Real Estate and Appraisal Industry News

When must Real Estate Agency Relationships be disclosed to a consumer?

VanEd is constantly being asked this question by pre-license students, and the answer only varies slightly from state to state, but generally the answer is that brokerage services must be disclosed at "First Substantial Contact". This is typically defined as the earliest practicable opportunity during a conversation with a consumer, but is definitely required at the time before the licensee provides specific services or solicits specific information. 

Recently the Nebraska Real Estate Commission (NREC) adopted an interpretation further defining First Substantial Contact. We are reprinting the information provided in the NREC Spring 2013 Commission Comment newsletter below for the benefit of students and consumers.

First Substantial Contact

Chapter 76. Real Property

Article 24, Agency Relationships

SS 76-2421 (1) contains two phrases (in bold italics below) that the Nebraska Real Estate Commission believes need some clarification to guide the conduct of real estate licensees in their practice with clients and customers, to assist designated brokers in their supervision of their affiliated licensees, and to help real estate trainers formulate and implement practical, meaningful agency disclosure training.  

Section 76-2421 (1) requires that “At the earliest practicable opportunity during or following first substantial contact  [emphasis added] with a seller, landlord, buyer, or tenant . . . the licensee who is offering brokerage services to that person or who is providing brokerage services for that property shall” provide that person, whether a client or customer, with a written copy of the current brokerage disclosure pamphlet and disclose in writing to that person the types of brokerage services offered or which party the licensee is representing.

Although, as has been said in Commission Comment before (see Winter 2000 issue), “earliest practicable opportunity” is somewhat subjective and “depends on the circumstances of each situation,” the Commission interprets “earliest practicable opportunity” to mean that the required brokerage disclosure pamphlet should be presented and signed and the disclosure of the types of brokerage services offered or of which party the licensee is representing should be made BEFORE the licensee provides“specific assistance” to that client or customer. IF the written disclosure is not made before the specific assistance is provided, it must be made immediately thereafter.

Specific assistance means eliciting or accepting compromising information about a potential or actual client’s or customer's real estate needs.  Compromising information is information that would reduce, impair or erode that party’s bargaining power in an arm’s length negotiation.  Compromising information may include but is not necessarily limited to:

• The person’s motivations or motivating factors.
• That a buyer or tenant is willing to pay more than the offered purchase price or lease                  rate.
• That a seller or landlord is willing to accept less than the asking sale price or lease rate.
• That a client or customer will agree to financing terms other than those offered.

Specific assistance shall also mean showing a specific property or properties to a specific buyer by pre-arrangement.  Specific assistance MAY be provided at an open house if compromising information is elicited or accepted from the buyer at the open house, but specific assistance to a buyer WILL be deemed to be provided when there is a pre-arranged showing of a particular property or properties to that buyer.

Specific assistance may be offered anywhere and not necessarily at a formal showing or appointment, so it is important that the required disclosures be made BEFORE any compromising information is elicited or accepted, even if the setting is an open house or a public place.  It is not the venue, but rather the content of the interchange that determines if specific assistance has been provided.

However it is possible to enumerate some things that are not generally considered to be specific assistance within the meaning of this policy interpretation.  In the absence of the items listed above, specific assistance will not be considered to include:

• Preliminary conversations about the market, general real estate values and general financing terms;
• Conveying publically available information about the property’s or properties’ general factual features including price, location, style, amenities, etc.
• Eliciting or accepting general, non-compromising information about a buyer’s or tenant’s real estate needs or desires, such as the person’s general preferences for location, price range, features, etc.

Two useful criteria can be assessed in determining whether specific assistance has been provided:

• The direction information is flowing should be considered.  It can generally be held that the licensee eliciting or accepting personal, compromising information from the person constitutes specific assistance, but the licensee conveying general information to the person about the market, financing or a specific property or properties is not offering specific assistance.
• The nature of the information being conveyed should be considered.  Generally, if the information being elicited or accepted is compromising (i.e. information a rational person would not share with the other principal in an arm’s length negotiation because that information could reduce, erode or impair that person’s bargaining power), then specific assistance is being provided, but if the licensee is eliciting or accepting general information that is not compromising to the person’s bargaining power or position, then the licensee is not providing specific assistance.

The point at which the licensee first provides specific assistance will be deemed to be “first substantial contact” under this section.

On a related matter, the Commission will deem an electronic copy of the current brokerage disclosure language that has been appropriately checked and completed by the licensee and which has been emailed to the person to whom disclosure is being made to be in compliance with Section 76-2421 (1) (a), provided that the recipient client or customer sends the licensee an email response acknowledging receipt of the disclosure language.

Adopted January 17, 2013

Need a Mortgage? Be Prepared!

Sustained Use of Loans Raises Consumer Protection Concerns

The following press release was issued by the CFPB on April 24th, 2013. We are reposting this for the benefit of our studens and members.

WASHINGTON, D.C. —Today the Consumer Financial Protection Bureau (CFPB) issued a report on payday and deposit advance loans finding that for many consumers these products lead to a cycle of indebtedness. Loose lending standards, high costs, and risky loan structures may contribute to the sustained use of these products which can trap borrowers in debt.

“This comprehensive study shows that payday and deposit advance loans put many consumers at risk of turning what is supposed to be a short-term, emergency loan into a long-term, expensive debt burden,” said CFPB Director Richard Cordray. “For too many consumers, payday and deposit advance loans are debt traps that cause them to be living their lives off money borrowed at huge interest rates.”

The Payday Loans and Deposit Advance Products report is at: http://files.consumerfinance.gov/f/201304_cfpb_payday-dap-whitepaper.pdf%20 

The report found that payday loans and the deposit advance loans offered by a small but growing number of banks and other depository institutions are generally similar in structure, purpose, and the
consumer protection concerns they raise. Both are typically described as a way to bridge a cash flow shortage between paychecks or other income. They offer quick and easy accessibility, especially for consumers who may not qualify for other credit. The loans generally have three features: they are small-dollar amounts; borrowers must repay them quickly; and they require that a borrower
repay the full amount or give lenders access to repayment through a claim on the borrower’s deposit account. 

The CFPB study is one of the most comprehensive ever undertaken on the market. It looked at a 12-month period with more than 15 million storefront payday loans and data from multiple depository institutions that offer deposit advance products.

Key Finding: Payday and deposit advance loans can become debt traps for consumers

The report found many consumers repeatedly roll over their payday and deposit advance loans or take out additional loans; often a short time after the previous one was repaid. This means that a sizable share of consumers end up in cycles of repeated borrowing and incur significant costs over time. The study also confirmed that these loans are quite expensive and not suitable for sustained use. Specifically, the study found limited underwriting and the single payment structure of the loans may contribute to trapping consumers in debt. 

Loose Lending: Lenders often do not take a borrower’s ability to repay into consideration when making a loan. Instead, they may rely on ensuring they are one of the first in line to be repaid from a borrower’s income. For the consumer, this means there may not be sufficient funds after paying off the loan for expenses such as for their rent or groceries – leading them to return to the bank or payday lender for more money.

·      Payday: Eligibility to qualify for a payday loan usually requires proper identification, proof of income, and a personal checking account. No collateral is held for the loan, although the borrower does provide the lender with a personal check or authorization to debit her checking account for repayment. Credit score and financial obligations are generally not taken in to account.

·      Deposit Advance: Depository institutions have various eligibility rules for their customers, who generally already have checking accounts with them. The borrower authorizes the bank to claim repayment as soon as the next qualifying electronic deposit is received. Typically, though, a customer’s ability to repay the loan outside of other debts and ordinary living expenses is not taken into account.   

Risky Loan Structures: The risk posed by the loose underwriting is compounded by some of the features of payday and deposit advance loans, particularly the rapid repayment structure. Paying back a lump sum when a consumer’s next paycheck or other deposit arrives can be difficult for an already cash-strapped consumer, leading them to take out another loan.

·      Payday: Payday loans typically must be repaid in full when the borrower’s next paycheck or other income is due. The report finds the median loan term to be just 14 days.

·      Deposit Advance: There is not a fixed due date with a deposit advance. Instead, the bank will repay itself from the next qualifying electronic deposit into the borrower’s account. The report finds that deposit advance “episodes,” which may include multiple advances, have a median duration of 12 days. 

High Costs: Both payday loans and deposit advances are designed for short-term use and can have very high costs. These high costs can add up – on top of the already existing loans that a consumer is taking on.

·      Payday: Fees for storefront payday loans generally range from $10-$20 per $100 borrowed. For the typical loan of $350, for example, the median $15 fee per $100 would mean that the borrower must come up with more than $400 in just two weeks. A loan outstanding for two weeks with a $15 fee per $100 has an Annual Percentage Rate (APR) of 391 percent.

·      Deposit Advance: Fees generally are about $10 per $100 borrowed. For a deposit advance with a $10 fee per $100 borrowed on a 12-day loan, for example, the APR would be 304 percent. 

Sustained Use: The loose underwriting, the rapid repayment requirement, and the high costs all may contribute to turning a short-term loan into a very expensive, long-term loan. For consumers, it is
unclear whether they fully appreciate the risk that they may end up using these products much longer than the original term. Or, that they may end up paying fees that equal or exceed the amount they borrowed, leading them into a revolving door of debt.

·      Payday: For payday borrowers, nearly half have more than 10 transactions a year, while 14 percent undertook 20 or more transactions annually. Payday borrowers are indebted a median of 55 percent (or 199 days) of the year. For the majority of payday borrowers, new loans are most frequently taken on the same day a previous loan is closed, or shortly thereafter.

·      Deposit Advance: More than half of all users borrow more than $3,000 per year while 14 percent borrow more than $9,000 per year. These borrowers typically have an outstanding balance at least 9 months of the year and typically are indebted more than 40 percent of the year. And while these products are sometimes described as a way to avoid the high cost of overdraft fees, 65 percent of deposit advance users incur such fees. The heaviest deposit advance borrowers accrue the most overdraft fees. 

The CFPB has authority to oversee the payday loan market. It began its supervision of payday lenders in January 2012. The CFPB also has authority to examine the deposit advance loans at the banks and credit unions it supervises, which are insured depository institutions and credit unions, and their affiliates, that have more than $10 billion in assets. Today’s report will help educate regulators and consumers about how the industry works and provide market participants with a clear statement of CFPB concerns.  

While today’s study looked at storefront payday lenders, the CFPB will continue to analyze the growing online presence of such businesses. The Bureau is also looking at bank and credit union deposit account overdraft programs which provide short-term, small-dollar, immediate access credit services. The CFPB will publish initial results from this overdraft study later this spring. 

To help educate consumers about payday and deposit advance loans, today the CFPB updated its Ask CFPB <http://www.consumerfinance.gov/askcfpb/>  web tool to assist consumers with their
financial questions about these products.  

A factsheet about payday and deposit advance loans is available at: http://files.consumerfinance.gov/f/201304_cfpb_payday-factsheet.pdf

Upcoming Changes to the Real Property Appraiser Qualifications

The Appraiser Qualifications Board of The Appraisal Foundation has adopted changes to the Real Property Appraiser Qualification Criteria. These changes will become effective on January 1st, 2015 and represent minimum national requirements that will be required beginning in 2015.

The most critical change that is taking place relates to the requirement that in order to reach the Certified Residential Appraiser license level a bachelor's degree will be required. Again, this is a minimum requirement. For the Trainee or Licensed Residential Appriaser classifications no degree is required.

IRS Releases the Dirty Dozen Tax Scams for 2013

WASHINGTON — The Internal Revenue Service today issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

"This tax season, the IRS has stepped up its efforts to protect taxpayers from a wide range of schemes, including moving aggressively to combat identity theft and refund fraud," said IRS Acting Commissioner Steven T. Miller. "The Dirty Dozen list shows that scams come in many forms during filing season. Don't let a scam artist steal from you or talk you into doing something you will regret later."

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

The following are the Dirty Dozen tax scams for 2013:

Identity Theft

Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.

Combating identity theft and refund fraud is a top priority for the IRS, and we are taking special steps to assist victims. For the 2013 tax season, the IRS has put in place a number of additional steps to prevent identity theft and detect refund fraud before it occurs. We have dramatically enhanced our systems, and we are committed to continuing to improve our prevention, detection and assistance efforts.

The IRS has a comprehensive and aggressive identity theft strategy employing a three-pronged effort focusing on fraud prevention, early detection and victim assistance. We are continually reviewing our processes and policies to ensure that we are doing everything possible to minimize identity theft incidents, to help those victimized by it and to investigate those who are committing the crimes.

The IRS continues to increase its efforts against refund fraud, which includes identity theft. During 2012, the IRS prevented the issuance of $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011.

This January, the IRS also conducted a coordinated and highly successful identity theft enforcement sweep. The coast-to-coast effort against identity theft suspects led to 734 enforcement actions in January, including 298 indictments, informations, complaints and arrests. The effort comes on top of a growing identity theft effort that led to 2,400 other enforcement actions against identity thieves during fiscal year 2012. The Criminal Investigation unit has devoted more than 500,000 staff-hours to fighting this issue.

We know identity theft is a frustrating and complex process for victims. The IRS has 3,000 people working on identity theft related cases — more than double the number in late 2011. And we have trained 35,000 employees who work with taxpayers to help with identity theft situations.

The IRS has a special section on IRS.gov dedicated to identity theft issues, including YouTube videos, tips for taxpayers and an assistance guide. For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.

Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. Taxpayers can call the IRS Identity Protection Specialized Unit at 800-908-4490. More information can be found on the special identity protection page.

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information that can help you protect yourself from email scams.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.

It is important to choose carefully when hiring an individual or firm to prepare your return. This year, the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs).

The IRS also has created a new web page to assist taxpayers. For tips about choosing a preparer, red flags, details on preparer qualifications and information on how and when to make a complaint, visit www.irs.gov/chooseataxpro.

Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task.

IRS.gov has general information on reporting tax fraud. More specifically, report abusive tax preparers to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 and fill it out or order by mail at 800-TAX FORM (800-829-3676). The form includes a return address.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, 38,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS continues working on a wide range of international tax issues and follows ongoing efforts with DOJ to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

The IRS has collected $5.5 billion so far from people who participated in offshore voluntary disclosure programs since 2009.

“Free Money” from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes promise refunds to people who have little or no income and normally don’t have a tax filing requirement – and are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Scammers prey on low income individuals and the elderly and members of church congregations with bogus promises of free money. They build false hopes and charge people good money for bad advice including encouraging taxpayers to make fictitious claims for refunds or rebates based on false statements of entitlement to tax credits. For example, some promoters claim they can obtain for their victims, often senior citizens, a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college. Con artists also falsely claim that refunds are available even if the victim went to school decades ago. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are also a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return.

Beware: Intentional mistakes of this kind can result in a $5,000 penalty.

Impersonation of Charitable Organizations

Another long-standing type of abuse or fraud is scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims. As in the case of a recent disaster, Hurricane Sandy, the IRS cautions both victims of natural disasters and people wishing to make charitable donations to avoid scam artists by following these tips:

• To help disaster victims, donate to recognized charities.
• Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.
• Don’t give out personal financial information, such as Social Security numbers or credit card and bank account numbers and passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
• Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

Call the IRS toll-free disaster assistance telephone number (1-866-562-5227) if you are a disaster victim with specific questions about tax relief or disaster related tax issues.

False/Inflated Income and Expenses

Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit although they were not eligible. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims

In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Disguised Corporate Ownership

Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

Identity Crisis: How to Protect Yourself against Identity Theft - Part 2

• Memorize your Social Security number and all your passwords and PINs.

• Sign all your credit cards upon receipt and never loan your cards to anyone.

• Save all your credit card receipts and match them against your monthly bills.

• Report all lost or stolen credit cards immediately, and notify credit card companies and financial institutions in advance of any change in your address or phone numbers.

• Order your credit report annually and inspect it for anything suspicious.

• When you make Internet purchases, be sure it's through a secure website.

• When you complete a credit or loan application, you only need to list the last four digits of credit cards. This is enough information for creditors to match up what's on your credit report.

Identity Crisis: How to Protect Yourself against Identity Theft - Part 1

• Skimming is when someone steals credit or debit card numbers by using a special storage device when processing your card. This can happen anywhere, so be sure to watch when they scan your card at a store, restaurant or gas station.

• Phishing is when false financial institutions or companies send spam or pop-up messages on a website to get you to reveal your personal information. Remember: no legitimate company is going to ask for your personal information unless you contact them.

• Lastly, some thieves will divert your billing statements to another location by changing your address. Keep track of when you receive your bills and statements. If one doesn't show up, contact the company immediately.

In Memoriam: Life Lessons: How to Teach Your Kids about Safety and Strangers ~ by Andrew Wooten

Upcoming changes to Real Property Appraiser Qualifications

Beginning January 1, 2015, the AQB has made significant changes to appraisal qualifications. It is possible that some states may choose to implement the changes sooner, so be sure to check with your state regulator.

Several important changes are outlined below, with complete details available in this AQB publication: http://www.asisvcs.com/publications/pdf/220913.pdf

IMPORTANT CHANGE: Increased College Degree Requirements

Implications: After 1/1/15, you must hold a bachelor's degree to obtain the Certified Residential license level or beyond. If you achieve this license level prior to 1/1/15, you will be grandfathered under the old regulations.

IMPORTANT CHANGE: Experience Hours are Required BEFORE taking the licensing exam.

Implications: For the Licensed, Certified Residential and Certified General license levels, the required experience must be completed prior to taking the licensing exam. If you intend to upgrade your license prior to the 1/1/15 rules change, you need to be sure that you have enough time to complete your experience hours.

The 2013 Colorado Annual Commission Update (ACU) Course is available online

In any three-year license renewal cycle brokers need to take this course annually (3 times) to equal 12 hours of Update Course credit as part of the 24 hours of total education required.

This course is presented without modification as required by the Colorado Real Estate Commission (CREC). This will be the only CREC Annual Update course offered by the CREC in 2013.

Students will also be introduced to various concepts, including:

Don't let the year slip away... take the CREC Annual Update Course today to meet the Commission requirements and to get the most value from the course material. Log on today to learn this timely and valuable information and to prepare yourself for future success. >>> Click Here for more information! You can also find this course in our Real Estate License renewal packages for Colorado Brokers.

Consumer Financial Protection Bureau adopts rule to improve consumer access to appraisal reports

The CFPB recently posted the following article on its website. We have published the notice in its entirety below for our students;

Rule gives consumers additional rights to information on how a home value is determined

WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) adopted a new rule that requires mortgage lenders to provide applicants with free copies of all appraisals and other home-value estimates. The rule will ensure that consumers can receive information prior to closing about how the property’s value was determined.

“This rule will guarantee consumers can receive important information on how a lender determines the value of the home,” said CFPB Director Richard Cordray. “Having this information available promptly makes it easier for loan applicants to make informed decisions.”

Appraisals and other estimates of a home’s value are generally used by mortgage lenders to inform their decisions. Consumers are typically charged for the costs related to conducting an appraisal; however, currently the law does not require that consumers receive a copy of the appraisal unless they request it and does not require that consumers receive a copy of any other estimates of the home’s value.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that lenders give consumers a copy of each appraisal or other estimate free of charge although a lender generally may still charge the consumer a reasonable fee for the cost of conducting the appraisal or other estimate. The Bureau’s new rule implements these requirements.

Today’s rule also requires that creditors inform consumers within three days of receiving an application for a loan of their right to receive copy of all appraisals. Creditors will then be required to provide the copies of appraisal reports and other written home-value estimates to consumers promptly, or three days before closing, whichever is earlier. The new rule will go into effect in January 2014 and will apply to first-lien mortgages.

The final rule is available at: http://www.consumerfinance.gov/regulations/disclosure-and-delivery-requirements-for-copies-of-appraisals-and-other-written-valuations-under-the-equal-credit-opportunity-act-regulation-b/

A summary of the CFPB’s rule is available at: http://files.consumerfinance.gov/f/201301_cfpb_ecoa-appraisals-rule_summary.pdf

Today, in partnership with several other federal regulatory agencies, the Bureau is also adopting a new rule that establishes special requirements concerning appraisals for higher-priced mortgage loans. The new rule creates an additional level of due diligence by requiring that creditors use a licensed or certified appraiser to prepare the written appraisal report based on a physical inspection of the property. The rule also requires creditors to disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report.

The interagency higher-priced appraisals rule for higher-priced mortgage loans is available at: http://www.consumerfinance.gov/pressreleases/agencies-issue-final-rule-on-appraisals-for-higher-priced-mortgage-loans/

A summary of the interagency rule is available at: http://files.consumerfinance.gov/f/201301_cfpb_tila-appraisals-rule_summary.pdf

Background checks take up to 17 weeks in Colorado ~ Recommendation for Real Estate Students from VanEd

A recent 9 News report on background checks in Colorado found that the Colorado Bereau of Investigation (CBI) is now taking up to 17 weeks to process the requests for background check applications. This can cause a delay for job seekers, including those applying for a real estate license in the state.

New real estate brokers are required to complete a background chek before a license is issued by the Division of Real Estate. VanEd is now recommending that fingerprint cards (along with the appropriate fee) are submitted to the CBI as soon as the applicant is beginning their education. VanEd includes the background information for all new pre-license students in Colorado.

Beginning in 2013 real estate appraisers in Colorado will also be required to complete a background check. VanEd will be posting notices on these requirements as they become effective.

You can watch the report on our blog online by clicking here or read the article posted on the website at 9News.com.

The Oklahoma Broker License Education Program is now available online

The Oklahoma Association of REALTORS® (OAR) Real Estate School is now offering all 90 hours of required education toward a broker's license in Oklahoma. The Oklahoma Broker License Education program, is available entirely online and can be found online at http://www.oklahomarealestatelicensing.com.

Students needing to upgrade to the Broker License level and registering for this program will be introduced to the following concepts;

Exam Prep is also included with this program for those who are upgrading thier license and need to pass the Broker's Examination in Oklahoma. Candidate Handbooks will also be provided. Other materials included in this program include;

• The OAR Study Guide
• The Oklahoma Real Estate Commission Manual, hereinafter referred to as
  "Manual" or "REM"
• The reference book Modern Real Estate Practice by Fillmore W. Galaty,
  Wellington J. Allaway, and Robert C. Kyle, 18th Edition

>>> Click Here for more information! or to Register today!

Thank you for the opportunity to serve you in 2012. Have a Wonderful New Year!

On behalf of the entire VanEd team, we want to wish you and yours happiness and success in the coming year. And as we prepare for years end, we want you to know that we truly appreciate your business. Thank you for your continued support.

Over the past few years the real estate industry has faced incredible challenges. We have seen new laws, new rules and enhanced regulation affect and change the landscape of real estate. This has affected not only real estate licensees but also appraisers and mortgage brokers. And it has affected education as well. But as we reflect upon this past year we realize that while the issues we face are difficult, we do not have the same problems that we had last year. And that, in and of itself, is a sign of progress.

Last year we wrote to you and let you know that looking ahead we saw great opportunity, and in 2012 we embraced that with our students and affiliates as we continued to encourage them to be successful. We believe that even more challenges are in store for the real estate industry in the coming year but that the industry is now poised to handle those challenges and create overall growth and individual success among those involved. We are working behind the scenes to help our students and affiliates take advantage of these new opportunities.

So thank you for calling us, visiting our website, subscribing to our Newslog and becoming a fan on social media. We greatly appreciate you being our customer and we look forward to being your resource far into the future.

Our entire team is dedicated to serving the best interests of our students, so if you have any questions or ideas for how we might better serve you, feel free to contact us. Today, and for almost 15 years now, we are here to help.

Here's to your success and peace in the coming year. May you find, and leave, Joy wherever you go.

Sincerely,

C. Vann Hilty, CRS, CDEI                     Burton Lee, MAI, CDEI

Have questions or comments? Let us know with an email at info@vaned.com
& don't forget to follow the VanEd NewsLog, fan and link with us online!

The most successful people in Real Estate use VanEd. See what they say by clicking here.

How is the Federal Reserve held accountable in our democratic society?

On October 1st, 2012 the Federal Reserve released a speech by Fed Chairman Ben Bernanke given at the Economic Club of Indiana where he asked and then answered five key questions related to QI, or Qualitative Easing. VanEd is publishing these answers one at a time for our students to review.

The five questions are;

• What are the Fed's objectives, and how is it trying to meet them?
• What's the relationship between the Fed's monetary policy and the fiscal decisions of the Administration and the Congress?
• What is the risk that the Fed's accommodative monetary policy will lead to inflation?
• How does the Fed's monetary policy affect savers and investors?
• How is the Federal Reserve held accountable in our democratic society?

Today we are publishing the Chairman's response to the final question and conclude his remarks in this series.

Chairman Ben S. Bernanke

At the Economic Club of Indiana, Indianapolis, Indiana

How Is the Federal Reserve Held Accountable in a Democratic Society?

I will turn, finally, to the question of how the Federal Reserve is held accountable in a democratic society.

The Federal Reserve was created by the Congress, now almost a century ago. In the Federal Reserve Act and subsequent legislation, the Congress laid out the central bank's goals and powers, and the Fed is responsible to the Congress for meeting its mandated objectives, including fostering maximum employment and price stability. At the same time, the Congress wisely designed the Federal Reserve to be insulated from short-term political pressures. For example, members of the Federal Reserve Board are appointed to staggered, 14-year terms, with the result that some members may serve through several Administrations. Research and practical experience have established that freeing the central bank from short-term political pressures leads to better monetary policy because it allows policymakers to focus on what is best for the economy in the longer run, independently of near-term electoral or partisan concerns. All of the members of the Federal Open Market Committee take this principle very seriously and strive always to make monetary policy decisions based solely on factual evidence and careful analysis.

It is important to keep politics out of monetary policy decisions, but it is equally important, in a democracy, for those decisions--and, indeed, all of the Federal Reserve's decisions and actions--to be undertaken in a strong framework of accountability and transparency. The American people have a right to know how the Federal Reserve is carrying out its responsibilities and how we are using taxpayer resources.

One of my principal objectives as Chairman has been to make monetary policy at the Federal Reserve as transparent as possible. We promote policy transparency in many ways. For example, the Federal Open Market Committee explains the reasons for its policy decisions in a statement released after each regularly scheduled meeting, and three weeks later we publish minutes with a detailed summary of the meeting discussion. The Committee also publishes quarterly economic projections with information about where we anticipate both policy and the economy will be headed over the next several years. I hold news conferences four times a year and testify often before congressional committees, including twice-yearly appearances that are specifically designated for the purpose of my presenting a comprehensive monetary policy report to the Congress. My colleagues and I frequently deliver speeches, such as this one, in towns and cities across the country.

The Federal Reserve is also very open about its finances and operations. The Federal Reserve Act requires the Federal Reserve to report annually on its operations and to publish its balance sheet weekly. Similarly, under the financial reform law enacted after the financial crisis, we publicly report in detail on our lending programs and securities purchases, including the identities of borrowers and counterparties, amounts lent or purchased, and other information, such as collateral accepted. In late 2010, we posted detailed information on our public website about more than 21,000 individual credit and other transactions conducted to stabilize markets during the financial crisis. And, just last Friday, we posted the first in an ongoing series of quarterly reports providing a great deal of information on individual discount window loans and securities transactions. The Federal Reserve's financial statement is audited by an independent, outside accounting firm, and an independent Inspector General has wide powers to review actions taken by the Board. Importantly, the Government Accountability Office (GAO) has the ability to--and does--oversee the efficiency and integrity of all of our operations, including our financial controls and governance.

While the GAO has access to all aspects of the Fed's operations and is free to criticize or make recommendations, there is one important exception: monetary policymaking. In the 1970s, the Congress deliberately excluded monetary policy deliberations, decisions, and actions from the scope of GAO reviews. In doing so, the Congress carefully balanced the need for democratic accountability with the benefits that flow from keeping monetary policy free from short-term political pressures.

However, there have been recent proposals to expand the authority of the GAO over the Federal Reserve to include reviews of monetary policy decisions. Because the GAO is the investigative arm of the Congress and GAO reviews may be initiated at the request of members of the Congress, these reviews (or the prospect of reviews) of individual policy decisions could be seen, with good reason, as efforts to bring political pressure to bear on monetary policymakers. A perceived politicization of monetary policy would reduce public confidence in the ability of the Federal Reserve to make its policy decisions based strictly on what is good for the economy in the longer term. Balancing the need for accountability against the goal of insulating monetary policy from short-term political pressure is very important, and I believe that the Congress had it right in the 1970s when it explicitly chose to protect monetary policy decisionmaking from the possibility of politically motivated reviews.

Conclusion
In conclusion, I will simply note that these past few years have been a difficult time for the nation and the economy. For its part, the Federal Reserve has also been tested by unprecedented challenges. As we approach next year's 100th anniversary of the signing of the Federal Reserve Act, however, I have great confidence in the institution. In particular, I would like to recognize the skill, professionalism, and dedication of the employees of the Federal Reserve System. They work tirelessly to serve the public interest and to promote prosperity for people and businesses across America. The Fed's policy choices can always be debated, but the quality and commitment of the Federal Reserve as a public institution is second to none, and I am proud to lead it.

The entire speech may be found online at the Federal Reserve website: http://1.usa.gov/Svkwl7

How Does the Federal Reserve's Monetary Policy Affect Savers and Investors?

On October 1st, 2012 the Federal Reserve released a speech by Fed Chairman Ben Bernanke given at the Economic Club of Indiana where he asked and then answered five key questions related to QI, or Qualitative Easing. VanEd is publishing these answers one at a time for our students to review.

The five questions are;

• What are the Fed's objectives, and how is it trying to meet them?
• What's the relationship between the Fed's monetary policy and the fiscal decisions of the Administration and the Congress?
• What is the risk that the Fed's accommodative monetary policy will lead to inflation?
• How does the Fed's monetary policy affect savers and investors?
• How is the Federal Reserve held accountable in our democratic society?

Today we are publishing the Chairman's response to the fourth question.

Chairman Ben S. Bernanke

At the Economic Club of Indiana, Indianapolis, Indiana

"How Does the Fed's Monetary Policy Affect Savers and Investors?"

The concern about possible inflation is a concern about the future. One concern in the here and now is about the effect of low interest rates on savers and investors. My colleagues and I know that people who rely on investments that pay a fixed interest rate, such as certificates of deposit, are receiving very low returns, a situation that has involved significant hardship for some.

However, I would encourage you to remember that the current low levels of interest rates, while in the first instance a reflection of the Federal Reserve's monetary policy, are in a larger sense the result of the recent financial crisis, the worst shock to this nation's financial system since the 1930s. Interest rates are low throughout the developed world, except in countries experiencing fiscal crises, as central banks and other policymakers try to cope with continuing financial strains and weak economic conditions.

A second observation is that savers often wear many economic hats. Many savers are also homeowners; indeed, a family's home may be its most important financial asset. Many savers are working, or would like to be. Some savers own businesses, and--through pension funds and 401(k) accounts--they often own stocks and other assets. The crisis and recession have led to very low interest rates, it is true, but these events have also destroyed jobs, hamstrung economic growth, and led to sharp declines in the values of many homes and businesses. What can be done to address all of these concerns simultaneously? The best and most comprehensive solution is to find ways to a stronger economy. Only a strong economy can create higher asset values and sustainably good returns for savers. And only a strong economy will allow people who need jobs to find them. Without a job, it is difficult to save for retirement or to buy a home or to pay for an education, irrespective of the current level of interest rates.

The way for the Fed to support a return to a strong economy is by maintaining monetary accommodation, which requires low interest rates for a time. If, in contrast, the Fed were to raise rates now, before the economic recovery is fully entrenched, house prices might resume declines, the values of businesses large and small would drop, and, critically, unemployment would likely start to rise again. Such outcomes would ultimately not be good for savers or anyone else.

What is the risk that the Fed's accommodative monetary policy will lead to inflation?

On October 1st, 2012 the Federal Reserve released a speech by Fed Chairman Ben Bernanke given at the Economic Club of Indiana where he asked and then answered five key questions related to QI, or Qualitative Easing. VanEd is publishing these answers one at a time for our students to review.

The five questions are;

• What are the Fed's objectives, and how is it trying to meet them?
• What's the relationship between the Fed's monetary policy and the fiscal decisions of the Administration and the Congress?
• What is the risk that the Fed's accommodative monetary policy will lead to inflation?
• How does the Fed's monetary policy affect savers and investors?
• How is the Federal Reserve held accountable in our democratic society?

Today we are publishing the Chairman's response to the third question.

Chairman Ben S. Bernanke

At the Economic Club of Indiana, Indianapolis, Indiana

What is the risk that the Fed's accommodative monetary policy will lead to inflation?

A third question, and an important one, is whether the Federal Reserve's monetary policy will lead to higher inflation down the road. In response, I will start by pointing out that the Federal Reserve's price stability record is excellent, and we are fully committed to maintaining it. Inflation has averaged close to 2 percent per year for several decades, and that's about where it is today. In particular, the low interest rate policies the Fed has been following for about five years now have not led to increased inflation. Moreover, according to a variety of measures, the public's expectations of inflation over the long run remain quite stable within the range that they have been for many years.

With monetary policy being so accommodative now, though, it is not unreasonable to ask whether we are sowing the seeds of future inflation. A related question I sometimes hear--which bears also on the relationship between monetary and fiscal policy, is this: By buying securities, are you "monetizing the debt"--printing money for the government to use--and will that inevitably lead to higher inflation? No, that's not what is happening, and that will not happen. Monetizing the debt means using money creation as a permanent source of financing for government spending. In contrast, we are acquiring Treasury securities on the open market and only on a temporary basis, with the goal of supporting the economic recovery through lower interest rates. At the appropriate time, the Federal Reserve will gradually sell these securities or let them mature, as needed, to return its balance sheet to a more normal size. Moreover, the way the Fed finances its securities purchases is by creating reserves in the banking system. Increased bank reserves held at the Fed don't necessarily translate into more money or cash in circulation, and, indeed, broad measures of the supply of money have not grown especially quickly, on balance, over the past few years.

For controlling inflation, the key question is whether the Federal Reserve has the policy tools to tighten monetary conditions at the appropriate time so as to prevent the emergence of inflationary pressures down the road. I'm confident that we have the necessary tools to withdraw policy accommodation when needed, and that we can do so in a way that allows us to shrink our balance sheet in a deliberate and orderly way. For example, the Fed can tighten policy, even if our balance sheet remains large, by increasing the interest rate we pay banks on reserve balances they deposit at the Fed. Because banks will not lend at rates lower than what they can earn at the Fed, such an action should serve to raise rates and tighten credit conditions more generally, preventing any tendency toward overheating in the economy.

Of course, having effective tools is one thing; using them in a timely way, neither too early nor too late, is another. Determining precisely the right time to "take away the punch bowl" is always a challenge for central bankers, but that is true whether they are using traditional or nontraditional policy tools. I can assure you that my colleagues and I will carefully consider how best to foster both of our mandated objectives, maximum employment and price stability, when the time comes to make these decisions.

VanEd offers both Continuing Education and Pre-Licensing courses that will help students discover more about the role of the Federal Reserve and Government financing for housing.

Colorado Division of Real Estate publishes new application fees effective November 15th, 2012

VanEd offers all of the required continuing education for real estate, appraisal and mortgage loan officers online.

What's the relationship between the Fed's monetary policy and the fiscal decisions of the Administration and the Congress?

On October 1st, 2012 the Federal Reserve released a speech by Fed Chairman Ben Bernanke given at the Economic Club of Indiana where he asked and then answered five key questions related to QI, or Qualitative Easing. VanEd is publishing these answers one at a time for our students to review.

The five questions are;

• What are the Fed's objectives, and how is it trying to meet them?
• What's the relationship between the Fed's monetary policy and the fiscal decisions of the Administration and the Congress?
• What is the risk that the Fed's accommodative monetary policy will lead to inflation?
• How does the Fed's monetary policy affect savers and investors?
• How is the Federal Reserve held accountable in our democratic society?

Today we are publishing the Chairman's response to the second question.

Chairman Ben S. Bernanke

At the Economic Club of Indiana, Indianapolis, Indiana

What's the Relationship between Monetary Policy and Fiscal Policy?

In short, monetary policy and fiscal policy involve quite different sets of actors, decisions, and tools. Fiscal policy involves decisions about how much the government should spend, how much it should tax, and how much it should borrow. At the federal level, those decisions are made by the Administration and the Congress. Fiscal policy determines the size of the federal budget deficit, which is the difference between federal spending and revenues in a year. Borrowing to finance budget deficits increases the government's total outstanding debt.

As I have discussed, monetary policy is the responsibility of the Federal Reserve--or, more specifically, the Federal Open Market Committee, which includes members of the Federal Reserve's Board of Governors and presidents of Federal Reserve Banks. Unlike fiscal policy, monetary policy does not involve any taxation, transfer payments, or purchases of goods and services. Instead, as I mentioned, monetary policy mainly involves the purchase and sale of securities. The securities that the Fed purchases in the conduct of monetary policy are held in our portfolio and earn interest. The great bulk of these interest earnings is sent to the Treasury, thereby helping reduce the government deficit. In the past three years, the Fed remitted $200 billion to the federal government. Ultimately, the securities held by the Fed will mature or will be sold back into the market. So the odds are high that the purchase programs that the Fed has undertaken in support of the recovery will end up reducing, not increasing, the federal debt, both through the interest earnings we send the Treasury and because a stronger economy tends to lead to higher tax revenues and reduced government spending (on unemployment benefits, for example).

Even though our activities are likely to result in a lower national debt over the long term, I sometimes hear the complaint that the Federal Reserve is enabling bad fiscal policy by keeping interest rates very low and thereby making it cheaper for the federal government to borrow. I find this argument unpersuasive. The responsibility for fiscal policy lies squarely with the Administration and the Congress. At the Federal Reserve, we implement policy to promote maximum employment and price stability, as the law under which we operate requires. Using monetary policy to try to influence the political debate on the budget would be highly inappropriate. For what it's worth, I think the strategy would also likely be ineffective: Suppose, notwithstanding our legal mandate, the Federal Reserve were to raise interest rates for the purpose of making it more expensive for the government to borrow. Such an action would substantially increase the deficit, not only because of higher interest rates, but also because the weaker recovery that would result from premature monetary tightening would further widen the gap between spending and revenues. Would such a step lead to better fiscal outcomes? It seems likely that a significant widening of the deficit--which would make the needed fiscal actions even more difficult and painful--would worsen rather than improve the prospects for a comprehensive fiscal solution.

I certainly don't underestimate the challenges that fiscal policymakers face. They must find ways to put the federal budget on a sustainable path, but not so abruptly as to endanger the economic recovery in the near term. In particular, the Congress and the Administration will soon have to address the so-called fiscal cliff, a combination of sharply higher taxes and reduced spending that is set to happen at the beginning of the year. According to the Congressional Budget Office and virtually all other experts, if that were allowed to occur, it would likely throw the economy back into recession. The Congress and the Administration will also have to raise the debt ceiling to prevent the Treasury from defaulting on its obligations, an outcome that would have extremely negative consequences for the country for years to come. Achieving these fiscal goals would be even more difficult if monetary policy were not helping support the economic recovery.

VanEd offers both Continuing Education and Pre-Licensing courses that will help students discover more about the role of the Federal Reserve and Government financing for housing.

What are the Federal Reserve's Objecives and How is it trying to meet them

On October 1st, 2012 the Federal Reserve released a speech by Fed Chairman Ben Bernanke given at the Economic Club of Indiana where he asked and then answered five key questions related to QI, or Qualitative Easing. VanEd is publishing these answers one at a time for our students to review.

The five questions are;

What are the Fed's objectives, and how is it trying to meet them?

• What's the relationship between the Fed's monetary policy and the fiscal decisions of the Administration and the Congress?
• What is the risk that the Fed's accommodative monetary policy will lead to inflation?
• How does the Fed's monetary policy affect savers and investors?
• How is the Federal Reserve held accountable in our democratic society?

Today we are publishing the Chairman's response to the first question.

Chairman Ben S. Bernanke

At the Economic Club of Indiana, Indianapolis, Indiana

What Are the Fed's Objectives, and How Is It Trying to Meet Them?
The first question on my list concerns the Federal Reserve's objectives and the tools it has to try to meet them.

As the nation's central bank, the Federal Reserve is charged with promoting a healthy economy--broadly speaking, an economy with low unemployment, low and stable inflation, and a financial system that meets the economy's needs for credit and other services and that is not itself a source of instability. We pursue these goals through a variety of means. Together with other federal supervisory agencies, we oversee banks and other financial institutions. We monitor the financial system as a whole for possible risks to its stability. We encourage financial and economic literacy, promote equal access to credit, and advance local economic development by working with communities, nonprofit organizations, and others around the country. We also provide some basic services to the financial sector--for example, by processing payments and distributing currency and coin to banks.

But today I want to focus on a role that is particularly identified with the Federal Reserve--the making of monetary policy. The goals of monetary policy--maximum employment and price stability--are given to us by the Congress. These goals mean, basically, that we would like to see as many Americans as possible who want jobs to have jobs, and that we aim to keep the rate of increase in consumer prices low and stable.

In normal circumstances, the Federal Reserve implements monetary policy through its influence on short-term interest rates, which in turn affect other interest rates and asset prices.¹ Generally, if economic weakness is the primary concern, the Fed acts to reduce interest rates, which supports the economy by inducing businesses to invest more in new capital goods and by leading households to spend more on houses, autos, and other goods and services. Likewise, if the economy is overheating, the Fed can raise interest rates to help cool total demand and constrain inflationary pressures.

Following this standard approach, the Fed cut short-term interest rates rapidly during the financial crisis, reducing them to nearly zero by the end of 2008--a time when the economy was contracting sharply. At that point, however, we faced a real challenge: Once at zero, the short-term interest rate could not be cut further, so our traditional policy tool for dealing with economic weakness was no longer available. Yet, with unemployment soaring, the economy and job market clearly needed more support. Central banks around the world found themselves in a similar predicament. We asked ourselves, "What do we do now?"

To answer this question, we could draw on the experience of Japan, where short-term interest rates have been near zero for many years, as well as a good deal of academic work. Unable to reduce short-term interest rates further, we looked instead for ways to influence longer-term interest rates, which remained well above zero. We reasoned that, as with traditional monetary policy, bringing down longer-term rates should support economic growth and employment by lowering the cost of borrowing to buy homes and cars or to finance capital investments. Since 2008, we've used two types of less-traditional monetary policy tools to bring down longer-term rates.

The first of these less-traditional tools involves the Fed purchasing longer-term securities on the open market--principally Treasury securities and mortgage-backed securities guaranteed by government-sponsored enterprises such as Fannie Mae and Freddie Mac. The Fed's purchases reduce the amount of longer-term securities held by investors and put downward pressure on the interest rates on those securities. That downward pressure transmits to a wide range of interest rates that individuals and businesses pay. For example, when the Fed first announced purchases of mortgage-backed securities in late 2008, 30-year mortgage interest rates averaged a little above 6percent; today they average about 3-1/2 percent. Lower mortgage rates are one reason for the improvement we have been seeing in the housing market, which in turn is benefiting the economy more broadly. Other important interest rates, such as corporate bond rates and rates on auto loans, have also come down. Lower interest rates also put upward pressure on the prices of assets, such as stocks and homes, providing further impetus to household and business spending.

The second monetary policy tool we have been using involves communicating our expectations for how long the short-term interest rate will remain exceptionally low. Because the yield on, say, a five-year security embeds market expectations for the course of short-term rates over the next five years, convincing investors that we will keep the short-term rate low for a longer time can help to pull down market-determined longer-term rates. In sum, the Fed's basic strategy for strengthening the economy--reducing interest rates and easing financial conditions more generally--is the same as it has always been. The difference is that, with the short-term interest rate nearly at zero, we have shifted to tools aimed at reducing longer-term interest rates more directly.

Last month, my colleagues and I used both tools--securities purchases and communications about our future actions--in a coordinated way to further support the recovery and the job market. Why did we act? Though the economy has been growing since mid-2009 and we expect it to continue to expand, it simply has not been growing fast enough recently to make significant progress in bringing down unemployment. At 8.1 percent, the unemployment rate is nearly unchanged since the beginning of the year and is well above normal levels. While unemployment has been stubbornly high, our economy has enjoyed broad price stability for some time, and we expect inflation to remain low for the foreseeable future. So the case seemed clear to most of my colleagues that we could do more to assist economic growth and the job market without compromising our goal of price stability.

Specifically, what did we do? On securities purchases, we announced that we would buy mortgage-backed securities guaranteed by the government-sponsored enterprises at a rate of $40 billion per month. Those purchases, along with the continuation of a previous program involving Treasury securities, mean we are buying $85 billion of longer-term securities per month through the end of the year. We expect these purchases to put further downward pressure on longer-term interest rates, including mortgage rates. To underline the Federal Reserve's commitment to fostering a sustainable economic recovery, we said that we would continue securities purchases and employ other policy tools until the outlook for the job market improves substantially in a context of price stability.

In the category of communications policy, we also extended our estimate of how long we expect to keep the short-term interest rate at exceptionally low levels to at least mid-2015. That doesn't mean that we expect the economy to be weak through 2015. Rather, our message was that, so long as price stability is preserved, we will take care not to raise rates prematurely. Specifically, we expect that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economy strengthens. We hope that, by clarifying our expectations about future policy, we can provide individuals, families, businesses, and financial markets greater confidence about the Federal Reserve's commitment to promoting a sustainable recovery and that, as a result, they will become more willing to invest, hire and spend.

Now, as I have said many times, monetary policy is no panacea. It can be used to support stronger economic growth in situations in which, as today, the economy is not making full use of its resources, and it can foster a healthier economy in the longer term by maintaining low and stable inflation. However, many other steps could be taken to strengthen our economy over time, such as putting the federal budget on a sustainable path, reforming the tax code, improving our educational system, supporting technological innovation, and expanding international trade. Although monetary policy cannot cure the economy's ills, particularly in today's challenging circumstances, we do think it can provide meaningful help. So we at the Federal Reserve are going to do what we can do and trust that others, in both the public and private sectors, will do what they can as well.

Learn more about the functions of the Federal Reserve as it relates to mortgage financing by taking the VanEd "Finance in Real Estate" Course online.

California Office of Real Estate Appraisers issues warning regarding license renewal notices

The California Office of Real Estate Appraisers (OREA) recently sent out an important notice regarding license renewal notices. We have entered the text of the email from that notice below;

You can find more licensing and education information, as well as continuing education course listings, including both the 7-hour USPAP and 15-hour USPAP courses, on our California Appraisal pages.

Make REALTOR® Safety a top priority

September's REALTOR® Safety Month may have come to a close, but VanEd wants to remind all of us that personal safety should always be "top of mind" and not something we take for granted.  We are reminded of this every time a real estate professional is attacked or injured on the job.

There are ways to mitigate the dangers when working with customers and clients so that everyone is more safe. Tell the office where you are and who you are with. Get a copy of every customers drivers license and tell them your office requires to have that on file before you are allowed to show property. Take someone with you when working an open house. Take steps to ensure your safety in every situation.

Small steps can lead to a safer work environment. For more information on REALTOR® safety, you can visit http://reator.org/safety/ or http://justbesafe.com/. During September VanEd posted videos on Safety issues. You can also review older NAR REALTOR® Safety videos published by Realtor.org by using the following links:

• Safety at the Office
• Safety on the Job 
• Safety at Home
• Safety Strategies for you and your Clients

For more information, or to request assistance in locating safety information, contact us at info@vaned.com.

Full conference schedule for October in real estate and appraisal

This month there are a number of conferences and expos that are being highlighted. Our staff will be at many of these so if you would like to speak with someone please let us know. And if you have any questions about any of these events feel free to drop us a note or connect with us on any of our social media channels. We're happy to answer any questions you may have!

The FHA Appraisal - October 10, 2012 - Denver, CO. 

This FREE one-day class discusses FHA appraisal requirements including FHA Appraisal Protocol, updates to FHA appraisal policy, as well as equips attendees with the knowledge to determine property eligibility. This course provides a refresher to seasoned FHA appraisers, as well as provides valuable information to appraisers new to the FHA roster. Attendees will receive 7-hours of continuing education acceptable for the State of Colorado appraisal licensing requirements. Class size is limited, first-come, first served.

Registration Required:  http://www.hud.gov/emarc/index.cfm?fuseaction=emar.registerEvent&eventId=1516&update=N

On the day of the class, check-in begins at 8:00 a.m. Class begins promptly at 8:30 a.m. Mountain Time. Questions? E-mail denverhoc-pudtraining@hud.gov

AARO - Association of Appraiser Regulatory Officials

Washington, D.C. October 13th - 16th

With updates from the Appraisal Subcommittee and the Appraisal Foundation, Day one of this three and a half day conference will start attendees off with a bang. Day two includes a panel on attracting trainee appraisers to the profession. For more information and to register visit the AARO website online at http://www.aaro.net/.

Colorado Association of REALTORS Annual Conference and Expo

The CAR annual conference and expo will be October 14th - 16th in Denver. This year's conference will be a keynote from Nicole Nicolay and a town hall with Dr. Lawrence Yun, NAR's chief economist. And do not forget to stop by and visit the VanEd booth on the expo floor. Team members will be onsite answering questions about not only licensing requirements, but also regarding the recently updated courses for both CE & Pre-Licensing. We might even be giving away free courses again!

More information and registration details can be found online by clicking here. (Note: Early Registration Deadline is October 5th!)

Oklahoma REALTORS Education Conference and Trade Show

Running October 17th and 18th in Tulsa, this year's event features Andrew Wooten and Pat Strong. Attendees will have the opportunity to hear from top National speakers, network and prepare for the next wave in business trends. Register now for the largest real estate conference in Oklahoma. (Can't be there in person? No problem - follow along on twitter with the hashtag #HomeInOK - we'll post it here as well!)

More info and registration at http://www.oklahomarealtors.com/meetings-events/annual-conference. 

The 2012 NAIFA Conference

Register online at http://www.naifa.com today and join your colleagues at the NAIFA
2012 National Conference, October 17-20 at the Crowne Plaza Meadowlands in
Secaucus, NJ.

Instructors may want to know about DevLearn & Adobe Learning Summit

Held this year October 31st - November 2nd in Las Vegas, NV, where experts will gather to share new ideas and information related to education technology. This event includes a focused expo and educational program designed to engage those involved with delivery and product development. Learn more and register online at http://www.elearningguild.com/DevLearn/content/2272/devlearn-2012-conference-and-expo---home/.

And coming in November!

Valuation Expo set to run Nov. 8th - 10th in San Antonio

National Association of REALTORS Conference and Expo

Running November 7th - 12th this year in Orlando, FL, this year's conference will include a team of elite military professionals who share combat-proven methodologies to help you achieve victory in your rapidly changing business environment.

Find out what else is going on and register online at http://www.realtor.org/convention.nsf/.

With so much going on in the real estate, mortgage and appraisal industries it is more important than ever to stay up to date on rules and technology. Have an event scheduled that we missed here? Let us know! We will be happy to look at it!

What is Errors & Omissions insurance Extended Reporting Period (or "Tail Coverage") and how does it work in Real Estate?

Dear VanEd: Another agent in my office recently suggested I purchase "tail coverage" to cover a period of time when my license was inactive. What the heck is tail coverage? And should I get it?

From VanEd: Good question! This is simply a type of E&O coverage that will bridge the gap between activities that occur when you are licensed and a period of time after your license expires, is placed inactive or you retire. This type of coverage is only applicable to acts that occur during your license period.

Below is a copy of an announcement about "Extended Reporting Period" (ERP or "tail" coverage) from one of the top Errors and Omissions providers in the country, RISC Insurance.

PROTECTION AFTER YOUR POLICY EXPIRES

If an insured licensee retires, places his/her license on inactive status, or allows his/her license to expire, the ... policy insures the licensee for claims made and reported within 90 days of the expiration date of the policy, provided the error or omission upon which the claim is based took place after the retroactive date and before the expiration date. Claims made more than 90 days after the expiration date will not be eligible for coverage consideration under the ... policy, unless an optional Extended Reporting Period (ERP) Endorsement is purchased.

OPTIONAL ERP Endorsement: Optional ERP Endorsements are available to licensees who are currently insured ... under a policy and who are not renewing their coverage for any reason, including because they are retiring, inactivating their license, or obtaining insurance through another carrier.

An ERP endorsement may be purchased within the first 90 days after the licensee’s policy expires and allows the insured to report claims made after the expiration date and during the ERP. The optional ERP Endorsement is important because many professional liability claims are not made until years after the underlying transaction occurred. If a claim is made after the ... policy expires and there is no applicable ERP, then the claim will not be covered under the ... policy. Licensees with coverage expiring ... may obtain an optional ERP endorsement for one year (plus any applicable endorsement premium), two years (plus any applicable endorsement premium) or three years (plus any applicable endorsement premium).

NOTE: The fees listed have been removed from the announcement as they will likely vary from provider to provider. Also, not all providers will offer this type of coverage so it is important to contact your E&O provider directly to determine your eligibility and the costs associated. And don't forget to ask for specifics regarding what the tail coverage will cover in case it is not an all-inclusive type of coverage. And licensees should be aware that, as stated in the announcement, this is usually not a new policy but rather an endorsement to your current policy. That means if your current carrier doesn't offer this type of endorsement you may need to look into changing carriers if you desire to put this in place.

How to Interview the brokerage when starting out as a licensed real estate professional

Dear VanEd: I am just about to finish my real estate pre-licensing course online and wanted to know if you have any tips on how to decide where I am going to hang my real estate license? There are lots of companies out there! -- Glen M.

You are right, Glen, there are a ton of companies, many business models and an almost overwhelming number of ideas on what an Employing or Managing Broker should do for new real estate licensees. Don't even get us started on best practices! And while we have some considerations that you may want to take into account, remember that your license is a commodity and you should be interviewing the brokerage firm and managing broker as much as they are interviewing you!

Start by interviewing with at least three firms in your area, even if you think you already know where you are going to start your new career. This will give you ideas on commission rates, splits and current licensing fees as well as how the firm can help you get started. We suggest to new brokers that the following items should be considered when considering hanging their brand new real estate license at any brokerage. Employing/Managing brokers should be prepared to answer questions on these topics:

• The Company - Image, Location, Convenience, Environment, Size - is camaraderie important in your firm? In your local sales area?
• Franchise vs. non-franchise - and the fees that are associated
• What Training and Educational opportunities are provided
• Is membership in a REALTOR organization required/optional
• Office Support - Clerical, equipment such as telephone system, voice mail, copier, fax, scanner, office vs. personal computer, access to the Internet, Board membership(s), personal assistants, Off-Hours services - answering service, setting showings
• Broker Support - assistance in review & preparation of market analysis, listing presentation, drafting contracts, etc. vs. a competing/selling broker or buddy system? Team approach?
• Earnings/Commissions: Traditional splits, 100% concept and/or associated fees, desk fee and transaction costs, other creative programs
• What might the Agent's Personal Expenses be, including:
  • Licensing Fees
  • Insurance Requirements/discounts
  • Association Memberships - Local, State, National Dues, MLS membership fees/books
  • Monthly computer access fees
  • Office supplies & equipment (Palm pilot, Day timer, organizer, computer, Top producer software, calculator, cell phone, etc.)
  • Marketing Materials (Farming, Promotion)
  • Business Stationary & Cards
  • Signs, Riders, Lock-boxes, Key-Pads
  • Training - Continuing Education, Graduate REALTOR® Institute programs, Seminars
  • Personal Appearance and Image
  • Vehicle
  • Other? _____

Don't exclude any question - remember, take charge of your interview and you will find the perfect fit when selecting a company to start your new career with.

Wondering what to do in the first few weeks? Go through the "Getting Started and Staying on Track" professional development course online. All VanEd pre-license students are given this course for free so that they can get off on the right foot! It's online in your new CE Account so you can see exactly what steps need to be taken in the first five weeks as a real estate professional.

Have a question you would like VanEd to answer? eMail us at info@vaned.com or post it on one of our social media channels!