So it's just a little "gray" area that will never harm anyone. Maybe I'll just let it slide so I can get the commission from this deal. After all, how will anyone ever know?
For those of us serious about eliminating fraud and mitigating the damages to our industry and indeed our nation a statement like that is a Call To Action. Younger ones may have a more difficult time controlling their zeal when explaining how gray is not harmless and how it is just that attitude of letting things "slide by" for the sake of a paycheck that help perpetuate real estate and mortgage fraud.
Let me go back a few years to Mr. Velázquez, a former employee for some four years. Mr. Velázquez was trained in the industry by a real pig. I mean this broker treated his employees like yesterday's trash, threw items around the office, and *alledgedly* allowed and participated in mortgage fraud. (This was later evidenced through the revocation of his license. Unfortunately he somehow got that license back under a new name. Never quite figured that one out. But I digress.)
Mr. Velázquez had been working with a client to get a loan closed for about two months. The client had been shopping for a home and had finally found one. Mr. Velásquez's wife was the buyer's agent and this had all been disclosed. The couple stood to make about $7500 total commissions from the transaction and they had literally put all of their eggs in this basket. This paycheck meant they would be able to go to Mexico City so Mr. Velásquez's mother could see her grandbabies for the first time. And he had not seen his mother for seven years. This was a big deal.
It was the morning of the closing and Mr. Velazquez came into my office and said, "I have to tell you something. This morning the man we are closing the house for called me and said he is afraid to go to the closing. I was trying to tell him not to worry because all first time home buyers get a little nervous. They get cold feet. Then he said to me, 'That's not it Mr. V., I made up my social security number that I gave you. I made it up five years ago.'"
My heart sank and I was so proud of this young man at the same time. He knew what it meant to tell me this. The loan was approved and the funds were already with the closing attorney. He could have closed that loan but he did not. He did the right thing even though it was hard. It took his family's entire months wages away from them but he did not feel saddened by that part. He felt saddened that this perpetrator had committed fraud that had stolen from the mouths of his children. In this particular case I allowed the LO to sit in my office as I filed the FBI report.
Today we can quickly check a social security number and see if it is valid and registered to the person who presented it to us. Back in those days if it could be done we did not yet know of it. Today we would have discovered this long before this young couple literally poured their life into this deal.
Now let me tell you how people discover things even when there are no confessions. If the man who had committed this fraud had gone through a divorce it would have been discovered. If Mr. V. had closed the loan and the client's cousin became angry because the client had a new home but Mr. V. turned them down the cousin could have reported it. If the client defaulted on the loan it would have been discovered. If the attorney who presided over the closing had been found involved in an entirely unrelated fraud but all of their files were seized and a team of prosecutors began their forensic journey it would have been found.
Today it is easier than ever to catch a fraudster. There are tools available today which were not yet a dream when the story I described happened. Know this: If you are working with a broker and that broker is working with a mid-level mortgage lender like my Novation Mortgage and that mid-lender is selling the loan to a bigger investor and that investor is selling to Fannie Mae, every transaction goes through quality control. So if the broker doesn't catch it or commits it we'll catch it. If we don't catch it our investor will catch it. If our investor doesn't catch it, FNMA will catch it.
Then there are random QC's on closed files. That's right, when we're "not too busy" I will personally pull some random closed files and we'll scrub them again ... sometimes just for training.
And here is the last rule that contradicts that old "honor among thieves" belief: they squeal. There is always a weak link and somebody is always going to start naming names and singing a song. If one birdy sings the whole flock is exposed.
And the prosecutor's method? Indict them all and somebody will sing.
So the next time you are sitting at a closing table staring at your commission check and you just spotted obvious fraud or the next time somebody is making an offer that seems too good to be true, do the right thing. Report it. If you're too afraid to report it yourself tell me, I'll report it.
If you THINK it may be fraud, email me. One of my most favorite parts of my job is Fraud Detection & Deterrence. I'll be happy to look for flags for you!
This article is Copyright©2007 Ken Cook
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