Our client was planning to sell his rental property to a buyer who would be getting her financing from a company which does a great deal of advertising in this area. He wanted to sell the property for $80,000. The loan officer came up with the great idea that we could raise the purchase price to $120,000 and the seller could give the buyer a check after closing for the $40,000 difference. He even wanted us to prepare two different purchase agreements--one that accurately reflected the transaction, and one he would give to his lender. The buyer thought this was great, since she would have $40,000 worth of spending money. The real purpose, of course, was that the loan officer wanted to increase his commission. We told the loan officer point blank that this was loan fraud, RESPA fraud, money laundering, and wire fraud. He replied that it was no big deal, since he and his closing agent did this "all the time." Even though the seller purchase the property just a couple years ago for $60,000, the assessed value according to the county was $76,000, and all the very similar houses in the neighborhood sell for plus or minus $80,000, somehow the loan officer found an appraiser that said it was worth $120,000. When we explained to the seller and buyer that committing this fraud could result in significant fines and imprisonment, that the buyer's house payment would be more than $300 higher per month, and that the seller would be responsible for the excess capital gains, revenue stamps, and title fees, the parties agreed to stick with the legitimate $80,000 purchase price. Perhaps this loan officer found someone else to make his boat payment for him that month.
Being fed up with transactions like this occuring in this area, I contacted the Attorney General's office, the FBI, the Department of Justice, the Department of Financial Institutions, HUD, and probably a few initials I have forgotten. Basically, I was passed from office to office, with nothing being done. This lender has a reputation for this type of fraud, and other types as well, so I thought this would be a perfect opportunity to catch them in flagrante delicto. Everyone I talked to agreed this was fraud, but no one seemed to know, or care, who was responsible for prosecuting it. If you know, please pass along contact information.