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Fraud can happen right under your nose – And it hurts!

Let me tell you a story of one of my first clients. As a newbie, and even now, I don't think I could have stopped it since I was being lied to, but I wish I had known because I would have stopped what was happening in its tracks, and told my clients not to buy, they were not ready.

Two days ago I found out these clients were about to lose their home to foreclosure coming up this Friday. They just want to let it go and don't want any help saving it. They just were ready to move on. What happened? They were doing so good, plenty of money, and this was their dream home.

Well here is the history of what had occurred before we found the home. In the pre-interview everything looked good, they were ready to buy a home, we just needed to find their home. They had good income (or so I thought), they had a pre-approval letter, and we were ready to go!

What had happened was one of them had less than perfect credit and the other was an independent contractor, but based on his pay they could afford the home and she didn't even have to be on the loan. Fine, great, let's find you a home! The only problem was the mortgage broker told them to lie. He based it on both their incomes and told them to lie about their income. Since he was an independent contractor, they could easily show her income combined with his. He told them to do this and NOT TO TELL the Realtors or you will not get the house. (WHAT?) You told them to commit fraud, just so they could get a house?

Well that decision, and their pride of not wanting to call me and try to find a way out, has cost them their home. They were embarrassed that they let themselves fall into the trap of committing fraud to get the home in the first place. You see as the market started to turn, his income as an independent contractor went down and because of that, they started to find themselves in trouble.

Was their anything I could have done? It's doubtful, as they wouldn't have told me their true situation with their money, because they were friends and really wanted a home. Was the mortgage broker going to tell me the truth? Well no, he had already proven that by telling them to lie to me if I asked any questions.

I've since tried to find the mortgage broker that wrote the loan for them, but his company seems to be out of business and nobody I know seems to know of him. So at this point I have to assume he is out of the business. (THANK GOD!)

The lesson here for you, the consumer and future home owner, is if someone tells you to lie, then it is time to walk away and get a second opinion. You are being asked to commit mortgage fraud and you can go to jail for it!

Todd Clark - broker
Kastings & Associates
Phone: (503)524-9494
Fax: (503)622-8739

Posted by Todd Clark (Broker) (503)524-9494 (Beaverton, Oregon Real Estate Expert) on 02/14/2008 10:07 AM

Comments (18)

Mortgage Fraud in the ActiveRain Channel

mortgage fruad is against the law, dont keep secrets when selling your home, todd clark

Originally posted at: Living Beaverton - Your guide to everything Beaverton: Fraud can happen right under your nose – And it hurts!

This post has been included in Oregon Information Washington County, OR Information

18 Comments on Fraud can happen right under your nose – And it hurts!

FEB

2008

There are people that spend every minute of every day trying to come up with ways to be dishonest....good post

Amazing story, and how sad for your clients. I'm sure they learned a costly lesson.

Very good advice Todd! Thanks

Wow! So sad. There just does not seem to be any profit in not telling the truth.

I could only imaging how the couple felt in the end especially knowing that they had (with the help of the mortgage broker) done this to themselves. Its a tough lesson to learn. They are lucky, if they had gotten caught it could have been worse. They would not only lost their home but also went to jail. I see why the company went out- of- business.Jessica Cordell

Such a shame, some people are so embarrassed to share the state of their affairs with someone who could help them, its sad. And of course one bad apple ruins it for the rest, hopefully that person is out of business as its apparent (s)he would lie in any job they held no matter the field.

Todd, fraud can happen when you least expect it. Sometimes it happens and you never know it.

Shocking! I sincerely hope you eventually identify the mortgage broker responsible for this tragedy.

Todd - Unbelievably, I had a mortgage broker years back who wanted ME to pose as his wife's employer so that they could get the home they wanted. WHAT?!?

By the way, I noticed that your bottom two buttons are not displaying properly (I see the red X's instead).

Telling a client to lie is not very smart and frankly the fact the originator is out of the business tells me that person jumped in the market and got out and is not a long time professional.

BUT now let's look at the contractor and compare the contractor to a fifth grader. A fifth grader instinctively knows they can't make a house payment since they only get a small allowance each month for odd jobs around the house.

Are you telling me, this contractor, an adult, knowing exactly what is earned as a result of their business activity, didn't instinctively know they may be getting over their head?

"What had happened was one of them had less than perfect credit and the other was an independent contractor, but based on his pay they could afford the home and she didn't even have to be on the loan."

So they could afford to buy the home right? (The originator was wrong doing what he did BUT) As an agent you must have known or had some idea of the credit issue since you would have to sign an addendum dropping the co-borrower so this didn't prompt any questions from you? I presume it did and I presume the contractor lied to you too.

I'm not defending the "looser originator" but I am not going to defend the contractor and the co-borrower because nobody put a gun to their head. The rush to hang blame on one aspect of this transaction and then avoid looking at the whole picture is disingenuous and not an honest approach since we are talking about honesty here. (And foreclosures)

Transaction after transaction many were "caught up" in the madness. Starting with the regulatory agencies and oversight powers by congress (the lack of it), SIV's on wall street working backwards to the lenders back to the originator and back to the Realtor. (Don't' forget the builders with their own mortgage companies!)

The client was not forthcoming to you Todd and there was nothing you could do. I believe your integrity is intact. You obviously were unaware of the dilemma.They obviously made their own bed and slept in it. They proved it twice it seems. They didn't tell you they lied about their ability to buy the house they purchased and they made the same mistake again by not telling you their dilemma and allowing you to help them sell out of it.

Realtors are not expected to know the loan programs but they too play a part in the transaction and taking the Roger Clemens defense saying I didn't know he was injecting me with steroids (I thought it was Vitamin B) doesn't work either.

I have two points. 1) Your contractor is not a victim. 2) All of us in this business need to look in the mirror and make sure we are doing what is best for our clients.

Todd

Can you believe that crap still goes on like there is no tomoorrow?

What are people thinking.

Sincerely

Tom BRaatz

Todd,

How true...and some call that 'creative financing'!!! Hmmm! Thanks, Fran

You are 100% correct. Lies get people into trouble.

Todd - What a sad story. It sounds like these are people who have paid a high price for a lie. I hope things will turn around for them in the future. Thanks for posting this. It's important for the public to be aware that it's not only the mortgage broker who lies, but has many willing accomplices (home buyers, sellers, appraisers and yes even some real estate agents).

Todd, sad story! I guess this is a business where we're all worth whatever out word is worth. It's probably a blessing that their loan officer is out of business.

Todd, I feel so bad for your clients! I'm glad that mortgage broker is out of business, but I wonder how many people he did that to!

FEB

2008

Todd- Fraud is wrong. But the buyers knew what the house payment was going to be. We do so many short sales here. We turn down the ones that lied on their applications. What is worse, is that Realtors are getting sued because they tell the seller to give the lender a short sale package with financials and then the lender see they lied and then the agent gets sued for telling them to do that, something is wrong with that picture.

Accountability and personal responsibility are scarce and hard to find. Your buyers, no matter how much you like them, are not victims. If he is an independent contractor and his money got low, then find another line of work, get out there and get a second job. I know too many single moms, dads, who make it no matter what the economy is.

I know entire cultures of people who will do anything to protect their family name and work 3 jobs to pay their mortgage payment so they don't go into foreclosure. I am very passionate about this subject as you can tell, Katerina

Karel - It was just sad that he and the home buyers thought it was necessary to do this to buy a home, when instead they could have just worked on their credit for about 3 months.

Linda - Sad, but at the same time partially their fault. As soon as they heard don't tell anyone they should have ran!

Christina - Hope someone else learns from it!

Michael - I'm sure if he had continued to have a good as year as he did that year, I'm sure he could have made it, but apparently not.

Jessica - I was glad also to see the company went out of business, I just wish in my state mortgage brokers could be held just as accountable as real estate agents.

Diane - I think maybe when they bought the house they were just as embarrassed then at the fact they had to lie to get the home in the first place.

Danny - That was what was sad, that I thought these people wouldn't have had anything to do with that, but they wanted a home so badly they felt they had to.

Rosario - I think it is just as much their fault, but I know who he is and it seems he is out of the business now.

Jason - You be here in employer, wow that took some ______, you fill in the blank! Normally mortgage brokers aren't stupid enough to ask anyone else to get involved in fraud, but I hope you reported that!

Kirk - I knew going in that she had less than perfect credit and when he went to his mortgage broker, he said no problem to him getting alone on his own. So I never thought anything else about it. (By the way independent contractor in the fact that he works for a commission, not works on homes) His pay had been steady for about 5 years straight and even went up some months, but business went down and so did his pay, because their was less work.

I don't think the buyer is a victim either, they brought this on themselves, but I could have helped get them out of it if they hadn't been so embarrassed by what they had done.

Tom - I think people want to be a part of the American dream and saw people buying homes around them and selling those 5 years later for $100,000 more than they had bought it for. It looked better than most 401K plans out there and they get caught up in that, but you have to be able to afford it for the 5 years and that is where the problem came here.

Fran - Don't bring me in on this one Fran, you know my creative financing involves helping people fix their credit during the time owner financing and lease options and teaching people to better understand and manage their money.

Kay - It certainly did here!

Marlene - Oh, I agree it does happen in all fields, I've seen to appraisers forced out of the business in just the last year because they were caught padding the numbers.

Patricia - I wish we could still trust the handshake business deal, but it looks like those days are long gone!

Roberta - I don't know, but don't feel so bad for them, they partially did this to themselves. They could afford it as long as his checks stayed at a certain level and as business fell his checks didn't.

Katerina - I think the agents getting sued over something I don't get involved in, I don't look at a buyers credit report, pay check stubs or run their mortgage calculator. Yes, some people tell me their situation and I tell them, then they need to wait!

But, like you said and I've done it myself! A second job would have been the difference here and yes you would have been away from your family for a little bit, but you would still have a house!

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