....are bad. This one's not even very clever. The "bad guys" write up two contracts. One contract is the "real deal." The other contract goes to the end lender. Sometimes it is the real estate agent who comes up with this scheme, sometimes the buyer, sometimes the mortgage broker. Sometimes even the attorney. But the effect is the same. Maybe the buyer wants to put some cash in his pocket. Maybe the real estate agent or the mortgage broker want to pad their commission.
Say the seller wants $100,000 for the house. There will be a contract which specifies this price--the real deal. Then we have the second contract. This will either be a completely separate contract or just an extra page which will be conveniently removed before the appraiser and/or end lender get hold of it. This contract will say the purchase price is $140,000 and the buyer will "refund" the extra $40,000 to the seller, either under the table or via a "flexible" closing agent.
Again, not even clever. This is fraud, pure and simple. If the lender does not know the whole transaction, you are committing fraud. Hope you look good in orange....
www.thomasmoens.com
Showing posts with label mortgage fraud. Show all posts
Showing posts with label mortgage fraud. Show all posts
Friday, March 28, 2008
Friday, February 1, 2008
Good for her!
One of the reasons many of the mortgage fraud schemes can flourish is because of complicity, or at least indifference, of a very few appraisers. Just a few bad apples make it very difficult for appraisers with a strong moral compass to succeed. A California appraiser was "blacklisted" by Washington Mutual because she refused to lie about market conditions. This is pretty much the same problem legitimate closing agents and title companies suffer through every day. If I had a nickel for every "client" or "deal" we lost because we were not "flexible" enough.... Well, it would be a nice big pile of nickels. Of course, who need clients like that, I know, I know, but it sure would make life and business easier if we all played by the same rules.
Here's the whole story:
http://www.chicagotribune.com/classified/realestate/news/chi-harney_re_01-27jan27,0,5983594.story
Good luck Jennifer! We're all rooting for you.
Here's the whole story:
http://www.chicagotribune.com/classified/realestate/news/chi-harney_re_01-27jan27,0,5983594.story
Good luck Jennifer! We're all rooting for you.
Thursday, January 31, 2008
Your check register needs to match the HUD-1
Isn't that a simple rule? But for some reason, many closing agents and title companies just can't quite seem to follow this rule. When I look at a title/closing/escrow company's trust or escrow account check register for a particular file, it needs to match exactly what is on the HUD-1 Settlement Statement. So, if the seller is getting $23,000 on the settlement statement, your check register better show a check to the seller for $23,000. Not only that, but the names need to match. If the settlement statement says "Repairs to Smith Construction," that check best have gone to Smith Construction, and not back to the buyer or seller. Likewise, the seller's proceeds need to go to the seller, not to the seller AND the buyer, as some of the "flexible" closing agents will do.
The buyer and seller sign under this language on the HUD-1 Settlement Statement:
I have carefully reviewed the HUD-1 Settlement Statement and to the best of my knowledge and belief, it is a true and accurate statement of all the receipts and disbursements made on my account or by me in this transaction.
The closing agent signs this:
The HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused or will cause the funds to be disbursed in accordance with this statement.
Those statements are pretty simple too, aren't they? What often happens is that the purchase agreement says that the seller will pay $3,000 of the buyer's closing costs (we won't discuss the fact that they have artificially inflated the purchase price by that $3,000). Sometimes, the closings costs don't amount to $3,000. Sometimes, the lender will not allow the seller to pay certain closing costs. Sometimes, the buyer would end up getting money back if the buyer gets the full $3,000, and the lender does not allow the buyer to get a check at closing. Doesn't matter.
Let's say the lender, for whatever reason, only allows the buyer to receive a credit for $2,000 of the $3,000 seller paid closing costs. The loan officers and real estate agents will beg, plead, and argue that you should give the seller $22,000 of the $23,000 shown on the settlement statement, and give the other $1,000 to the buyer. When the real estate agents and the loan officer are telling you that it's not fair if the buyer doesn't get the full $3,000, that all the other title companies in town will cut checks which differ from the settlement statement, go back and read what you just signed:
The HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused or will cause the funds to be disbursed in accordance with this statement.
And then ask yourself if their business is worth damaging your community, hurting our economy, and committing mortgage, RESPA, mail, and wire fraud.
www.thomasmoens.com
The buyer and seller sign under this language on the HUD-1 Settlement Statement:
I have carefully reviewed the HUD-1 Settlement Statement and to the best of my knowledge and belief, it is a true and accurate statement of all the receipts and disbursements made on my account or by me in this transaction.
The closing agent signs this:
The HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused or will cause the funds to be disbursed in accordance with this statement.
Those statements are pretty simple too, aren't they? What often happens is that the purchase agreement says that the seller will pay $3,000 of the buyer's closing costs (we won't discuss the fact that they have artificially inflated the purchase price by that $3,000). Sometimes, the closings costs don't amount to $3,000. Sometimes, the lender will not allow the seller to pay certain closing costs. Sometimes, the buyer would end up getting money back if the buyer gets the full $3,000, and the lender does not allow the buyer to get a check at closing. Doesn't matter.
Let's say the lender, for whatever reason, only allows the buyer to receive a credit for $2,000 of the $3,000 seller paid closing costs. The loan officers and real estate agents will beg, plead, and argue that you should give the seller $22,000 of the $23,000 shown on the settlement statement, and give the other $1,000 to the buyer. When the real estate agents and the loan officer are telling you that it's not fair if the buyer doesn't get the full $3,000, that all the other title companies in town will cut checks which differ from the settlement statement, go back and read what you just signed:
The HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused or will cause the funds to be disbursed in accordance with this statement.
And then ask yourself if their business is worth damaging your community, hurting our economy, and committing mortgage, RESPA, mail, and wire fraud.
www.thomasmoens.com
Wednesday, January 30, 2008
Fake second mortgages
Why would anyone give a "fake" second mortgage? Here's how the scam works. Let's say the seller wants $100,000 for their house. The buyer does not have a down payment, and does not want to pay mortgage insurance. The buyer, seller, and sometimes the real estate agent, loan officer, and title company all conspire to increase the purchase price to $120,000 with the seller "financing" $20,000. The $20,000 seller financing is shown on the settlement statement. There is an actual note and mortgage signed by the buyer at closing evidencing the $20,000 debt. In extreme cases, the title company will even record the mortgage (though most do not).
So far, this is completely legitimate. What happens next though, is that the mortgage is immediately released, and the note cancelled. I have actually heard tell of the president of a big title company in our area who actually makes a big show of tearing up the note at closing.
As soon as that is done, it becomes a $20,000 gift from the seller to the buyer. And it becomes mortgage and RESPA fraud. The end lender is led to believe that the purchase price is actually $120,000, and that the buyer will be making payments to the seller on the $20,000. The truth is that the house is only worth $100,000 and the buyer has absolutely no investment in the property. Not really any different that under the table kickbacks, except that they put it on the table first.
www.thomasmoens.com
So far, this is completely legitimate. What happens next though, is that the mortgage is immediately released, and the note cancelled. I have actually heard tell of the president of a big title company in our area who actually makes a big show of tearing up the note at closing.
As soon as that is done, it becomes a $20,000 gift from the seller to the buyer. And it becomes mortgage and RESPA fraud. The end lender is led to believe that the purchase price is actually $120,000, and that the buyer will be making payments to the seller on the $20,000. The truth is that the house is only worth $100,000 and the buyer has absolutely no investment in the property. Not really any different that under the table kickbacks, except that they put it on the table first.
www.thomasmoens.com
Monday, February 19, 2007
Bogus appraisals, et al.
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.
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.
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