Miami Real Estate Blog

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Detecting Mortgage Fraud

 

spyI know Mortgage Fraud has been a really sensitive subject around AR lately, and I wanted to share with you what we went over at our office meeting yesterday.  Scott Daniels had an outrageous case a couple of days ago and Bryant Tutas wrote a fabulous post on this same subject.  As some of you may know, Rick and I received 2 fraudulent offers this past week and as common as this may be, it’s important for Realtors, as professionals, to be able to identify fraud and report it.  Here are some red flags that will help you identify questionable transactions:

 

 

 

  1. Receive request from a buyer or mortgage broker to increase the listing price of a property after the buyer is under contract.
  2. Credits to a buyer or price reductions written into separate addenda rather than the body of the contract even though the credit/reduction is part of the initial offer.
  3. Taking properties off the market to facilitate a refinance (lenders ask owners whether they are selling their property when applying for refinance since lenders typically lose money on the first few months of a loan.)
  4. Unusual credits to buyers for “redecorating” or “remodeling”handcuffs

Fortunately for us, we were able to spot fraud because we received a fax by mistake.  In that fax the numbers as well as signatures from both buyer and seller had been forged, the numbers had been changed, and there was an appraisal request showing an amount in excess of $300,000 above purchase price. 

Mortgage Fraud is extremely common and we have to do our part to stop it.

18 commentsRick & Ines - Miami Beach Real Estate • October 25 2006 08:43AM

Comments

#1 is not uncommon if we have received an application after an inept mortgage broker had it.  I think the trick is "how much are you raising it?"  If you're raising it 2-3% to cover closing costs and the new price is within the "listing range", you really won't have a problem with an appraiser and underwriter.

Good blog! 

Posted by Brian Brady, VA Home Loans/San Diego (San Diego VA Home Loans/858-777-9751) over 7 years ago

Thanks for clearing that up Brian - but I usually don't like changing anything once I have an executed contract.

ines

Posted by Rick & Ines - Miami Beach Real Estate (Majestic Properties) over 7 years ago
Great "Heads-Up!" post. I think there is more of this going around than we realize.
Posted by Rich Jacobson, Your Kitsap County WA Real Estate Broker (Keller Williams West Sound Realty) over 7 years ago
Rich - It's all about awareness - there is A LOT of it going around, and not just in South Florida.
Posted by Rick & Ines - Miami Beach Real Estate (Majestic Properties) over 7 years ago
Rick, Ines,

Good start on subject that needs a lot more discussion.

Brian as always is right, those of us who get called upon to save the deal often have to ask for the O & A to be corrected. The shame is it should have been done right the first time.

Item 2. Any addendum not referred to in the offer or counter offer, is a very big red flag! It’s not just credits or price reductions, which will also require the escrow company / closing agent to defraud the lender, but things as simple as possession or proration and assignment of rents which could hide the investment status of the property.

Item 3. Taking a property off the market to refinance is most often required and is not a problem if it is not hidden. Most MLS systems will let the appraiser know the listing history. The home owner is going to have to convince the lender that their situation has changed and the property is not going back on the market.

Item 4. I would only suggest that you put the word "Unusual" in bold type. My concern is that the novice and the novice minded (you know the type: 6 months experience 10 times.) I would suggest that when you receive an offer like this you ask that the pre-approval letter reflect what’s allowed by the lender.

I believe (I have no reference, just my experience.) The most common fraud remains Occupancy (claiming O/O or second home when the intention is to rent, stated income with no reference to reality, followed by addendums not mentioned on the offer or counter offer, and items handled out side of escrow. The simpler the fraud the more common it is. What amasses me is the number of fraudulent conspirers there are. Don’t think just because you’re a listing agent and not an active participant your not involved, if you present the offer and should have known its questionable nature you’re involved!

Wow, all that and I like your post.

Bill

William J Archambault Jr

The Real Estate Investment Institute

http://www.reii.org

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) over 7 years ago

Thanks so much Bill for expanding so proficiently on my points - I have made the change to #4 making "unusual" in bold type.  The important thing is to remember that this is an on-going problem and there are key factors to recognize.  And you are totally right, if as a real estate agent you know or detect fraud in a transaction, and you present the offer, you are could be officially involved.  Thanks for clearing that up.

ines

Posted by Rick & Ines - Miami Beach Real Estate (Majestic Properties) over 7 years ago
Hi Ines, I bet we could all tell storys every day about fraud and never run out of things to say. That, in itself, is truly amazing.  I guess we just need to keep writing about it. The only way to stop it is education. Great posts. Thanks.
Posted by Bryant Tutas, Broker/REALTOR, Tutas Towne Realty, Inc (Bryant Tutas-Tutas Towne Realty, Inc) over 7 years ago
Thanks for visiting Bryant - we can never learn enough about Mortgage Fraud - it's good to know other people's strategies for spotting questionable activities.
Posted by Rick & Ines - Miami Beach Real Estate (Majestic Properties) over 7 years ago

How dumb are those crooks faxing you by mistake! Well, it seems that nothing surprises me any more. I just read an article on fraud and ID theft and posted the link in Broker Bryant's Blog. When I was doing a lot of appraisal work last year, I noticed quite a few 'fakies'..
good blog. see you.
-nick

Posted by Nick M., Realtor-Appraiser in West Palm-South Florida Real Estate Appraiser (Certified Residential Appraiser- West Palm Beach Real Estate) over 7 years ago

It was beyond dumb, but lucky for us.  Thanks for the link....very interesting!

ines

Posted by Rick & Ines - Miami Beach Real Estate (Majestic Properties) over 7 years ago
I commented earlier but this is a really good blog.  It is astounding when you see some of the BS that is put in front of us.
Posted by Brian Brady, VA Home Loans/San Diego (San Diego VA Home Loans/858-777-9751) over 7 years ago

Bill brought up a good point on #3.  properties can be removed from the MLS as long as everyone knows.  The lender will offer a loan with upfront points at that time to insure that it is profitable.  We usually write these loans under the "bridge loan" program.  Rates are around 8.5% today with 2-3 points.

However...you are correct.  Non-disclosure of the listing to the lender is bad news.  It sometimes takes as long as 6-12 months for a lender to recoup the origination costs.

Posted by Brian Brady, VA Home Loans/San Diego (San Diego VA Home Loans/858-777-9751) over 7 years ago

Rick & Ines..... very good blog. It all comes down to educating the clients. But also reporting these lenders. If we don't take action, it will continue to get worse. And it's more so because of the newer loan officers that are struggling now. They made some good money the last few years. I have talked to many that are struggling seriously.....and scared. And when scared, you do stupid things..... usually... ;o)

And again... Brian beats me to another blog and his 2 cents, which I agree. And Bill backs it up.....because I had to come in and save two deals just this month. One closed already and the other is closing Tuesday.

There are just certain ways that are legal. And if the price is truly there, then this can be done...as in number one, but within reason.

Again....good points and good blog,

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) over 7 years ago

Thanks for stopping by Jeff - I agree with you about ways to make number 1 work, but you have to agree it's a red flag and a lot of mortgage brokers out there take those "seller contributions" a little too far.

ines

Posted by Rick & Ines - Miami Beach Real Estate (Majestic Properties) over 7 years ago

Excellent post.  I am going to link to it from my "other blog."

Thanks for the info.

kk

Posted by Kristal Kraft, Denver Real Estate - 720-279-4599 (The Berkshire Group Realtors) over 7 years ago
Thanks Kristal, I was starting to wonder where you were!!!  Glad to have you back.  Love your other blog, will definitely look into it.
Posted by Rick & Ines - Miami Beach Real Estate (Majestic Properties) over 7 years ago

Ines,

If I were you I'd delete this comment. "Foolish One" names a lot of people but you don't know who he/she is. I went to the link and it doesn't mention names.

I'd have no problem if someone sighted indictments but this is anonymous slander.

 

Bill

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) almost 7 years ago
Thanks Bill - it's done - I appreciate you watching my back (I had not even seen it).
Posted by Rick & Ines - Miami Beach Real Estate (Majestic Properties) almost 7 years ago

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