The Real Estate Settlement Procedures Act (RESPA)

ALERT!!
MINNESOTA DEPARTMENT OF COMMERCE ENFORCEMENT ACTIONS REGARDING AFFILIATED BUSINESS ARRANGEMENTS

Since the D.O.C. started its investigation/enforcement actions against agents/joint ventures of Title Insurance Companies organized by First American Title Insurance Company, representatives of the Minnesota Association of REALTORS® (MNAR) have been in contact with D.O.C. representatives to seek clarity and express the concerns of our industry about these investigation/enforcement actions.

After considerable discussion with MNAR staff and MNAR Legal Counsel Don Smith, the D.O.C. has recognized the dilemma real estate agents are put in by executing a Civil Penalty Agreement confessing to wrongdoing to avoid greater D.O.C. sanctions when they believe they did not engage in wrongdoing. While the D.O.C. was of the opinion there are problems with the First American joint ventures, the D.O.C. recognized the potential adverse legal ramifications to an agent/joint venturer confessing to wrongdoing, and such ramifications were not intended by the D.O.C.

Commissioner Glenn Wilson, Deputy Commissioner Patrick Nelson, and Chief Investigator Paul Hanson have made a sincere effort to understand and address the concerns of the industry as expressed by MNAR representatives. In an effort to meet those concerns, the D.O.C. has agreed to provide in future Civil Penalty Agreements that:

the following allegation will be eliminated:
* failed to act in the best interests of your clients in violation of Minn. Stat. § 82.22;
* the three remaining violations spelled out in the Civil Penalty Agreement will be referred to as "alleged";
* the agent/joint venture will acknowledge he/she understood the alleged violation and agrees to resolve the matter through an informal disposition (rather than acknowledging/agreeing that the violation had occurred).

These modifications afford MNAR members a new option to resolve this controversy which was not available earlier. Each agent/joint venture should consult with his/her own attorney to determine if this option serves that agent’s interests or the pursuit of another option is more appropriate.

Future correspondence and civil penalty agreements or consent orders to be sent out by the D.O.C. will include the language substantially as set forth in this Alert.

Those agents/joint venturers who have already signed a civil penalty agreement should contact the D.O.C. to discuss a new agreement.

Those agents/joint venturers who have not responded to the D.O.C. letters as of yet or have submitted a response will receive a new civil penalty agreement or consent order from the D.O.C. with the language substantially as outlined in this Alert incorporated into the new agreement or order.

HUD will be a participant in any civil penalty agreement or consent order between agent/joint venturers and the D.O.C.

The MNAR will continue to dialogue with the D.O.C. in an effort to bring clarity to the legal issues raised in this investigation/enforcement action.

MNAR will be scheduling two informational meetings in the near future to update members on matters related to the D.O.C. initiative including the implications for First American Joint Ventures as well as implications for other affiliated business arrangements and the industry in general. Don Smith, MNAR Legal Counsel has been involved in the MNAR dealings with the D.O.C. since its beginning and will lead the discussions at this informational meeting.

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