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Read it, learn it, recognize it and report it.

Ok so I’m here to toot some horns today. Not mine, but I do feel compelled to highlight a couple members of ActiveRain and a few off site Blogs. Why? Because I think they have something important to say and we all should be made aware of it. I’m talking about mortgage fraud. I know this subject has been beaten to death but it really is important and will be affecting our business drastically over the next few years. Mortgage Fraud is running rampant through out industry. It is leaving a trail of ruined lives and is affecting market values everywhere. And we all pay the price. Mr. and Mrs. Homebuyer are going to be facing a very difficult time when it comes to finding financing to purchase a home. Lenders are going to be forced to tighten up their qualifications or they are going to end up going out of business.

This is going to put pressure on housing prices and unfortunately will spoil the chance for a lot of honest, hard working people to own a home of their own. We have not even begun to see the effects from all the shady lending practices and investor fraud that has taken place over the last few years. Folks, I am here to tell you, it is going to get ugly. And it is going to get ugly very quick. Remember the Savings and Loan crisis? I am not a negative thinking person but I think the coming crisis is going to be just as bad.

As Realtors, we need to be able to spot the signs of fraud and we need to report it to the proper authorities. I am by no means an expert on fraud. So, I am going to provide with some links here that may help you to educate yourselves and will also give you some resources to report it.

First, I’m not sure if you have noticed but we have new member by the name of Ralph Roberts. For those who don’t know, Mr. Roberts is a Realtor, author, lecturer, investor and fraud expert among many other things. Read his bio. Mr. Roberts has written 5 excellent books on Real Estate sales and investing. Anyway, his site at www.FlippingFrinzy.com is an excellent resource for learning about fraud AND reporting it. I encourage you to visit it.

Another member of ActiveRain, Michael Richardson, has been on both sides of the table when it comes to mortgage fraud and has now made his mission to stomp out fraud one transaction at a time. He is an expert on this subject and has a great website www.preventmortgagefraud.com.

I have read several good Blogs this week also related to mortgage fraud. You owe it to yourselves and our profession to read these and educate your self on fraud in all it’s ugliness.

Damion Flynn’s ActiveRain post, from last night. Blew me away that people can be so blatant about teaching others how to become criminals.

Another great Blog dedicated to mortgage fraud. http://www.mortgagefraudblog.com/

And this one you will really like. IamFacingForeclosure.com. This is a Blog from 24 year old “investor” who is now facing foreclosure on his properties and possible jail time. His Blog is very open and details his endeavor into committing loan fraud. I could not stop reading.

So folks, read it, learn it, recognize it and report it.

Posted by Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc on 10/22/2006 03:07 PM

Comments (38)

mortgage fraud, educational

38 Comments on Read it, learn it, recognize it and report it.

OCT

2006

"The Lovely Wife Here"

Mortgage Fraud is a topic that pisses me off!

We know a Guy who served a little time for this.

Where is he now...Out of jail...Doing it all over again!

TLW "The Lovely Wife"...Kum La Ka Lakka...ROAR!

Chicago is notorious for mortgage fraud. In fact it became so obvious that the Feds stepped in.

There are now 10 zip codes where buyers have to go to classes before they can qualify for a loan.

This is an attempt to prevent mortgage fraud. Let's hope it works.

Eileen that is an excellent idea. Education is key to stopping fraud. I wish all Cities/States did that.

There was a lengthy article in the Tampa Tribune today about an agent who has been doing this (and there are many, many more). It was brought up by appraisers who came upon the closed transactions as comps. If you see "credit" vs. "escrow" run, run, run.

Hi Sharon, I just finished reading that. It is happening all over the place. With all the desperate sellers right now it is going to be very common. That why it is so important that Realtors are aware of the signs of fraud.

I have an offer sitting on my desk right now from an investor that has never even seen the property. The property is preforeclosure and is going to require a short sale. The deal is for "cash" written on an assignable contract requesting the use of his title company and he wants to handle the short sale negotiations with the bank. Fraud? maybe. Of course as soon as I ask for proof of funds, which I will in the morning, this offer will be withdrawn.

Now that the case of the Tampa agent has been exposed, it will be interesting to know what will eventually will happen to her and all the others (appraiser, title company, and perhaps lender) who where involved in this scheme. Thank you for pointing out these resources in your post, I am just a couple of counties north and have already been approached on this subject.

This kid (IAMFACINGFORECLOSURE.COM) is a fool and anyone who has simpathy for him needs to have their head examined. He deserves to go to jail. I can't believe that I bust my ass all day, every day and this moron is on TV and radio.

Delicate R.

Bryant

Great info and stuff we all need to keep in mind. I'm a little surprised that more of this didn't surface earlier when the sheer number of transactions was going through the roof. Maybe the fraud folks were too distracted to keep up with the volume.

Oh, sorry. I forgot that I wasn't supposed to rag on anyone here.

Fortunately I have not been exposed to it yet, but plan on learning what the sign are so I can spot it

Looks like you have done a lot of work in coming up with those sites Bryant. Let’s hope that more people will be watching out for this, and maybe what you fear will happen can be minimized.

We received two fraudulent offers this week and Rick was able to identify them immediately and notify the proper authorities. It was heart breaking for the sellers, and not to mention for us, since we didn't sell the homes, but we cannot allow for this to keep happening. Great Post Bryant and TLW, it pisses me off too!

Ines

Ines, can you give us some examples of the fraudalent offers? how can you detect them ?

Thanks for the tips and insight on this. I have not experienced this yet, but can definitely see the opportunity for it with our changing markets. Thanks for the resources and helping us be proactive!

OCT

2006

I remember the &L crisis all too well. I bought a sweet condo f in Scottsdale, AZ for $67,000. It was sold for $120K three years before.

Loan fraud runs rampant in fast markets due to greed. Everyone wants to make the loan and due diligence is often overlooked.

It's time for some careful lending practices. It will hurt the market but we'll recover. Thanks for a good post.

Bryant, I don't think its possible to beat this topic to death. It is a big problem here in St. Paul. This will not be beaten to death 'til the practice of mortgage fraud is beaten to death! Jay Merton

BB,

As usual another great post! Thanks for referencing/linking your post to additional subject matter, particularly to Damions Flynn's AR post. It is posts like this that will serve to make AR a premier real estate website. The real key to all these posts and stories is that we as real estate and related services professionals take the policing of our ranks serious rather to just say "too bad, how sad, I'm so glad that it's not me! At the end of the day any professional group or association is only as good as the efforts that they take to root out and expose those who serve to degrade the reputation of our respective industries.

Bryant.... yes, another great post. Like someone said....we can beat this topic into the ground. We need to educate. One problem that I see is that it seems like many of the good and honest people are on this site. I am actually getting friends, family, and clients to log on here and read these awesome blogs....and to ask questions.

In regards to what Eileen said..... that's amazing, about the zip codes.

In regards to what Rick & Ines had mentioned about 2 fradulent offers. I am with Ray, could you give us a few examples of this. I am not a realtor....but anything helps to help myself, clients, and other realtors.

Again....great post and I will check out the links this evening.

Great post. I noticed a 'dirty' deal on an appraisal assignment a while back, during the frenzy. Mortgage broker sent in assignment with a contract. I requested a copy of the contract from the seller (FSBO) at the time of appointment. The MB contract (whos girlfriend with a different last name was the buyer) was for $440K, and the sellers (FSBO) contract was for $410K. The 440K contract had the signarute done with a sharpie (to go over the thinner pen lines which they undoubtly tried but had shaky hands). The MB was trying to get the appr at 440K because he lined up a buyer at that price to purchase from his girlfriend and do a simultenous close, I suspect. Poor FSBO's they were clueless and most likely crushed.

How did you notice, Rick and Ines?

nick

Thanks for the post Braynt!

Education is the key to protecting ourselves and our clients, but we need proper education. I am going to be posting something shortly which I find a little scary, even if it is done with cooperation with Freddie Mac. It follows in line with Brain Brady's blog about the insanity happening in the mortgage industry (IMO).

Check out my blog later today as I still need to formulate it.

Robert, I will look forward to your blog posts. Im not sure anything can scare or surprise me but please try. This is stuff is ugly.

Another dimension to this is not only in the Loan field with "loan" officers...but also with Realtors acting in the capacity of loans. I personally had a situation where the agent, who is acting as both the realtor and loan officer sent an offer on a "pristine" home asking for $18,000 recurring, non-recurring costs AND a SEPARATE Addendum asking for $30,000 for "home improvement."

When I asked about the "home improvement", he indicated that it was like an "equity-line of credit"...then I asked if he planned on sharing this Addendum with the Lender. The answer was "no"...and he also indicated that the Title Co. that he deals with "knows how to handle this Addendum."

Needless to say, I told him that this would be considered LOAN FRAUD and that I could not accept it as written unless he wanted to place all the monies in the Offer.

As a side-note for those that don't know...you have to present the offer to your Sellers (no matter what) and as soon as I told them it was Loan Faud, they were not interested for that reason & for the fact that it wasn't a good offer anyway.

The agent for the Buyer wasn't the least bit concerned and said "fine, someone else will accept our offer".

Great post and I hope it serves each of us to learn more about recognizing loan fraud and helping our clients and getting those unscrupulous "lenders" out!

Damion, I have a deal on my desk right now that is very similar to the short sale outlined in your post yesterday. The house is brand new priced at $199,000 valued at $225,000 my seller owes $220,000 and is needing a short sale.

Offer came in at $199,000 "cash". Buyer wants to use his preferred Title Company, Buyer wants to handle all the negotiations with the bank. I called the Realtor this morning and asked for proof of funds. He was all concerned that I had spoken to the lender already(I hadn't) and proceeded to explain how once the deal is negotiated they will fax over a new contract for the seller to sign as they weren't really offering $199,000 but were going to start at more like $150,000. "What difference does it make the seller is not getting any money anyway?" Oh well let the games begin!!

As a mortgage broker, I would have to say that one sign that realtors can be on the look out for is stated income loans. If you know that your client is doing a stated income loan, ask your client to verify that the income that is submitted to the bank is accurate to the income that they really make. I have seen numerous brokers try to increase income 2-3 times more than what is really earned just to make the numbers work.

Biggest issue with mortgage fraud is that those that play by the rules end up paying for it. The banks don't loose money on it, they pass along all of the costs to their other consumers.

Amen! Fraud is a rapidly growing problem, and everyone is going to suffer for it.

Great post! We bookmarked it for future referencce

Damion, Thanks for the additional info. Yep, I knew that. The idea is to get the bank as much as possible. I've done quite a few of these and my goal is to always negotiate the deal as HIGH as possible with the seller and the buyer and then run it by the bank. My seller was on the other end of fraud when he bought the house with the promise from the builder of being able to flip it for a profit. He paid $225,000 for a house worth $200,000 with $5,000 down. The builder then referred them to a Realtor who immediately listed it at $265,000. They did about 30 of these and all are still on the market with new Realtors at very low prices. Countrywide has the 1st on these properties.

Damion, I just had along conversation with the Realtor that had submitted the offer I currently have. I have sent him the link to this post. Hopefully he will visit and read up on this stuff. Countrywide has the 1st but only for about $170,000 so the 2nd is the one that will need to do a short. Why don't you post another post on this stuff today or tomorrow. I wonder if we should all use the same tags? Think we could get the first position on Google for mortgage fraud or short sales? Just a thought.

BB/Damion,

In reference to using the same tags for exposure/google position is an awesome idea. That is really brilliant! Go for it.

I think flippingfrenzy is a great site. I have send a few customers there for some education. Ralph Robers is the best.

We had a group of lenders, appraisers, and REALTORS get caught up in some mortgage fraud stuff a number of years ago. Some of them turned state's evidence and some served some real time. What are they doing today.....several of them own large McMansion-type homes, big boats, flashy lifestyles. Not sure they learned a single thing from the time they served!

I had an offer like one written about above...separate addendum with a large amount of money back for improvements, and some other monies on top of that for something....but all of it, on paper, covered the buyer's out of pocket money. The buyer was an agent and a lender, and it just didn't feel right to me. I'd never seen something like that before, so cautioned my seller about it, and seller wasn't interested in stuff like that. Reading the posts above, I now know what it really was, mortgage fraud.

Great post, as always, Bryant!

Ann Cummings
www.AnnCummings.com

I am in need of an education here... not just on spotting mortgage fraud but the whole topic of short sale, pre-foreclosure and foreclosure. One of the things I really like about AR is the open availability of such information...you always make me think! and then I have a zillion more questions. Thanks BB --- I know what I will be doing for the rest of the night.

Damion, I will definitely look forward to your post. Let's keep this info coming. Realtors need to know this stuff as it is going to be very common practice with all the desperate sellers.

I will be standing firm on my commission. These deals are not easy and I don't plan on making less money for helping the lender avoid foreclosure costs.

Ray, there were a series of e-mails where they had manipulated amounts, signatures and price on appraisals (which were never completed). It was pretty black and white. The first hint was the offer without seeing the house.

As Realtors it is important to keep a trail of everything that comes in and is sent out, I know it sounds like common practice, but one little slip and you can get pulled into the whole nightmare.

Hope that helps,

ines

OCT

2006

The iamfacingfforeclosure.com web site looked a lot different back in September when I first took note of it. I think the guy changed it because the mortgage fraud was so blatantly apparent back then?