A New Twist on Fraud
You have no doubt heard of the well publicized scam where a buyer makes an offer on a home well above the listed price and asks for cash back at closing (typically not stated in the contract)? Of course the seller, if the property has been languishing on the market for a while, is tempted to accept the offer – but wait ….
… what’s wrong with this picture? It’s lender fraud and the Feds are cracking down on perpetrators.
Here’s how it works: A “friendly” appraiser comes in and appraises the home to show the value at the inflated price (although the comparable sales don’t support it). This appraisal is then submitted to the lender for 100% loan to value, the lender unknowingly approves the loan, seller gets paid and buyer takes ownership of home. The buyer cashes out the loan amount above the listed price (often tens of thousands), never makes a mortgage payment and allows the home to be foreclosed upon. Shocking yes, and amazingly it's been done across the country and it’s just now that we are reading about it in the papers. Reading about the litigations that is, because the transaction is not only 100% fraudulent its 100% illegal! This behavior more importantly also hurts the real estate market by creating a non stable comparable sales environment as well as unnecessary added foreclosures to the market!
As if that isn’t enough …
… others have figured out another way to defraud the industry. The set up is simple: Jill Jones’ mortgage has adjusted from her very low 3% rate to an ugly rate of 11%. Her home is not worth what she paid for it 2 years ago. Jill calls her lender and begs to be relieved of some of the debt she owes and asks her lender to allow her to list the home as a short sale. Jill then asks her brother-in-law to purchase the home at the new “lower” discounted price of the short sale. Jill’s brother-in-law fraudulently purchases the home as “owner occupied”, saves thousands for Jill Jones and Jill stays in her home with the help of her brother-in-law. What's wrong with this one?
It rips off the original lender - as lovely of a solution as this scheme sounds, this too is 100% fraud and 100% illegal! Now cases like this haven’t hit the papers yet, but the word is out and the investigations will be around the corner. This type of scam also hurts our real estate market (this time in reverse) by lowering the sales prices of homes in a neighborhood, thus lowering the comparable market sales used for future homes listed for sale. Plus it fraudulently adds to the numbers of short sales the real estate and mortgage industry tracks.
There certainly are home owners facing financial hardship due to getting drawn into low rate ARM’s that are now adjusting and President Bush cannot help all of them. Before you get to the point of desperation, do yourself and the market a favor, first call your lender and let them know your situation - odds are they will be willing to work with you.
If you're hesitant to call your lender and want to discuss the situation first, then call an experienced Realtor, one who knows the market and the ins and outs of good and bad markets. Choose a Realtor who has been in the business long enough to know that the market is ever changing, ever adjusting.
… what’s wrong with this picture? It’s lender fraud and the Feds are cracking down on perpetrators.
Here’s how it works: A “friendly” appraiser comes in and appraises the home to show the value at the inflated price (although the comparable sales don’t support it). This appraisal is then submitted to the lender for 100% loan to value, the lender unknowingly approves the loan, seller gets paid and buyer takes ownership of home. The buyer cashes out the loan amount above the listed price (often tens of thousands), never makes a mortgage payment and allows the home to be foreclosed upon. Shocking yes, and amazingly it's been done across the country and it’s just now that we are reading about it in the papers. Reading about the litigations that is, because the transaction is not only 100% fraudulent its 100% illegal! This behavior more importantly also hurts the real estate market by creating a non stable comparable sales environment as well as unnecessary added foreclosures to the market!
As if that isn’t enough …
… others have figured out another way to defraud the industry. The set up is simple: Jill Jones’ mortgage has adjusted from her very low 3% rate to an ugly rate of 11%. Her home is not worth what she paid for it 2 years ago. Jill calls her lender and begs to be relieved of some of the debt she owes and asks her lender to allow her to list the home as a short sale. Jill then asks her brother-in-law to purchase the home at the new “lower” discounted price of the short sale. Jill’s brother-in-law fraudulently purchases the home as “owner occupied”, saves thousands for Jill Jones and Jill stays in her home with the help of her brother-in-law. What's wrong with this one?
It rips off the original lender - as lovely of a solution as this scheme sounds, this too is 100% fraud and 100% illegal! Now cases like this haven’t hit the papers yet, but the word is out and the investigations will be around the corner. This type of scam also hurts our real estate market (this time in reverse) by lowering the sales prices of homes in a neighborhood, thus lowering the comparable market sales used for future homes listed for sale. Plus it fraudulently adds to the numbers of short sales the real estate and mortgage industry tracks.
There certainly are home owners facing financial hardship due to getting drawn into low rate ARM’s that are now adjusting and President Bush cannot help all of them. Before you get to the point of desperation, do yourself and the market a favor, first call your lender and let them know your situation - odds are they will be willing to work with you.
If you're hesitant to call your lender and want to discuss the situation first, then call an experienced Realtor, one who knows the market and the ins and outs of good and bad markets. Choose a Realtor who has been in the business long enough to know that the market is ever changing, ever adjusting.
posted by Barbara Gaines at 5:25 AM
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