The Tin Man, the Cowardly Lion, and the Straw Buyer

By
Mortgage and Lending with Bank of Oregon a division of Willamette Valley Bank

Have you ever heard the term "Straw Buyer"?  You may be envisioning the Scarecrow from the Wizard of Oz...I know that's what comes to my mind, but a Straw Buyer is actually a common mortgage fraud scheme, involved in "Fraud for Property"

So, what exactly is a straw buyer?  Well, a straw buyer is basically an individual who's personal information such as employment and credit is used as a "cover" for a transaction.  It's possible that the straw buyer may be a victim of identity theft OR a willing participant to the transaction.  There are cases where a straw buyer is not even a real person in that they only exist on paper.

In this type of fraud scheme, this often involves a party who "borrows" the identity of a friend or family member in order to receive a home loan.  It's possible that the individual may or may not receive some sort of financial compensation for their part in the scheme.

So how are straw buyers spotted?  There are a number of red flags that may be identified within a loan file that may indicate a straw buyer is being used.  Here are a few:

Investment property is represented as Owner-occupied

Someone signed on the borrower's behalf

Names were added to the purchase contract

The sale of the property involves a relative or related party

No sales agent is involved

A quit claim deed is used either right before, or soon after, the loan closing.

While none of these red flags necessarily prove that fraud is being committed, it does warrant further investigation and consideration on behalf of the underwriter and lender. 

 

Check out this additional information as it pertains to Mortgage Fraud.




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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Krista Lombardi 07/21/2011 07:35 AM
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Rainmaker
472,275
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

Karen, very informative and I hadn't heard of this before. Is there a lot of this in yoru selling area?

Jul 21, 2011 07:19 AM #1
Rainmaker
147,409
Krista Lombardi
Prudential Calfornia Realty - San Diego, CA

Hi Karen,  I must admit that  I've never heard of a Straw Buyer before. Thank you for your post.  

Jul 21, 2011 07:31 AM #2
Rainmaker
1,402,493
Vickie Nagy
Coldwell Banker Residential Real Estate - Palm Springs, CA
Vickie Jean the Palm Springs Condo Queen

I had a seller that was previously working with a loan modification company that said they had a straw buyer and she was smart enough to run!

Jul 21, 2011 07:32 AM #3
Rainer
143,002
Karen Burket
Bank of Oregon a division of Willamette Valley Bank - Medford, OR
Valley Mortgage Grou, Conventional, FHA, VA, mortgages

Hi Janice!  Thanks for your visit and your kind comments.  I'll be honest, I don't believe I've ever experienced any suspicions with a straw buyer...but I DEFINITELY had some suspect of a gal who blatantly wanted to falsify her employment/income documentation.  I ran like hell!  

You are most welcome, Krista.  Glad you found it informative, and I appreciate the re-blog!  Thanks so much!  All the best to you! 

Hi Vickie!  People are smart to get the heck away from a transaction where there is some suspicious activity.  Kudos to your client!  :-)

Jul 21, 2011 07:36 AM #4
Rainmaker
138,046
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, ACI Home Inspector,San Diego

Karen, this is some valuable information. I can't believe how much fraud there is anymore!

Jul 21, 2011 08:06 AM #5
Rainer
255,399
Mary Stewart
HomeTrust Real Estate, LLC, Homes for Everyone - Wilsonville, OR
Wilsonville and Surrounding Portland Metro Areas

Hi Karen,

I remember straw buyers being around for a very long time.  Guess I must be old. LOL.  It just proves that you have to really qualify your buyers.  I just had a friend call me about a property she has listed, an REO.  A neighbor of the property who is a renter, called her and asked her if this was a rent-to-own home and  she told him no it was not.  He then proceeded to tell her that there was an ad on Craig's list advertising the property (no address) but a photo and description taken from the MLS, that the property was a rent-to-own and to call a number.

My friend had someone call the number before she called the police and found the number to be a locksmith.  I don't know the outcome, but strange things are really happening these days.

Jul 21, 2011 09:51 AM #6
Rainer
143,002
Karen Burket
Bank of Oregon a division of Willamette Valley Bank - Medford, OR
Valley Mortgage Grou, Conventional, FHA, VA, mortgages

Hi Steve!  Thanks for the visit and I'm glad you found the information useful.  Fraud is definitely up!  I took a Fraud Class yesterday and it was learned that in 2010 the FBI reported that 70,533 mortgage fraud reports were filed.  And that number is low, as some aren't even reported.  Thanks for your interest and I wish you continued successes!

Mary...oh mercy, that IS a very strange and well, scary turn of events.  I hope only good comes out of it.  Thanks for sharing your added experiences....that's what makes this forum so great!  All the best to you! 

Jul 21, 2011 11:36 AM #7
Ambassador
1,509,412
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

I swear our down market breeds more fraud than the up market took!  Great post outlining some of the possibilities!

Jul 22, 2011 04:18 AM #8
Rainer
143,002
Karen Burket
Bank of Oregon a division of Willamette Valley Bank - Medford, OR
Valley Mortgage Grou, Conventional, FHA, VA, mortgages

You're absolutely right Renee!  Fraud is DEFINITELY up from previous years.  Sad state of affair that's for sure.  Thank you for your visit and the kind comments.  I'm glad  you found this worthy of reading.  All the best to you! 

Jul 22, 2011 05:01 AM #9
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Rainer
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Karen Burket

Valley Mortgage Grou, Conventional, FHA, VA, mortgages
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