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I am always amazed at the creativity of the techniques used to commit fraud. I remember the first time I sat in the Continue Education Class a few years ago that was on loan fraud. I came out of there with what were pretty good ideas. I often wondered did the class help educate or teach more people how to commit fraud.
My general rule of thumb is. The words creative financing and an institutional bank are not usually spoken in the same transaction.
I sometimes get the question. Why can't a buyer and seller agree to do what they want? The answer I always give is, they can. But if there is a bank involved they now have a say and if the buyer and seller make an agreement that the bank is not aware of is not creative financing, it is fraud.
Usually money is somehow siphoned off the top. In order to do that there has to be more money than reality or the original seller would just keep it.
So the value has to be inflated. The real losers are those honest folks that purchased homes and their values were determined by those falsely inflated home prices. Because when the music stops and the prices slide back and all the fraud folks are just giving their properties back or selling them short. The guy that put down real cash is losing value on his home.
Of course the banks lose big time, but they are not so innocent, loaning money to people with no jobs and bad credit. They should know better.
The old axiom proves to be correct again. Why do people commit loan fraud? Because that's where the money is.
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