Freddie Mac/Chase - Guidelines - Forum

Pat Chadwell January 8, 2012 at 4:03am

While I can not answer to the guidelines point I had the same thing happen to me. The buyer ultimately took title in his name and immediately transferred it to his trust. The reason we were given was the lender was concerned that the seller might have a connection to the trust. As soon as the property transferred ownership I went to the county and recorded the change. It is really sad that the people that commit fraud are adding to the headaches of all future involved parties.

All the best,

Pat

Tara Samney > Pat Chadwell January 8, 2012 at 4:11am

Ditto. It's b/c of these unscrupulous folks the rest suffer. Thanks Smitty for the warning. I saw this last year but others should be aware of why LLCs and trusts will create a servicer flag and be prepared in the beginning. I've gotten some of these transactional funding letters and go online to site where they get them free- and it tells them how to beat Freddie Mac and commit fraud by doing the flip right at or after closing. In addition to the questionable proof of funds- it also advises them to put it in a LLC.
- Smitty > Tara Samney January 8, 2012 at 1:26pm
  
  WHOA....Tara, Red Flags don't equal fraud. Transactional funders don't equal fraud. Flipping / buying and selling on the same day doesn't equal fraud. FRAUD is a misrepresentation. It's intentional misrepresentation to a lender. Now if an investor fully discloses they intend to sell the property immediately for profit, there is no fraud. I GET that Freddie may not like that, but Freddie doesn't create law. Freddie can implement red flags all they want, but it's perfectly legal to take title in an LLC or Trust. As a matter of fact this is a daily occurance all over the country. Just because someone took title in an LLC, trust, inc, does not constitute fraud. Let's get that clear.
  
  To me, what is unscrupulous are lenders making guidelines/policies/rules, that don't parallel law. Lenders DISCRIMINATE against investor buyers. To me, that is unscrupulous. These are the same investors/servicers that gave a woman making $12 hr working at Home Depot a $500,000 mortgage.
  
  Please we all need to make sure we understand fact from fiction. It's perfectly LEGAL to flip property, buy in trust, buy in LLC, etc. Let's make sure we understand things before we go on the offense. I GET Freddie doesn't want to lose money. I guess they shouldn't have loaned on that $500,000 mortgage for someone who makes $12 an hour.
  - Tara Samney > Smitty January 8, 2012 at 2:55pm
    
    Smitty- It is fraud when these same "investors" falsely sign no-flip affidavits before closing, when they do in-fact transfer it at closing or right afterwards. Many of the short sale lenders I'm working with have no-flip affidavits (no resale within 3 months) and purchaser cannot know they have a buyer lined up already at the time of contract.
    
    I don't disagree with anything you are saying in regards to loans were flagrantly given out where they shouldn't have been. I have no real opinion one way or the other on "investors",. What does bother me is possibly getting involved in a fraudlent scheme where the short sale lender specifically issues affidavits (no-flip and arms-length) and the purchasers of short sales fraudulently sign them and try to circumvent it. Duping Freddie Mac is fraud (no comment on what they've done...but that's not part of this post)...duping any lender by falsely signing affidavits is fraud. I'm not just throwing this term around see the FBI stance on this back-to-back flipping at closing and LLC use to do so http://www.fbi.gov/stats-services/publications/mortgage-fraud-2010 to illegal property flipping and short sale schemes.- including hidden relationships and agreements to resell the property usually within 90 days and using LLCs to hide their involvements in short sales.
    
    I'm just sharing facts here. Yes, properties get bought every day in LLCs. Short sales...as we know are a different animal.
    
    I'm not saying it is right or wrong- this is what you are up against though. It is a shame investors who want to legiitamately buy and use it as a rental and take title in a LLC are subject to the same scrutiny same day or 90-day flippers will likely get.
    - Smitty > Tara Samney January 8, 2012 at 3:40pm
      
      Tara, if you read my post - misreprestation is fraud. So you're right, if an investor signs an affidavit saying they won't transfer the property, it's fraudulent. Now, that said, an affidavit is a document similar to a P&S and what do you do if you don't like the terms of a P&S...cross it out an initial, which happens many times. So an investor, disclosing a flip, crossing out terms on an affidavit, is not DUPING anyone.
      
      Now, none of this pertains to my original post, as the person buying this property is NOT an investor, nor flipping (to my knowledge) but flipping is not illegal..back to back closings are not illegal as much as Freddie Mac, Corelogic, etc., want to paint it as so.
      
      Clouding the title can be looked at as illegal, in many states, which is exactly what a lender does when issuing an approval with a no resale clause.

Tara Samney January 8, 2012 at 3:49am

It is a red flag for short sale fraud - property flips right from Freddie Mac's website: http://www.freddiemac.com/service/factsheets/pdf/preventing_servici...

It doesn't specifically say the buyer cannot be a trust or LLC, but it is a flag it could be fraud. I've encountered this along with transactional funding letters which can be gotten free online with no credit or asset check. Given some of the characters that have come to me with these items- yes, they straight out told me they were going to reassign it at closing or have another buyer "investor" lined up to sell it to before closing. That is why these items raises flags with the servicers. Freddie Mac's argument is debatable whether the market value is really being projected low if another buyer would pay more if they are not getting it. My beef is that these "investors" do not add actual value- just are trying to resell it right away the same same or a week later and pocket difference with no change to property.

Sounds like she used the wrong word by just saying "guideline"...it's a "guideline for servicers to follow for Freddie Mac" versus a Freddie Mac specific guideline.

Joy Baker January 8, 2012 at 3:31am

I ran in to this issue with BAC about 6 months ago and all we did was add the name of the Member who signed the P&S to the body of the P&S, i.e, instead of "Main Street, LLC" with John Smith's name only appearing at the end of the P&S, we changed it to "John Smith as Member of Main Street, LLC". Did the same thing on the HUD. They could live with that. Deed was done in the normal manner for an LLC.

Steve Capen January 8, 2012 at 2:36am

I have been told by several different lenders that Freddie doesn't like buyers to be a LLC and that you have low probability of getting an approval for a LLC. Basically I was told that it is not a guideline, but that I am wasting my time. We had buyer reduce offer a little (to compensate buyer for the cost and hassle) and resubmit in their name and put in name of LLC right after closing.

Bryant Tutas January 8, 2012 at 1:44am

Going out in the newsletter today

Kevin - Greenville, SC January 7, 2012 at 5:42am

Fount it - http://www.freddiemac.com/singlefamily/preventfraud/docs/short_sale...

Some of the following red flags may occur with short sale flip fraud:
 Title to the property has been transferred to a trust, LLC, or corporation, prior to the short sale closing.
 The buyer of the property is a trust, LLC, or corporation.
 The purchase contract contains language that indicates the buyer’s intent to resell the property.
 An “Option Contract” is utilized, which indicates the buyer’s intent to simultaneously resell the property.
 Buyer’s proof of funds letter is from his or her IRA or a transactional funding company

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