Earlier today, I asked for your collective opinion regarding a builders' rebate. The willingness of the Active Rain community to contribute will never cease to amaze me. I've spent the day preparing for two upcoming presentations in Florida and now have better and more relevant information than I could have gathered in any other manner. Thank you. My gratitude is heart felt.
The scenario in the initial post developed around a builder who solicits buyers by agreeing to make a year's worth of mortgage payments. The questions arise from the ability of the builder to make the concessions legally. Full disclosure, or lack thereof, to the buyer's lender is the paramount issue. The builder described in the post is very real. The fact pattern is completely accurate.
Click here to read the original post titled A Builder's Special Incentive ... Your Opinion Please. The comment thread is well worth reading. It's a living testament to the experience, judgment, and knowledge of this community.
My response: The case portrayed earlier is an example of fraud for housing as defined by the FBI. It's important to note that the buyer intends to make regular monthly payments and live in the house. As harmless as this situation might appear, it’s contains warning signs of an inflated appraisal and possibly other criminal acts. A common fallacy to avoid at all costs is one incumbent on the right of buyers and sellers to have side agreements that aren't disclosed to lenders. Again, the participation of a loan officer in a creative scheme does not imply that the source of funds has actual knowledge of material facts. One can safely assume the opposite to be true.
If a deal is above board, why not fully disclose it's elements to the lender? The players in this scenario have demonstrated a willingness to conspire and deceive. Where does the cheating end?
Always keep in mind that every settlement statement contains the following language:
It is a crime to knowingly make false statements to the United States on this or any other similar form. Penalties upon conviction can include a fine and imprisonment.
The misrepresentation of the commission and the silent rebate of funds is clearly a case of knowingly making false statements.
Many incidents of mortgage fraud remain undetected, and/or unreported, and are therefor not prosecuted. Most people, industry insiders included, are unable to recognize the real warning signs of mortgage fraud. The well intended pamphlets that are handed out are a great start, but we need to do much more. Education is the key, but awareness is the first step.
A community based approach to fraud prevention is, in my opinion, the most effective avenue available. An informed consumer is the fraudsters worst enemy.
This nation’s real estate community is uniquely positioned to make a contribution through vigilance and training. Most forms of mortgage fraud could not exist without the participation of an industry insider. You can make a difference by learning everything possible about fraud prevention and reporting any criminal activity, known or suspected.
Every time one of you stops an incidence of mortgage fraud, you make it “that much easier” for federal agents to continue their struggle against terrorist, drug dealers, and other criminals.
If that’s not the act of a patriot, I really don’t know one that is!
I realize that it’s often difficult to report white collar crime. The criminal is often a neighbor, friend, colleague, or customer. A criminal doesn’t have to carry a gun or a knife to be dangerous. We’ve all seen the numbers representing the staggering cost of mortgage fraud to financial institutions and society in general.
If for some reason anyone is reluctant to report this particular type of crime, ask yourself one simple question: What type of crime would you report?
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