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Disclosure, disclosure, disclosure! Everything is to be disclosed. No secrets, no surprises.

By Chrysti Tovani

Real Estate Agent with Nick Sadek Sothebys International Realty DRE# 01118449

January 15, 2010 07:23 AM

I just finished reading an insightful article on the CNBC blog about Big Banks Accused of Short Sale Fraud. You can read about it by following the link.

The article is discussing how second lien holders have been taking cash on the side from the real estate agents or the buyers outside of the escrow so that the first lien holder would not know that they were getting paid in order to drop the lien.

That is not legal.

Disclosure, disclosure, disclosure! Everything is to be disclosed. No secrets, no surprises.

Under no circumstances is there to be any compensation from any party that is not listed on the HUD statement.

(RESPA is the Real Estate Settlement Procedures Act, the 2008 law requiring that consumers receive disclosures at various times in the transaction. It outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD. Read more about it here.).

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Mark L. Ostrovsky

Howard Hanna Real Estate Services - Beachwood, OH

Howard Hanna Real Estate Services

Chrystina, when it comes to the antics of some of these lenders we seem to learn something new every week. There's no end!

Jan 15, 2010 07:28 AM

Barb Fischer

Big Block Realty - La Mesa, CA

San Diego and La Mesa Real Estate

So what do agents do when the buyers really want the a particular home, and list agent discloses to the buyer's agent that by paying the 2nd they can get it? I KNOW this is happening frequently.

Jan 15, 2010 07:43 AM

Sheldon Neal

Bergen County, NJ - RE/MAX Real Estate Limited - Maywood, NJ

That British Agent Bergen County NJ

Chrystina ! This can never be repeated enough !!!

Good post and all the best for 2010 !!!

Cheers !

Jan 15, 2010 07:53 AM

Chrysti Tovani

Nick Sadek Sothebys International Realty - Sacramento, CA

Sacramento Real Estate Agent

Barb, the article is discussing paying money to the 2nd lien holder outside of escrow. Buyers showing up at the closing table with a cashiers check that is not disclosed on the HUD settlement statement.

If the 1st lien holder is in agreement that they will release the seller and allow the 2nd lien holder to get paid then I would think (never sure these days) that it would be okay.

The problem is, that many of the 1st lien holders won't approve the short sale if they are losing but the 2nd lien holder is getting paid. That's why many of the 2nd loans have been getting paid (or a portion being paid) on the side. Which is not legal.

The banks have been instructing the agents to do it this way. That's what all the fuss is about.

Jan 15, 2010 08:01 AM

I also need to add to my message to Barb, that EVERYTHING, all money that changes hands must be on the HUD settlement statement.

Jan 15, 2010 08:06 AM

Mark & Elly: You got that right! Our company made the switch to become a direct lender on January 1st. Every loan officer in our office is on information overload right now. LOL!

Jan 15, 2010 08:09 AM

Hi Sheldon: Thank you! All I want is the BEST of 2010! Same to you!

Jan 15, 2010 08:15 AM

Tony and Suzanne Marriott, Associate Brokers

Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ

Coldwell Banker Realty

If you have to ask whether or not it should be disclosed, it's always wiser to disclose. That avoids any issues after the fact.

Jul 19, 2010 12:01 PM

Hi Tony/Susanne,

Yep, disclose.

Thanks for stopping by and leaving a comment. Much appreciated.

Jul 19, 2010 06:31 PM

Disclosure, disclosure, disclosure! Everything is to be disclosed. No secrets, no surprises.

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Chrysti Tovani

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