MN Dept of Commerce Violations: Now Is Not The Time To Risk Potential Violations
Sunday, January 9, 2011 at 5:02PM By: Stephen J. Nash
Nash Law Firm
nash@nash-law.com
While you never want to have to deal with the Minnesota Department of Commerce ("DOC") on a potential violation, now is an especially bad time to be in front of the DOC. The collapse of the real estate market has brought greater scrutiny to the profession. The real estate world has changed so dramatically in the last 15 years that many of today's common practices did not exist 10 or 15 years ago which provides the DOC a smorgasbord of activities to challenge. And, finally, with the state under tremendous debt pressure, there is great incentive to ratchet up the penalties for alleged violations.
The following chart shows a sampling of recent enforcement actions as reported by the DOC. Remember that the description of the alleged violation is reported by the DOC, not an impartial observer, and contain the DOC's conclusions but no the underlying facts of each case. That being said, fines are in the thousands of dollars, not in the hundreds. The days of the $500 slap on the wrist are well behind us. If the DOC knocks on your door don't be shocked if they propose a $5,000 penalty over a matter that you believe is at worst a mistake.
The best method to deal with a Department of Commerce violation is avoid the violation is the first place. Once a violation is alleged, you are facing an extremely difficult situation. While in the past being cooperative and responsive may have been enough to ensure a fair resolution, today that approach is not going to work. The Department of Commerce is much more hostile towards the industry today than in the past (given some of the abuses we have seen in the industry that went unchecked, their current attitude is not totally without merit). While they may start out being friendly ("Just come on done to our offices so we can talk about this situation"), once in their office, the tone of the conversation will quickly turn into one of hostility, You will feel as if you are being interrogated (you are), attacked (you are) and that they are trying to intimidate you (they are).
Bottom line, once a violation has been alleged, you are in a hostile situation. You need to be prepared to defend yourself. Negotiations will not be easy and you have to be realistic about what to expect. The only way you can truly get a result that you will be happy with is to avoid the situation altogether.
How can you avoid having to defend yourself to the Department of Commerce? Keep current on the multitude of lawsuits, enforcement actions, HUD announcements, etc. Don't take risks. Now is a time to be conservative when deciding whether to engage in an activity that may be determined later to be a violation. While you may concern the activity to be perfectly legal and proper, are you willing to spend the time, money and risk your license to prove that the activity is legal? There are many common activities that real estate professionals are involved in that may or may not be a violation and it will be years before we know the final answer.
If you still don't believe that dealing with the Department of Commerce is different today than in the past, if the chart below isn't enough to get your attention, ask anybody who has dealt with the DOC in the last couple of years over a potential allegation and I am sure they would be more than happy to tell you about the miserable experience they endured ending with a result they feel was totally unjustified.
| July 2010 | ||
| Real Estate | Allege Resp engaged in activity which requires licensure as a Residential Mortgage Originator by engaging in loan modification activities for another and for a fee. | $2,500 |
| June 2010 | ||
| Appraiser | Resp failed to: use the most appropriate comparable sales, complete the income approach when appropriate, provide listing information, maintain complete work file. Notary commission also revoked. | Revocation |
| Appraiser | Resp attempted to influence the outcome of an appraisal by disclosing a predetermined value in the appraisal request and offering a reduced fee if that value could not be reached. | $5,000 |
| Appraiser | Resp misled lenders by not disclosing material information, reporting inaccurate data and accepting information from a party to the transaction without verification | $4,000 |
| Real Estate | Allege Resp participated in a scheme or plan to defraud mortgage lenders by aiding and abetting mortgage fraud. Resp is permanently barred from engaging in mortgage originating or servicing activities in MN. |
$7,500 Revocation |
| Real Estate | Allege Resp acted as a property management firm without a real estate company license and conducted business under a different name than her licensed name. | $5,000 |
| Real Estate | Allege Resp issued 6 worthless checks, 5 of which were made payable to Resp. All checks were returned "non-sufficient funds". Resp Katrina Gordon is permanently barred from engaging in mortgage originating or servicing activities in Minnesota. | Revocation |