
       obtained from your account executive and must be used for every loan
       transaction. Lenders initial submission packages usually include: the submission
       coversheet; the transmittal summary, the borrower’s summary and the 1003
       along with the credit report of the borrower
   10. When the associate is working as both loan agent and the agent for purchase a
       disclosure of affiliated business must be given to buyer or borrower.
   11. A complete list of required disclosures is included in the transaction check list in
       Appendix B. The list can also be emailed to you for repeated use. Documents
       must be submitted in the order they are on the list.

Six Month Refinance Provision
       Any Associate/loan originator who refinances a loan for a customer within six (6)
months (three (3) to six (6) varies by lender) for which they served as the loan originator
on the original loan is generally required to refund all fees and commission from the first
loan to the customer. Associate must then also refund the portion of the commission
that paid the Broker’s fee in the original transaction to the lender.

                                   IX LOAN FRAUD
Loan Fraud is an extremely serious issue when originating loans. The
consequences are both financial and criminal to the broker, the associate and the
borrower. It is therefore discussed separately here.

Loan Fraud and the Consequences
       To all Associate or loan officers, we want to advise you that you will bear the
responsibility for all of your actions, performed in the course of this business. It is a
Federal Crime to submit a loan application containing false or misrepresented

Common Examples of Loan Fraud
      Submission of inaccurate information, including false statements on loan
       applications and falsification of documents claiming to substantiate credit,
       employment, deposit and asset information or personal information including
       identity, ownership/non-ownership of real property, etc.
      Forgery or misrepresentation of partially or primarily inaccurate information.
      Inaccurate representation of current occupancy or intent to maintain required
       occupancy as agreed in the security instrument.
      Lack of due diligence or concern by the Broker, loan officer, interviewer or
       processor, including failure to obtain or divulge all information required by the
       application and failure to request further information as dictated by borrowers
       response to other questions.
      Acceptance of information or documentation, which is known or suspected, to be
       inaccurate or acceptance of information, which should be known or should be
       suspected to be inaccurate. This includes: simultaneous or consecutive
       processing of multiple owner occupied loans from a single Applicant where
       information differs on each application.
      Permitting an applicant or interested third party to assist with the
       processing of the loan.
      Failure of the Broker or loan originator to disclose any relevant or
       pertinent information.
      Submitting/Closing/Funding loans from states in which the Broker, loan
       officer or originator are not properly licensed or registered to conduct

         Submitting/Closing/Funding loans from states in which the parent
          company is not licensed to conduct business in.

Consequences of Loan Fraud
          Fraudulent loans may not be resold in the secondary market for home
mortgages. If a loan is found to be fraudulent after its sale, the parent company in which
the loan was closed in is obligated to repurchase the loan from the investor. If an
Associate or loan officer engages in fraudulent loan activity they will be IMMEDIATELY
TERMINATED. In any case, the Associate who engages in the fraudulent behavior will
fully liable for the cost of the buy back, plus any legal fees incurred to recoup the cost of
the loan.
          Fraudulent loans harm our reputation and strain our relationships with the
investors and mortgage insurance providers. It will also end a loan officer's career
immediately. The consequences to those who participated in loan fraud are even more

Consequences of loan fraud to the loan officer
         Criminal prosecution, which may lead to possible fines
          and/or imprisonment; revocation of broker's license and
          branch office license.
         The inability to access lenders caused by the exchange of legally permissible
          information between lenders: mortgage insurance companies: FNMA: FHLMC
          and other investors: police agencies: and state and federal regulatory agencies.
         Civil action by the applicant (borrower) and/or any or all parties
          involved in the transaction.
         Loss of Commissions.

   Consequences of loan fraud to the borrower
       Borrowers can be affected by the acceleration of debt. FNMA/FHLMC Deed of
Trust (revised 09/1990) Item #6 states: Borrower shall also be in default if Borrower,
during the loan application process, gave materially false or inaccurate information or
statements to lender in connection with the loan. These false or inaccurate information or
statements include, but are not limited to, representations concerning Borrower's
occupancy of the property as a principal residence. Consequences include:
      Criminal prosecution, which may result in possible fines and imprisonment.
      Civil actions against the borrowers.
      Civil actions by other parties to the transition, such as seller or real-estate broker.
      Termination of employment.
      Forfeiture of any professional license
      Adverse, long term effect on credit record.
      A criminal record.

NOTE: Foreclosure under this section of the Deed of Trust does not require the Borrower
to be in payment default. As such, the Borrower will not have the benefit of
reinstatement. In order to cure the default, the borrower must pay off the loan prior to the
sale date of the property.

A. Real Estate License Requirements
   1. The Associate shall maintain at all times a valid and current Real Estate License at
       his or her own cost.
   2. The Associate shall meet all Continuing Education (CE) requirements as established
       by the California Department of Real Estate.
   3. Proof of CE compliance and license renewal shall be provided to Broker no later
       than fifteen (15) days prior to the applicable renewal date.
   4. The Associate is responsible for all CE, licensing and license renewal fees, or fees
       relating to name changes.
B. Membership In The Board Of Realtors
   1. The Associate, if specializing in residential transactions, agrees to become a
       member, and remain a member in good standing, of the local Board/Association of

        Realtors, California Association of REALTORS, National Association of REALTORS
        and the MLS, and further agrees to be responsible for all applicable dues and fees.
   2. The Broker is a member of the California Association of REALTORS, the National
        Association of REALTORS. The Associate may choose to join any
        Board/Association in which the Broker holds membership. The Broker is currently
        the primary in the South Bay Association of RealtorsThe Associate may also join any
        other Boards/Associations as a primary member, at their own cost. However, this is
        provided that the Associate pays for the Broker to join as secondary membership as
        designated realtor.
   3. The Associate further agrees to abide by the rules and regulations and code of
        ethics of the organizations to which the Broker must adhere as a member thereof,
        and any organizations which the Broker joins in the future.
The above provisions must be complied with at the Associate's personal cost:
        Associates are reminded that the use of the term “REALTOR” is restricted to
members of the National Association of Realtors and use by non-members is considered
grounds for disciplinary action by the DRE.


        (Prohibition against kickbacks and unearned fees)

In accordance with the Real Estate Settlement Procedures Act and Regulation X.
These acts together, in the simplest terms, prohibit the payment or acceptance of fees
for the referral of clients from or to related businesses. Payment must only be made or
received for services actually rendered and must not exceed the going market rate for
the service rendered.
Fees include any item of value. Some non cash examples are
   1.   Gifts of more than nominal value
   2.   Meals out
   3.   Tickets to events
   4.   Vacations or use of vacation property
   5.   Free or discounted services
   6.   Use of automobiles
   7.   Gifts made to family members of associate.

The following is a list of settlement services and settlement service providers, including
but not limited to:

    1. Mortgage brokers
    2. Lenders
    3. Loan originators
    4. Title company services
    5. Attorneys and legal services
    6. Escrow services
    7. Credit reporting companies
    8. Property inspectors
    9. Credit report providing companies.
    10. Home owners insurance agents and companies
    11. Homeowners warrantee policy providers.
    12. Building contractors
    13. Appraisers
    14. Building Inspectors
The list is not exclusive and other similar services would be covered by these laws.

It is therefore against the Broker’s policy for any Associate to pay or receive any form of
payment for referral fees. Further, all payments for services rendered should be made
directly by the client to the provider of the service.

In referring service providers such as appraisers, inspectors etc. the Associate
will always provide more than one name. While you may say “His services have
been used by our company” you might not endorse him as being great or better in
any way. Once you provide the client with the contact information it is the clients
job to make the contact and set the time. The service provider will be paid directly
by the client.

        The basic statutes making up the body of law known as the antitrust laws are the
Sherman Act, the Clayton Act, the Robinson Patman Act, and the Federal Trade
Commission Act. Together these acts:
           1.     Prohibit agreements, combinations or conspiracies between two or more
                  persons, firms, corporations, or associations which unreasonably restrain
           2.     Prohibit the monopolization or any attempted monopolization of any market
                  for a particular product or service.
        It is not necessary to show a written contract to prove a violation of the Act.
"Understandings," formal or informal, written or oral, express or implied, are enough for a
court or jury to infer that an agreement has been reached. As the Supreme Court said in a
leading antitrust case, "[a] wink of the eye or a shrug of the shoulder is often more important
than a formal handshake."
        Therefore, in no event may an Associate or Broker enter into any agreement with
any member of another firm as to charges for acting in a real estate or loan transaction. The
following phrases and any similar statements are provided as examples of what could be
construed as collusion or price-setting:
1. "We would like to charge a lower commission, but the board has a rule."
2. "This is the rate that all Realtors charge."
3. "The MLS will not accept less than a 120 day listing."
4. "Before you list with XYZ Realty, you should know that there nobody is going to work on
    their listing."
5. "If John Doe is really professional (or ethical) he would have joined the Board."
6. "The Board requires that all Realtors force their sales people to join it."
7. "The best way to deal with John Doe is to boycott him" or "we don't worry about John
    Doe; we just don't show his listings."
8. "If you valued your services as a professional, you wouldn't cut your commission."
9. "No board member will accept a listing for less than 90 days."
10. "Let him stay in his own part of town, this is our territory."
11. "If he was really a professional, he wouldn't use part timers."
12. "X is the going rate in this area."

13. "We have to charge that commission since our rates are set by the California
    Department of Real Estate."
14. "The standard commission in this area is X."
15. "When I see that guy's signs, I just drive the prospect down another street."
16. "We've all agreed that any commission below X is unfair."
17. "Something's got to be done about that company, nobody can charge such a low
    commission and make a living."
18. "That price cutter has no business being a member of the board."
19. "You will not get a lower commission from a Realtor."

C. Equal Housing and Equal Credit Opportunity
        The Equal Housing and Equal Credit Opportunity Codes apply to the sale, purchase,
exchange, rental or lease of real property and the origination and negotiation of loans.
Associates have the responsibility to offer equal service to all clients and prospects without
regard to race, color, religion, sex, handicap, familial status, sexual orientation or national
origin. This encompasses:
    1. Standing ready to enter broker-client relationships or to show property equally to
        members of all racial, religious, or ethnic groups.
    2. Exerting their best efforts to conclude all transactions.
    3. Associates, individually and collectively, in performing their agency functions
        have no right or responsibility to volunteer information regarding the racial,
        religious, or ethnic composition of any neighborhood or any part thereof.
    4. Associates shall not engage in any activity which has the purpose of inducing
        panic selling or blockbusting.
    5. Associates shall not print, display, or circulate any statement or advertisement
        with respect to the sale or rental of a dwelling that indicates any preference,
        limitations, or discrimination based on race, color, religion, sex, handicap, familial
        status, or national origin.
    6. Associates in the negotiating of loans for a borrower shall not take into
        consideration when negotiating with lenders any factors other that the borrowers
        financial situation and the property value


         An investigation by the Broker will follow any accusation of discrimination. If the
investigation confirms an act of discrimination, the Associate's actions will be reported to the
California Department of Real Estate for further investigation and any necessary disciplinary
action. Upon the finding of a violation all affiliation between the Broker and the Associate
will be terminated.

E. Advertising Regulations:
1. General Advertising Principles
    a. No Associate shall advertise to sell, purchase, exchange, rent or lease a property in
         a manner indicating that the advertiser is not engaged in the real estate or loan
         origination business.
    b. All advertising should be placed in media or general circulation
    c. No advertisement by any Associate shall direct responses to only post office box
         number, without telephone number, and/or street address.
    d. Every Associate shall affirmatively and unmistakably indicate in any advertising that
         he is a licensed real estate agent by using Broker’s name or the words Agent (Agt.)
         or Broker (Bro).
    e. All Associates shall advertise under the firm name this includes: offers to purchase,
         sell, rent, or lease any property or arrange loans.
    f.   Properties may not be advertised in a misleading manner. For example a property
         that requires serious fixing can not be advertised as “ready to move-in.”
    g. Only ACTIVE properties may be advertised or shown on websites unless a clarifying
         clause such as “back offers” is included. All sold properties must be removed from
         the “Available Properties” tab of your website.
    h. Advertising to arrange loans must include the Broker’s license number: 1523840
    i.   All advertising must be under the direct supervision of the Broker and approved by
         broker or manager.
    j.   No Associate shall post a sign on any property for which he does not have an active
         written authorization from the owner.
    k. Associates may not advertise in any medium by utilizing letters in their name larger
         than those of Broker.
2. Prohibited Advertising Language
Advertising copy used by Associates must describe the property, not the desired buyer or
tenant. Examples of prohibited advertising language are:

   a. Race, color, national origin: Real estate advertisements may not state a
        discriminatory preference or limitation on account of race, color, national origin or
        any other protected class, and shall not describe the housing, the current or potential
        residents, or the neighbors or neighborhood in racial or ethnic terms. However,
        Associates may use phrases such as "master bedroom", "rare find" or "desirable
   b. Religion: Associates shall not use advertisements which contain an explicit
        preference, limitation or discrimination on account of religion. Advertisements which
        use the legal name of any entity that contains a religious reference (i.e., Sisters of
        God Catholic Home) or a religious symbol (such as a cross) must contain an
        appropriate disclaimer against any religious preference or limitation.. Associates
        may use descriptions of the property (apartment complex with chapel) or the
        services (kosher meals available), and terms (Merry Christmas or Happy Easter) or
        symbols (Santa Claus or Easter Bunny) relating to certain religious holidays.
   c. Sex: Associates shall not advertise single family dwellings or separate dwelling units
        in multifamily housing in a manner which explicitly indicates a preference, limitation
        or discrimination on the basis of sex. Associates may, however, use terms such as
        "master bedroom," "mother in law suite" and "bachelor apartment" which describe a
        property type..
   d. Handicap: Associates' real estate advertisements shall not contain exclusions,
        limitations or other indications of discrimination based on handicap. Associates may
        describe the property (great view, fourth floor walk up, walk in closets), the services
        or facilities (jogging trails), the neighborhood (walk to the bus stop), the conduct
        required of residents (nonsmoking), and accessibility features, such as a wheelchair
   e. Familial Status: Associates shall not place advertisements which contain limitations
        on the number or ages of children or state a preference for adults (unless the
        property meets the housing for older persons exemption), couples or singles.
        Associates may use descriptions of the property (two bedroom, cozy, family room),
        services and facilities (no bicycles allowed) or neighborhoods (quiet streets).
   f.   The only exception to the above is when advertising property in a senior citizens
        complex that is designed and identified as being essentially meant for occupation by
        those over 55.
3. Blind Advertising

All Associates, Managers and Unlicensed assistants are expressly prohibited from running
blind advertising. At the minimum the word agent or broker along with a phone number must
be provided.
4. Do not Call List:
Associates may never knowingly call anyone on the do not call list. If an Associate
unknowingly calls someone on the do not call list, the Associate or Manager must apologize
and hang up immediately. If an Associate fails to comply with this policy, liability for violation
rests with that Associate personally. Associates will indemnify the Broker for any violation of
this policy

        XII. Binding Mediation and Arbitration Agreement
1. It is the policy of the Broker to resolve all disputes by alternative methods of dispute
2. Any controversy, claim or dispute arising out of or relating to this Agreement, between
    any Associate or Manager and the Broker shall first be submitted to the South Bay
    Association of Realtors for mediation.
3. If the parties are unable to mediate their dispute, the matter shall be referred to Binding
    Arbitration. This clause pertains to any controversy, claim or dispute arising out of or
    relating to this Agreement, between any associate or manager and the Broker shall be
    settled solely and exclusively by binding arbitration in Los Angeles, California. The
    Arbitrator will be chosen solely at the Broker’s discretion.
4. Such arbitration shall be conducted in accordance with the California rules of evidence,
    discovery and civil procedure, and any other applicable rules chosen by the Arbitrator.
5. One Arbitrator shall be chosen by the Broker. Each party to the arbitration will pay its
    pro rata share of the expenses and fees of the Arbitrator, together with other expenses
    of the arbitration incurred by or approved by the Arbitrator.
6. The arbitration may proceed in the absence of any party if written notice, pursuant to the
    rules governing the arbitration (California rules of civil procedure) has been given to such
    party. Each party shall bear its own attorneys fees and expenses.
7. The parties agree to abide by all decisions and awards rendered in such proceedings.
    Such decisions and awards rendered by the Arbitrator shall be final and conclusive.

8. All such controversies, claims or disputes shall be settled in the manner discussed
   above, in lieu of any action at law or equity; provided however, that nothing in this
   subsection shall be construed as precluding the bringing an action for injunctive relief or
   other equitable relief.
9. The Arbitrator shall not have the right to award punitive damages or speculative
   damages to either party and shall not have the power to amend this Agreement. The
   Arbitrator shall be required to follow applicable California law.

                              XII. Severance Clause
If at a later date any clause in this contract or the policy manual are held to be
such invalid such clause will no longer apply. However all other clauses in the
contract and policy manual will continue to remain binding on all parties.


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