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Permalink Reply by Smitty on 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.

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Permalink Reply by Tara Samney on 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.

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Permalink Reply by Smitty on 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.

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