Red Flag

Important information provided by the California Association of Realtors

Undisclosed Short Sale Payments May Be Illegal

"Undisclosed payments in short sale transactions, especially those paid outside of escrow, may violate the law, including RESPA, laws against loan fraud, and licensing laws.  Short sale agents have increasingly reported to C.A.R. about requests for agents and their clients to pay junior lien-holders and others, oftentimes outside of escrow.

One common scenario is when a short sale seller's senior lender authorizes a payment of $3,000, for example, to extinguish a junior lien, but the junior lender demands that the buyer pays an additional $9,000 outside of escrow.  Not only would it be risky for a buyer to pay outside of escrow, but concealing this additional payment from a federally-insured senior lender may constitute loan fraud, which is a crime punishable by 30 years imprisonment plus a $1 million fine (18 U.S.C. section 1014).  Furthermore, omitting from the HUD-1 Statement any charges paid at settlement by either a buyer or seller may violate the Real Estate Settlement Procedures Act (RESPA) (Appendix A to 24 C.F.R. Part 3500).  Depending on the specific circumstances, carrying out these payment requests may also violate other laws and regulations, and an agent's participation in the scheme may be subject to license revocation by the Department of Real Estate or other disciplinary action."

Agents and their clients are encouraged to file any complaints regarding fraudulent activities to the proper authorities, including the following agencies:

Attorney General's Office

California Department of Justice

Telephone: 800-952-5225

http://ag.ca.gov/consumers/mailform.htm

 

Department of Housing and Urban Development (HUD)

HUD Office of Inspector General Hotline (GFI)

Telephone: 800-347-3735

http://www.hud.gov/offices/oig/hotline

 

Federal Bureau of Investigation (FBI)

Telephone: 202-324-3000

https://tips.fbi.gov

 

 

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 Dori Kay, REALTOR®

Prudential California Realty

 CA DRE Salesperson License  #01856708    Office License #01208606

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6 Comments on Undisclosed Short Sale Payments May Be Illegal

NOV
05
874,471 Points 48 Featured Posts Outside Blog Attended Rain Camp Called Shot Master
Wow! That is crazy! I am glad that you put the word out to warn The public. Agents should know better, but the consumer may not realize, until it is brought to their attention, that this is illegal. Great post!!
4:10am • #1
871,571 Points 47 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Anything not on the HUD in a short sale or any transaction involving borrowed funds from a bank is illegal - that is real estate 101.

Sharon
6:42am • #2
Outside Blog

Joni - What's crazy is getting a response from a post I submitted over 2 1/2 years ago....but thank you for the kind words.

Sharon -  You are right...RE 101.  Unfortunately, some missed the course.....or just lack morals.

 
8:49am • #3
NOV
11
847,775 Points 71 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Dori,  I had such a demand from the buyer's lender about 2 years ago. I asked her if she was aware that what she was asking me to do was illegal.  She said nothing.  She knew the critical situation we were in. If we did not close on that transaction the property would go to foreclosure.  And it did. I offered to pay upfront on the HUD the $6,000 she demanded. They did not want it on the HUD they wanted it under the table. NO DEAL.  I explained to the sellers who understood and did not want me to pay the random even if it was disclosed. 
9:29am • #4
Outside Blog

Kathleen - That is really sad. Makes you wonder where that $6,000 might have been going to.  Good thing is you are able to sleep at night, and a big shout out to your sellers for their understanding and support.  Hopefully they will be contacting you soon for a new purchase! 
11:16am • #5
MAY
18
тут на вышеприведенном ресурсе собран громадный ассортимент свежих новостей про новости выхода игр
Harlamymsa
5:49pm • #42


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Dori Kay, Orange County, CA Realtor®

Huntington Beach, CA

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Prudential California Realty

Address: 5848 Edinger Avenue, Huntington Beachc, CA, 92649

Cell Phone: (714) 309-1589

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