I had to stave off another attempt to commit fraud via a HUD-1 Settlement Statement a few weeks ago. This time I alienated what is apparently the First Centrally located State Bank which is located in Iowa--if you catch my drift.
This was an FHA loan. There was a provision requiring the seller to pay $3,000 of the buyer's closing costs. Prior to closing we received a preliminary HUD-1 from the short-sleeved-dress-shirt-wearing closing agent which accurately showed the $3K as a credit from the seller to the buyer. When we arrived at closing, the seller paid closing cost credit had been reduced to $700. Since this was an FHA loan, the buyer was required to put in 3% of his own money (the closing was in 2008). If he had been given the whole $3K, he would not have met this requirement, so the lender reduced the seller paid closing cost credit.
The buyer reasonably asked how he was going to receive the remainder of his $3K in closing costs. We volunteered that we had no objection to paying the full $3K, but it would have to be shown on the settlement statement. The loan officer jumped in and told me that the seller had to write a check the the buyer for the $2,300 because it was in the purchase agreement. Apparently she was the buyer's attorney too!
Even though this was a state bank, and the loan officer was the one recommending we cut a check under the table, they were acting as a broker, so I am certain the end lender would not accept this. I told her that this was fraud, plain and simple, and I read to her the language from the settlement statement and from the the Certification of Seller in an FHA-Insured Loan Transaction, which says:
I certify that I have not and will not pay or reimburse the borrower(s) for any part of the cash downpayment.
That is when she really got mad. Actually turned red, wouldn't let me get a word in edgewise, tried to stare me down with an evil glare; that sort of mad. I gathered from her reaction that this was not her first "just write a check under the table that will solve everything the lender will never know" rodeo. Mr. Pocket Protector closing agent was not much help either, smugly repeating, "Oh, I'm sure there's something you can do to work this out." When I asked for suggestions, he was not very forthcoming.
I suggested that the purchase price and/or loan amount could be changed to ensure the buyer contributed his required 3%. They would have none of that.
Do you think I went too far when I told the loan officer that it was attitudes and actions like hers that have ruined this country? I thought maybe I had, but honestly, it really didn't seem to bother her.