Special offer

Can a bank go after a seller for fraud if the intent wasn’t to defraud the bank?

By
Real Estate Agent with eXp Realty LLC 200311024

 

I had a client that was in the middle of a short sale when the bank started investigating them hard for mortgage fraud. Now when they filled out the loan documents, and signed at closing, all the information was true and they didn’t see any changes on the horizon.

Fast forward to today when they have lawyers contacting them daily and are threatening them with jail time for mortgage fraud if they don’t bring their account current and continue with this short sale. Now, what is happening with this couple is probably happening with thousands of others across our country and the banks are just using scare tactics to try to get their money.

Here is what happened. My clients bought this home and onthe loan they put that they made “X” amount of money and that this was going tobe an owner occupied property. Both these statements were true at thetime of closing and they certainly had no intention of moving for years. But,as we know, the best laid plans don’t always work out that way.

Six months after moving in to their new home, the husband gets called in to his boss’s office at work and is told, “Sorry, the company is closing its doors here in Oregon and we are moving to Montana. But, we like you and we want to keep you with the company. If you will move to Montana,we will give you your old job, but there will be a pay cut since the cost of living there is so much less.”

So, of course the husband, having been with the company 15 years, really didn’t have a choice as there are not a lot of jobs here in Oregon, especially in his field of work. So the family packs up their things and moves to Montana and rents out the house because of the market dropping. If they sold now they would lose close to $50,000 with commissions.

However, after about a year, they realize that they were losing money every month and that if they didn’t sell they were going to loseeverything including their car and possibly the place they were living now. So, they decided to contact me about a short sale. I got their financial information and forwarded it to the bank and started the short sale process.Well, after the bank got the information they said they weren’t going to accept a short sale on this property and that they were proceeding with mortgage fraud against the sellers since they had got the property as an owner occupied loan and were now renting it out.

They have been in contact with a lawyer and the home has been off the market for awhile, but my question to you is, do the banks realize how stupid they sound when they go after someone who is just as much of a victim of the economy as they are?

Comments (79)

Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

The last short sale I closed was fortunately handled by an awesome listing agent.  When she couldn't get a reponse, she Fed Ex'd the entire package to the CEO of the bank.  Result - we closed 2 weeks later!  Sounds as if you need to use Fed Ex!

Jul 07, 2010 07:21 AM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

The last short sale I closed was fortunately handled by an awesome listing agent.  When she couldn't get a reponse, she Fed Ex'd the entire package to the CEO of the bank.  Result - we closed 2 weeks later!  Sounds as if you need to use Fed Ex!

Jul 07, 2010 07:21 AM
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Well the banks cannot prosecute someone criminally, however, they can call in the authorities and show them stuff.  I suspect there are a lot of seminars being given on this subject by Federal Law enforcement to banks and lenders.  As we know Fannie is going to start going after deficiency judgment.  The government that gives on one hand takes back with two others. 

So I suspect the Government is looking for any way possible to increase revenue and going after fraud or threatening it is one way.  Now sense this is a new thing to them they will get over zeleouse and no one will care because it will work.  Sense there is no debtors prisons they have to find a crime.  If you do not think this is possible think about all the witch hunts we have seen the government go on for political reasons. 

Nothing but a shake down and  another reason to hate banks and distrust government.  I like trying to alert the papers etc. . .

Jul 07, 2010 07:27 AM
John Cannata
214-728-0449 http://TexasLoanGuy.com - Frisco, TX
Texas Home Mortgage - Purchase or Refinance

Glad to see your update. I tend to agree that Im sure the decision was made because someone finally pulled their head out of their behind and it wasnt so much a concern for publicity (Im assuming). Lenders have taken a beating in the media over the past few years, so one more story would be just that.... one more story. Sounds like someone made the right decision for this situation. With all the fraud in the past, its no wonder they jump to the conclusion that this is another fraud instead of looking at the facts. Im not saying they should or should not be aware, but you cant be surprised if a company automatically thinks its fraud based on some of the facts that they could see... house was rented 6 months after purchase and his income is actually lower. Although, this could be the case with many of the homes the lender has... this one just happens to be delinquent which calls the lenders attention.

Anyway, glad it is working out for them. The homeowners looks like they happened to be in the middle and they needed to do what was best for their family.

Jul 07, 2010 07:28 AM
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

Hopefully these owners have written proof of all that transpired.  That should give them a strong defense in case a prosocutor needs it.

Jul 07, 2010 07:33 AM
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Hi Todd,  Since when do the banks care ( or even realize ) how stupid they look !?!?  Hope your client gets through this ok.

Jul 07, 2010 08:02 AM
Anonymous
John McCormick

Todd, Did the Bank also agree to forego a deficiency action? Michael Lissack (Downing-Frye) has it right. Extortion should be reported to the police. The bank charging fraud is like the pot calling the kettle names. The entire meltdown of our economy is the result of the banks' securitization schemes. Is the acronym MBS a double entendre?

Did you check out section four of the standard fannie mae mortgage note. Can the bank comply with this contractual provision? If they cannot, ......................... Is that tortious interference with contract?

Jul 07, 2010 08:39 AM
#72
Anonymous
John McCormick

Todd, Did the Bank also agree to forego a deficiency action? Michael Lissack (Downing-Frye) has it right. Extortion should be reported to the police. The bank charging fraud is like the pot calling the kettle names. The entire meltdown of our economy is the result of the banks' securitization schemes. Is the acronym MBS a double entendre?

Did you check out section four of the standard fannie mae mortgage note. Can the bank comply with this contractual provision? If they cannot, ......................... Is that tortious interference with contract?

Jul 07, 2010 08:39 AM
#73
Gayle Barton, Forsyth County Real Estate
BERKSHIRE HATHAWAY Georgia Properties - Cumming, GA
Cumming GA Homes For Sale (404) 710-0204

Interesting!  I have a client who has been put through the wringer by their bank - (bank twice said they would do one thing and then reneged.)   1) Bank gave them a "listing range" and an "acceptance range" and when we received a contract within $1,500 of the "acceptance range" they countered back saying they would now accept no less than the FULL listing price which was $50K over the offer - not going to happen.  2) Bank said that they would allow "deed in lieu" after 90 days on the market and then refused that and have now started foreclosure.  I would not believe anything the bank has said until the final paper is signed seal and delivered!

Jul 07, 2010 09:54 AM
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Congrats on the happy resolution!

I am sorry that they had to "promise not to tell," because other people are probably being faced with the same situation. Shining the light of day (or network news) on the subject might put a halt to the banks' stupid and greedy methods.

Jul 07, 2010 10:03 AM
Suzanne MacDowell
Exit Realty Gold Service - Mount Arlington, NJ

Oh, I hope I don't get in trouble, check with a lawyer on this one, but I spent several years working as a paralegal and the last time I checked the legal definition of 'fraud' had a requirement that the perpetrator INTENDED to commit fraud, that they KNEW what they were saying was not true and that they intended for the other party to rely upon the falsehood.  Thus, no intent, no fraud, but again, I am not an attorney so...

But, last time I checked, there was such a thing as a 'slap suit' which is a situation where a 'big fish'  sues a 'little fish' to gain an unfair advantage, again not a lawyer, didn't play one on TV but somebody ought to check with a real one! 

 

Jul 07, 2010 02:04 PM
Tina Gleisner
Home Tips for Women - Portsmouth, NH
Home Tips for Women

There is a lot of Fear, Uncertainty and Doubt (FUD) going around these days. Good luck to your sellers, and of course you

Jul 07, 2010 02:44 PM
Mike Henderson
Your complete source for buying HUD homes - Littleton, CO
HUD Home Hub - 303-949-5848

Man that's one of the worst situations I have heard about.  It seems to me legally that they are in the clear, but I'm not a lawyer and it sounds like they need to get one.

Jul 07, 2010 05:52 PM
Wade Kawahara
Dominion Real Estate Partners, LLC - Phoenix, AZ

I think that is definitely NOT a case of mortgage fraud.  If it ever went to court, the sellers would win but that is really rotten of the bank.  They are just grasping at straws.  If the sellers could afford it, they should hire an attorney and that should end the bank harrassing them.

Jul 07, 2010 06:03 PM
Kim Dove
Watson Realty Corp - Jacksonville, FL
Realtor - Jacksonville FL

It is shameful that the banks in their desperation are behaving like common thugs now. Things happen in life and unless you have been hiding under a rock they know this.

Jul 08, 2010 03:28 AM
Anonymous
Anon

Let's see here.  Countrywide reaches 8.4 Billion Dollar settlement in a fraud action brought by 11 states.  (Oct. 2008)  And this Oregon bunch is accusing Todd's customer of fraud?  Is this called "a good offense makes a great defense?" 

Jul 08, 2010 07:17 AM
#81
Kathy Opatka
RE/MAX CROSSROADS - Ocean City, MD
Serving Ocean City, MD, & The Delaware Beaches

The Banks just don't CARE! It's business as usual for them.  They tend to froget that there are PEOPLE involved!

Jul 08, 2010 07:32 AM
Catherine Marrone
Integrity Residential Brokerage LLC - West Newbury, MA
West Newbury MA real estate, Essex County

This has to top the list in the "idiocy" category.  If they spent their time and energy on what really matters, the market would re-coup much faster.  I can only imagine the fees being paid out by the lender to attorneys on these cases.

Jul 08, 2010 08:36 AM
Liane Thomas, Top Listing Agent
Professional Realty Services® - Corona, CA
Bringing you Home!

Im in a similar situation here in California with a short sale. Any lawyers out there care to jump in an offer some practical advice that might help these banks see the light?

Jul 08, 2010 10:37 AM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

I am glad you and the attorney were able to help your client.  It seems to me the bank could sue for fraud as anybody can sue for anything, but to succeed your client would have had to commit fraud in the first place.

Jul 08, 2010 06:02 PM