The goal of a short sale is to help a homeowner avoid foreclosure if they are no longer able to make payments or remain in the home. In the short sale process, a house is sold and a settlement of the mortgage debt is for less than the amount that is owed to the lender.
With the high level of foreclosure filings every month there are plenty of people out there promising homeowner's solutions that sound too good to be true. There is no lack of dishonest con artists willing to take advantage of desperate homeowners.
This particular fraud case involved a scheme called "flopping". The flopping of short sale properties usually has a real estate agent or a short sale negotiator involved in the scheme. In order to make the illegal flip work one of them will misrepresent the true market value of the property to the lender and or will fail to forward all offers to the bank reflecting the true market value.
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It is important to know that not all short-sale flips are fraudulent as there are many real estate professionals out there closing back to back transactions in a perfectly legitimate way.
"Short sales are an important tool that can help both the bank and the borrower," said Morgan McCarty, executive vice president for mortgage servicing at Birmingham, Alabama-based Regions Bank, which lost money in the Connecticut case. "It's just that criminals are always trying to find ways of profiting."
The real estate industry cannot turn a blind eye to fraud anymore. Not only does this make us an unknowing accessory but also it is the very reason fraud remains so rampant. Those who would commit fraud know that few will report the fraud if they are discovered.
You need to inform a lot of people about your knowledge of any possible fraud in process and be sure to write down the details of the transaction and individuals involved.
If you suspect fraud a few places where you can report those that try to commit the fraud are to the senior management of the Real Estate or Mortgage Company, your state, county or city Attorney General's office, The F.B.I., The media -- newspapers, television, radio, Internet bloggers / columnists.
The only way to stop such a widespread, global problem is to look ourselves squarely in the mirror and promise to fight fraud wherever, and whenever, we can, one transaction at a time.
Michael S. Richardson
Director/Chief Quality Officer
Author of "An American Epidemic, Mortgage Fraud a Serious Business"
Follow me on Twitter @ FocusonFraud
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