Ar_home_b_search
 

Calling All Ethical Loan Officers - Hello?  Anyone There?

Every day I field questions about short sales, foreclosures and real estate investing.  I represent developers, lenders, buyers, sellers, the sharks and the lambs.  All have different work for me and all need different solutions.  Today a call came in that was as they call it - "Over The Top"!  It compels this article on loan officers and how some continue to intentionally contribute to the financial credit mess our industry is experiencing.  The names are fictitious but the scenario unfortunately is something I have heard often.

Here is how it went.

Mr. Smith called because he was referred by another client and he is getting divorced.  He owns his home with his wife and they bought it in 2003.  The purchase price was $350,000 and they used a mortgage to purchase it in the amount of $280,000 - a nice traditional 80% loan to value but with a 10 year amortization.  The current remaining balance of the loan is $185,000.  He has no problem with the current loan payments.  The current market value according to an appraisal that was done as part of the divorce is $450,000.  He does not want to keep the house because he does not need such as large home now that he is single and so he intends to put it up for sale and hope to get $450,000.  That would be $265,000 over the existing mortgage to put in his pocket.

Since Mr. and Mrs. Smith are now getting divorced, as part of the property settlement agreement the husband is getting the house but has to get his (former) wife off the mortgage.  To get his wife off the mortgage he will need to negotiate a removal of her name from the Note (not necessarily a big deal, since he has good credit and lots of equity), or he can refinance for a new mortgage.

Mr. Smith spoke with a loan officer.  The loan officer suggested that instead of selling the house, the loan officer could arrange for an appraisal for $590,000 and then because of Mr. Smith's good credit he would arrange a $530,000 mortgage.  Then (hope your sitting down for this one) he told Mr. Smith to tell the bank he cannot afford the mortgage anymore and short sell the house!  The whole reason for this was for Mr. Smith to pocket $345,000, which is $80,000 more than the value of the house and without the cost or hassle of selling it.  The loan officer had no problem with (1) ruining Mr. Smith's credit, (2) suggesting Mr. Smith commit bank fraud, or (3) pocketing for himself hefty loan fees based on a bogus appraisal and his orchestrated conspiracy to commit bank fraud.

This scenario is frightful and worse yet - I hear about this type of scenario having happened or being planned a few times a month!  Since I am not a lightning rod for these type of stories, I can surmise that it is happening a lot more than the few instances that make it to my ear.

Now please understand - I have nothing against honest, ethical loan officers and mortgage brokers are a great referral source for me.  My son is a mortgage broker and so is my cousin.  But it makes me damn scared and worried for the Mr. Smiths out there and our financial system and for the lack of morality of people that call themselves professionals - and licensed professionals at that - when this type of open and notorious attack on our own well being (i.e. the economy and the financial markets) is occurring right in front of us.

These unethical professionals are guiding unsuspecting and otherwise law abiding citizens to wreck havoc on our own investment funds for their own selfish and self indulgent shortsightedness.  It's instant gratification syndrome - "Never mind the consequences - make me money today and I will worry about the future - in the future!"

I am writing this article for several reasons. 

One reason is to alert the unsuspecting that there are professionals out there that pervert the definition of morality to suit their own pocketbooks.  If a scheme is too easy or too good to be true, it probably is either untrue or illegal.  Consult with an attorney if you have any question!

The other reason is to gather comments from your own stories.  Am I indeed a lightning rod for this scenario or is it happening elsewhere too?

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660  RPZ99@FLORIDA-COUNSEL.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales
 
Post is included in group: All Things Florida
Post is included in group: Short Sales and Forclosures ONLY
Post is included in group: Florida Realtor® Network
Post is included in group: Short Sale REALTORS®
Post is included in group: PALM BEACH COUNTY SHORT SALES

9 Comments on CALLING ALL ETHICAL LOAN OFFICERS - HELLO? ANYONE THERE?

APR
10
2008
167,951 Points 12 Featured Posts Outside Blog
Richard, If every Industry we have good and bad. I agree those are very unethical Loan Officers. However, you did not go into detail about the property appraiser. Remember they are also licensed by the State as well and they are equally to blame.
6:17am • #1
146,218 Points 38 Featured Posts Outside Blog Attended Rain Camp

Matt

I don't think the primary bad guy is the appraiser.  In the story even if the "real value" (which is subjective anyway) were to be used the loan officer's "sell" to the borrower was to make "sticking it to the bank" the better alternative to trying to traditionally sell the house on the open market.  The loan officer had blinders on and focused only on the loan fees to be earned.

Thanks for the comment!
7:18am • #2
167,951 Points 12 Featured Posts Outside Blog
Richard, I agree the Loan Officer had blinders on but keep in mind he/she would still have to have a licensed appraiser to go along with the scam
7:52am • #3

I think this type of thing is disgusting.  I find that people blackmail each other with these types of scams.  Typically, the REALTORS are in on it, the Appraisers are in on it, the Closing agents are in on it, and the buyer and seller are in on it.  If just one of them stands up and says no this is wrong the whole thing falls apart.  It takes allot of complicity to commit this type of loan fraud.  Finally, if just one of these individuals goes to their local state's attorney then we could rid the market of the scam by setting an example.

A ring of loan fraud artists recently was busted here in Jacksonville, and the business practices that resembled the loan fraud guys dramatically decreased.  Make an example so people know that it is dangerous and wrong.
8:37pm • #4
APR
11
2008
368,422 Points 38 Featured Posts Outside Blog Hit Router Called Shot Master
Richard,  With all the focus now on mortgage fraud, this kind of blatant stuff is still going on, I see.  I had one scenario in Destin about a year and a half ago.  An agent tried to present an offer for $100,000 more than list price, and credit a third party company with the excess funds over the seller list price at closing.  He said they would "find" an appraiser to make it happen.  I reported the incident with supporting documentation to the Florida Division of Financial Services, where it is under investigation.  It turns out the third-party company was the mortgage broker.  Wendy
5:08pm • #5
APR
20
2008
Just wanted to remind everyone, that on Wednesday, 4.23.08 at 12 noon we are holding an Official Press Conference and an Open House for the the general public to visit the Ocala Mansion. This will be the only time the public will be able to tour the Ocala Mansion at 1315 SE 22nd. Ave, Ocala, Fl. 34471 prior to selecting the Winner! For more info http://www.ocalamansion.com/      

 

 

PET LOVERS START PACKING!

YOU COULD WIN MY OCALA MANSION!

Valued At $1,250,000.00

$200.00 Entry Fee & The Best "Pet Lover Story" WINS!

  

Ocala Mansion Essay Contest Kicks Off at Noon, Wednesday, April 23rd, 2008 

With an "Official Press Conference" at the property - 1315 SE 22nd Ave., Ocala, Fla. 34471

     Contest entrants will be able to visit the Mansion from 12 noon to 3:00p.m. Eastern Time. 

  

Would you like to own this extraordinary "Gone With The Wind" Plantation Style Mansion situated on more than two acres of land adorned with beautiful Oak trees, Camellia, Azalea, Gardenia and fruit trees in the heart of downtown Ocala, Florida? This magnificent home features approximately 5,200 square feet of living space, including five bedrooms, six bathrooms, a formal living room, a huge dining room, a spacious family room with a brick fireplace, beautiful pine wood floors throughout, marble bathrooms, three crystal chandeliers, 50 foot brick porches on the front and back of the home, 25 foot high grand foyer, a guest house, tree house, and a hand built dog house that resembles the mansion, complete with its own chain link fenced run.

 

The current owner, Miss Clementina Marie Giovannetti, a national best-selling author, spared no expense, approximately $200,000.00 to have the entire mansion completely restored, updated and freshly painted inside and out just for you! Why does she want to give such a magnificent mansion away to The Best "Pet Lover Story" Essay Winner?

 

"I purchased this magnificent mansion a few years ago for my retirement home and looked forward to having a quiet and simple life there. But sometimes, no matter how carefully you plan out the details of your life or make decisions, things change, and that's exactly what happened," Giovannetti said. "My entire life changed both professionally and personally while I was living there, and I am no longer retired. So to support my new lifestyle and career change I purchased a much smaller home in The Villages. Hence, this essay contest!"

 

"One person out of 6250 minimum entries will win this magnificent home valued at $1.25 million on or before July 23rd, 2008. All you have to do is send us your ‘Pet Lover Story' according to the rules and regulations, along with your cover letter, a 4x6 color photograph of the pet and a US $200 entry fee. In 100 to 300 words, tell us about your pet," Giovannetti said.  "‘The Pet Lover Story' can be funny, sad, heroic or inspirational. It can be about a rescue story, service animal, or an act of love or courage. The judges will select a winning entry based upon an honest and sincere expression of thought and emotions about a pet that is heartfelt and one that truly touches the hearts of the judges. It's that easy. "

 

"Even kids under the age of 18 can enter as long as their entry includes a written statement with a signature from their parent or guardian approving their participation in this contest. The contest is also open to all not-for-profit organizations," she said.

 

"Besides, all you ever hear on the news is bad news: crashing real estate market, pregnant women being murdered by their own husbands or boyfriends, political officials being indicted, gas prices going up, the economy going into a recession and on and on. I believe in miracles and sincerely want to bless someone else's life with this magnificent home. I need to find a very special family, individual or organization that could truly be happy there, and perhaps it would make his or her dreams come true! So start writing!" Giovannetti said. For more information visit http://www.ocalamansion.com/
Miss Clementina Marie Giovannetti
9:51am • #6
MAY
13
2008

So - I am wondering about investors that negotiate the short sales on their own.  Then call a Realtor to list the property once they have an agreement with the bank.  They are not yet closed on the property but have an agreement with the bank.  They borrow hard money to close (they are not using  the new borrower's money ie simultaneus closing).  Then they deed the property into a land trust and resell it within a few days for more money.

What disclosures should I be sure are included in any offers accepted by the investor (such as - this acceptance is subject to Seller obtaining Title and bank short sale approval).

As the listing Realtor, I am not involved in any way in the short sale negotiations with the first seller.

Help me see the pitfalls here.

Thank you,  Shirley

 
5:36pm • #7
146,218 Points 38 Featured Posts Outside Blog Attended Rain Camp

My first and last question is why would they close and then put the property into a Land Trust?  What does that legitimately accomplish?

This scenario - minus the Land Trust which is a waste of time for no purpose - is fine. The new buyer will see that the title is really with the seller from whom new buyer is getting title.  New lender will see the current new owner in title, see that old seller sold it rather recently.  Old lender will see that the investor buyer was indeed the buyer and investor got a mortgage to finance it based on the old lender authorized sale price.

Provided all is disclosed - which in your comment it would be (or at least be of public record, which is the same as disclosure) - I don't see a problem.

Your suggested new buyer disclosures are fine since it sets out that the buyer has a contract to buy which is subject to a contingency.  You might want to add that the new buyer agrees not to back door the deal by offering a higher price to the old owner / old lender.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660  RPZ99@FLORIDA-COUNSEL.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales
6:01pm • #8
MAY
27
2008

The direction of the comments here are unfortunate at best and awful at their worst.  I was speaking with two people at a major bank last week that related stories to me of mortgage brokers submitting files with fraudulent information.

The degree to which some people will go to get a file closed is alarming, complete with falsified documents including W-2's for 2009 (note that the year isn't complete yet), paystubs for a pay period that has yet to be completed (pay period ending 5/31/08 on a file submitted early May) and misspelling the name of a national employer on a falsified paystub.  These would almost all be comical if not so awful in their very nature. 

These are just a few examples of situations that have led to the mortgage mess we find ourselves in today and I continue to be surprised at the length to which people will go to today to seek financing.

Times are tough for many and unfortunately we will likely see a lot more of this before the system works to purge itself of those not only submitting fraudulent files but also providing people with abhorrent information like the individual you write about here.

There has never been a time where working with a professional mortgage person has been more valuable to consumers and referral partners alike.

Jim Sahnger
1:58pm • #9

What does the graphic say?

Leave a response…

(optional)
What does the graphic say?
 
Rainmaker_large

Richard Zaretsky, Florida Real Estate Attorney

West Palm Beach, FL

More about me…

Richard P. Zaretsky P.A. - Board Certified Real Estate Atty

Address: 1655 Palm Beach Lakes Blvd, Suite 900, West Palm Beach, Fl, 33401

Office Phone: (561) 689-6660 x 107

Email Me

Legal true life experiences, general observations and commentaries for Realtors, Lawyers and Mortgage Brokers - also see our Palm Beach County Short Sales group blog.
Locations of visitors to this page


Listings

Links

Archives

RSS 2.0 Feed for this blog