DECISIONS

WHEN ONE HUD 1 JUST ISN'T ENOUGH

You're scheduled to close tomorrow and call your title company to ask for a faxed settlement sheet.  You discover that the buyer needs $500 more than she expected or has saved.  The listing agent tells you that the seller is willing to contribute the entire amount.  Your friend at the title company suggests that he prepare two settlement sheets.  One is for the lender only who doesn't know that the buyer is short of funds.   The other reflects the actual numbers between buyers and sellers.  What do you do?

A common fallacy to avoid at all costs is one dependent on the right of buyers and sellers to have side agreements that are not disclosed to lenders.  It's wrong, and illegal, for anyone to contribute funds to the borrower without the lenders knowledge and consent.  The loan officer is not the lender.  The lender is the actual source of funds.

TRUTH:  Realtors, loan officers and title agents are indicted for mortgage fraud almost every day.  So are buyers and sellers.  It's wrong to assume that criminal investigations only follow large scale abuses or large dollars losses.  I know of federal cases that involve fraud during the course of a single transaction without financial losses incurred by anyone including the lender.

A SECOND TRUTH:  Industry insiders who habitually employ shady or illegal business tactics have more to worry about than criminal investigations.   Investigative reporters and class action attorneys are poised as the self appointed "watchdogs" of our industry.  And, they are vicious crusaders.  One of Maryland's largest title companies was brought to its knees by a single attorney representing clients who were overcharged by the company as part of a joint venture arrangement with a real estate brokerage.

REMEMBER THE LANGUAGE INCLUDED ON EVERY HUD 1: 

It is a crime to knowingly make false statements to the United States on this or any other similar form. Penalties upon conviction can include a fine and imprisonment.

The feds take the language very seriously; there is no "wiggle" room or plausible explanation.

LEARN MORE:  There are a number of blogs that actively report criminal cases involving real estate fraud.  My favorite is Ian Shuter's site, The Mortgage Fraud Blog.  I receive frequent e-mail alerts concerning federal and state fraud investigations.  Also, the blog has an index that makes it easy to find past cases. 

Two other sites worth visiting are: FraudBlogger.com and Mortgage Fraud Blog.