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Blatant Mortgage Fraud that we will not be a part of

You hear a lot of talk about Mortgage Fraud, how it is rampant, how banks are cracking down on easy loans, how the number of foreclosures is increasing......but the call we received today still has me in SHOCK!

We have a couple of listings of homes that need a lot of work, are not only advertised as such, but the pricing also reflects that. stop mortgage fraud

A gentleman who identified himself as a "real estate investor" called us today about one of these listings and this is what he had in mind. He said that he had an appraiser run a pencil search on the property and the house was valued at more than $150K over listing price. We explained that we were aware of that and so was the seller, but it was priced accordingly considering the amount of work it needed. He proceeded to ask if we could increase the list price by $150,000, he would pay full price and would request the difference at closing.

We told him that not only would we not increase the price, we would not partake in anything remotely similar to what he was suggesting because it would be considered mortgage fraud. We also told him that the owner would consider seller contributions, as long as these followed all Fannie Mae guidelines.

I know there are a lot of agents in our market that are participating in deals of this nature. I even know a lot of sellers that think nothing is wrong and they could play the "dumb card" just to make the deal happen. The only thing I have to say to these people is that Mortgage Fraud is a Felony. You can go to jail, plain and simple.

Posted by Rick & Ines - Miami Beach Real Estate on 05/26/2007 11:50 PM

Comments (49)

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Originally posted at: Miami Real Estate Blog: Blatant Mortgage Fraud that we will not be a part of

49 Comments on Blatant Mortgage Fraud that we will not be a part of

MAY

2007

Mortgage fraud is running rampant these days. We must keep our eyes open for all the new variants that keep coming out....

MAY

2007

Ines - I told BB that I wanted to write this same article based on some events that have happened to us last week and probably still need to write something to post to my audience to help educate them. I agree 100% and we refuse to commit any type of Fraud - well said - great job!

Ines - Good for you!!! Unfortunately their is a minority in both the real estate and mortgage industry that is willing to cross the line. Hooray for you though!

Ines, I wonder if these type of people pray on FSBOs and I just hope people are smart enough to distinguish these felons from the rest of us in this industry.

Anybody who goes into these kind of deals are asking to go to jail! You are right this is mortgage fraud and you were right to stay away from it!

Todd

We hear these horror stories all the time. It is amazing at what lengths these snake oil salesmen will go to. You would think that with all the government red tape, that they would get caught and this stuff would go away. I guess they all think that someone hasnt ever done this sort of stuff before, and we are all idiots. Buyer and Seller, and Agent beware!

I think the SNAKES will slither out of jail too.

I've had individuals suggest things such as this when perusing the net and finding me and then discussing deals. Quite frankly, I tell them to move on. I so hope that as 2007 winds down we will see the bulk of the 'snakes' go away. Though, in any market, they will always appear from under the rocks.

Rick and Ines

This post gets 2 thumbs up from me. Way to go! The scenario described is taking place in every part of the country. Regrettably, the higher value is typically the result of a fraudulently inflated valuation.

Ines, I applaud you! Mortgage fraud requires many willing parties. I still can't get over the fact that these people place calls like this! It's not even about losing our licenses people, it's about losing our freedom and going to jail! Sorry, this topic always does that to me.....

Ines and Rick, you are absolutely right. I am not going to jail or be fined to help an investor out. There are horrow storied in MI where they do this, pocket the money and leave.

Ines - I had a call from an agent I know well, wanting to know what I thought of a similar scenario a buyer of his was insisting he take part in writing up for him. I told him what I'd read here in AR on various posts about this subject, and he called his buyer back and told him there was no way he was going to be a part of anything like that. I also tried to tell someone else this same thing that I work with, and his loan officer told him there was nothing wrong with it at all. I don't know if what he was trying to put together worked or not, but I told him several times that it smacked of mortgage fraud to me. He insisted it wasn't because his lender told him it was okay and he said his attorney did, too. I still think it was......

Ann

Kaushik - and the rules keep changing - we must also stay on top of those.

Cyndee - this cannot be said enough, please write your article - people need to know.

Tony - thank you, I think you hit the nail on the head with that. There are a lot of people willing to do that and they don't understand it is a felony.

Mana - I do think you are right - I know of 3 FSBO's in my area that accepted deals like this. They figure they can have a blind eye and that alone will protect them.

Todd - we, as real estate professionals need to do our part to stop this nonsense.

Karl - either that, or they think there are so many thousands of transactions, it is impossible for anyone to notice.

Hi Ines, It just never stops. The more we write about these the more educated our peers and the consumer will be, so good job. Hey do we have a mortgage fraud group?

Chuck - I love the graphic - those snakes will slither out of jail, but a lot would have learned their lesson and use their experience to educate others.....I hope.

Jason - you are right, I do hope that these slow down. But there are snakes everywhere.

Ed - how can we get the message across to these people? In the last 6 months we have had at least 10 scenarios like this one come before us, it's crazy.

Maggie - what shocked me about this particular guy is that he just came out and say it without even knowing us. He's not a real estate agent but an investor - I do hope our answer opened his eyes.

Missy - I know of one individual that has gone to jail for mortgage fraud and to think of his family breaks my heart.

Ann - I do know of a couple of "slithering LO's" out there, but if the attorney thought it was OK, then what can they do? That's a good question to pose here in AR.

Bryant - I agree, we cannot say enough about this subject. Is there a mortgage fraud group?

Ines - what I don't think people understand is that it is just so widespread down here. I promise that there are days that we have more fraud offers than regular ones. I went to a seminar on this a few weeks ago and the speaker, a police officer, said that mortgage fraud today was like cocaine in the 80's- I think he is right!

Ines ~ I agree with you these agents should go to jail. IN fact everyone who participates in the scheme should get some mandatory time off behind bars AND never be allowed to practice real estate again.

If these people would only use their brains to do something legal, instead of crooked they could probably cure cancer...or something.

GOOD FOR YOU! You, and everyone else who calls themselves a professional, should be proud of you.

Slime like this clown are painting a very dark picture of our industry and are compelling changes that will ultimately hurt the honest folks who just want a place to call their own.

In my area, we had a huge fraud ring like this operating a few years ago with plenty of local agents taking part. When the proverbial "stuff" hit the fan, they couldn't run for the exits or distance themselves fast enough.

Kudos to you. You have just raised yourselves a few levels in the eyes of your peers.

Beth - Wow! that's a statement....a crazy scary one! ---->"mortgage fraud today was like cocaine in the 80's"

kk - mandatory time is a great idea - there is no way a real estate professional could ever play dumb and say they had no clue.

Steven - A couple of months ago we received 3 offers for 3 different listings from the same mortgage company all at full price (that was the first red flag), they all asked for 6 % seller contributions (at the time, Fannie Mae guidelines had not changed), the third red flag is that I had not shown any of those properties to those buyers - we handed these to the legal dept. at our office and it ended up being a huge mortgage fraud operation. If it smells fishy.....IT'S FISH!

Good for you!! My radar would have gone up as soon as they said pencil search.. Great post.

My office had someone come in a few weeks ago asking the same thing... we told him we were not interested in his business. He was persistent.

There are people out there that just want to always work against the system.

We all know that there is black, white and a massive grey area in Real Estate. The trick is that when it looks like a fish, sounds like a fish, and smells like a fish - it's probably not a duck.

When we know we're about to leave that Grey area and move to something WRONG, it is up to us to just call the whole thing off and distance ourselves from it as much as we can. We also need to make sure to document everything and let someone else know to protect our names.

Matthew - LOL! oh come on...not with "pencil search"!

David - your comment makes me think of something we all need to think about. When dealing with big companies, the little guys are the ones that will be at fault - the big ones will always have powerful attorneys pointing the finger at the innocent ones - so STAY AWAY FROM THESE CROOKS.....and you are right, document everything!

Interesting to read this post, especially since we are both in Florida. You may be interested to read my previous post Seller Beware. It got numerous comments and stirred up some good conversation on this topic. Almost sounds like it is the same guy or group approaching these people. The one in my post was out of Boca Raton. Perhaps we should share notes on these situations. Take a look.

A mortgage fraud group would be a very good resource for AR members.

Louann - there was a different investor a couple of months ago that was doing this and happened to fall in the hands of the wrong Realtor - the agent called every single agent in town to warn them about his shady practices. A lot listened to the warning, others did not care and the man ended up buying a couple of properties - we'll see how long it will take before they foreclose.

I know what you mean...and good for you to put your foot down...

Let's all say no to mortgage fraud!

We have been getting warned about this in California too. Apparently it's rampant. And illegal.

Sally - how about an international campaign "JUST SAY NO TO MORTGAGE FRAUD"! : )

Mary - I guess we see a lot more of this in Florida, it's pretty crazy. Just a couple of weeks ago I got a phone call from a lady saying, "Hi, is this Ines, I just wanted to verify your fax number because I'm sending in an offer for one of your listings". As soon as I hung up, the phone rings again and it's the same lady, when I tell her she already called me she says "Oh, lucky you, you're getting 2 offers for 2 different listings"-------from the same mortgage company......there was a HUGE RED FLAG THERE!!!

Good job. Unfortunately, this is being taught by many of the national real estate investors. A good response is taht you are more then happy to raise the price as long as it is fully disclosed in teh RE Purchase agreement with the lender and Title company being made aware of the situation. This throws it back on them and their buyers ability to get financing.

Ines, good for you, no deal is worth being involved in something like that. What is amazing is how blatant they are about it.

Larry - according to our broker and a seminar I just attended, by agreeing to increase the price, even if disclosed, you can be considered an accessory to the crime...and we all know it is a crime.

George - it IS amazing how blatant they are and as Larry pointed out, this scheme is being taught by a lot of the national real estate investors.

I agree and just wrote a blog on an aspect of this. My point was more in line with what you had finished with regarding seller concessions...

An institutional lender would not allow it to be sold under the terms he outlined. By disclosing it all upfront and indicating that he would receive the money out of escrow the deal would fall apart. But you did best by sending the message to this individual and hopefully all he knows that this practise is no longer acceptable.

This is also a good reason structure deals "as if" a lender were going to have to approve it even if a complete cash purchase is involved.

MAY

2007

Rick and Ines, good for you. I am very tired of hearing this type of fraud is still coming on strong in every community accross our nation. I am thankful for folks like you that take a stand, and do not place their sellers in harms ways as well. Thank you for sharing this with us.

Larry - I have to read your post- those are great points.

Bob - you know how we are and we are always looking out for the best interest of our customers. These types of deals make me sick and we do have to put our foot down.

MAY

2007

Ines- Great post. It's amazing to me that people have the nerve to ask such a thing. Talk about you know what! Hmm. Let's see, $150k directly into his pocket and he didn't see anything wrong with it? Yikes.

My radar went off too as soon as I read "pencil search". I thought uh-oh.

Debi - Matthew up above said the same thing about the "pencil search" - I guess those are a lot more common down here (or am I a little naive?).

Unbelievable! And I'm sure he has a particular mortgage broker in his pocket who's willing to break the law for a quick buck. That makes me sick!

Lisa - why don't you tell me how you REALLY feel! : )

MAY

2007

Ines.... sorry, semi late to this devil's party..... lol I wish I was with you on the other line, because just out of curiosity, I would have asked him what kind of financing that he had planned on doing and who he would use for this.... I like to know that kind of stuff.

Overall... you are 110% correct, even some realtors are part of this for that quick closing... and the buyers are playing that "dumb card". We need this topic more talked about.

jeff belonger

Jeff - it's funny you say that because Rick thought the same thing - we should have entertained him a little to see what he had in mind and maybe laugh about it later - but we didn't want for him to get the wrong impression.

Ines... sure, it can be a semi waste of time. ..... or for him to get the wrong impression as you mentioned. But it might be good to know for several reasons. Possibly to know who is out there and doing what and maybe in your area. But also.... just for that same reason that if you ever have another client using this same lender and or loan officer, that you would remember that name. And little red flags would pop up. Just a thought....

jeff belonger

That's a great idea Jeff - that would certainly pop up red flags.

Rick just told me about a call yesterday - where we have a listing that is being prepared and is not yet active on the MLS but appears on our website. An agent called and said her customer would be willing to draft up an offer for the full price of the listing as long as her customer would get $150,000 back. In that case, because she identified herself as a Realtor, we told her to draft it up - that way we can turn it over to the legal dept.

Ines... that is what I am talking about. Some would call it whistle blowing. But in all honesty, I am tired of hearing the real estate profession complaining about these issues at large, but nobody does anything about them. And do I like tattling on people as this would be looked upon. In general, yes. In regards to my profession, if it's not only hurting potential clients, other realtors, etc etc... HELL NO.... why should I even suffer because of this and if I know of illegal activities. Or in many cases, the blantant bait and switches that go on with other lenders.

Susan Milner wrote this : Control when you aren't in control? I am hearing more about this. Hey, I do feel sorry for all parties involved. Here is my solution : As a Consumer or a Realtor, should you complain?

jeff belonger

Ines... we do all need to think about this.

What I do for myself is:

never delete emails on a file or client that is squirrelly for 6 months minimum
keep all faxes and other information in PDF format on your computer
keep all other pertinent files on your computer
organize client files by year and by name on computer and Back them up

I have 2 pdf methods... 1 is a software program called PDF995 which acts like a printer and creates a PDF instead of sending it to my printer. The other is my efax program (I use PFAX and Callwave)... I fax to myself... the benefit of htis is that the fax headers print on the page so it has a built in time/date stamp!

Then... if someone is asking more than 3-6% back at closing...especially if it isn't a REAL primary residence, then you need to find out their intentions and if they have an ulterior motive!

Jeff - thanks for those articles I will take a look at them.

David - we also keep client files for longer than 6 months, it's the only way to cover yourself. It's funny when you mention "Fannie Mae Guidelines" ot other real estate agents, most respond with a big "HUH?" It's amazing.

MAY

2007

Wow!! You go girl!! I haven't gotten a call like that---but I've heard the stories. I am amazed (at times) that these shady investors are out there and make themselves so available for criticism! Too bad you didn't get his name and credentials to forward on to someone who could help him out (for a few years) in this type of work! Maybe BIG BUBBA could help him out while he acts like a DeDeDe!!! Get him girl!!!

Susie - I'm sure everyone will get a chance to get a call like this at some point. In Miami, they are way too common.

I appreciate your email---DONE DEAL SISTA!! I guess I was acting like the "D...D...D!!!" hehehe Thanks!! AND...I can't wait to check out the link you sent me as well! I'll be "UP ON MY TEEN" and he'll be wonderin' what's up!! TTFN

thanks Susie! much appreciated

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